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Trial Court Dismisses Tribe’s Claim for Exemption From Employer Shared Responsibility

N. Arapaho Tribe v. Burwell, No. 2:14-cv-00247 (D. Wyo., 7/2/15)

Visit the Health Care Reform Community on Checkpoint to join the discussion on this development (for Checkpoint subscribers to EBIA’s Health Care Reform manual).

A federal trial court has dismissed a lawsuit seeking to declare Indian tribes exempt from employer penalties under Code § 4980H. Based on policy considerations, the tribe asserted that Congress did not intend to cover tribal employers and that IRS regulations were invalid for failing to provide an exemption. In addition to concluding that certain procedural issues warranted a dismissal (including the tribe’s failure to raise concerns during the regulatory comment period), the court considered—and rejected—the merits of the tribe’s arguments.

The tribe argued, in essence, that tribal members would be better off with Exchange coverage than with employer-provided coverage, in light of the limited choice of group insurance available to employers in the state, the eligibility of most tribal members for premium tax credits and cost-sharing reductions on the Exchange, and the tribe’s program to pay up to 80% of any remaining Exchange premium cost. Forcing the tribe to offer coverage sufficient to avoid Code § 4980H penalties would eliminate eligibility for Exchange subsidies and might cause many employees to forego health coverage altogether (because tribal members are not subject to the individual mandate penalty). The court was not persuaded. It found that the absence of a provision exempting tribes from Code § 4980H evidenced Congressional intent to include them, especially in light of the explicit exemption for tribal members from the individual mandate. The tribe’s policy arguments did not trump the statutory language, and the court therefore upheld the IRS regulations as valid.

EBIA Comment: The intricacies of health care reform—difficult for any employer to navigate—are especially challenging for tribal employers, which operate under many special rules. For example, in addition to the individual mandate exemption noted above, qualified tribal members are not subject to regular Exchange enrollment rules but can enroll during any month (with the practical effect of increasing the likelihood of Code § 4980H penalties for their employers, which are triggered by a full-time employee’s receipt of subsidized Exchange coverage). We also note that the tribe’s program (of helping employees buy individual Exchange coverage), as described by the court, appears to be an “employer payment plan.” It is not clear how long the program continued, but such arrangements became prohibited under IRS, DOL, and HHS guidance (see our article) for plan years on or after January 1, 2014. As a final note, it seems that the tribe could preserve Exchange subsidy eligibility for its employees—and protect itself from Code § 4980H(a) penalties—by offering non-affordable or non-minimum value coverage to enough full-time employees; the tribe would still be subject to the penalty under Code § 4980H(b) ($3,000 as indexed) for each full-time employee actually receiving Exchange subsidies, but that might be much less than the tribe would pay for affordable employer-sponsored group coverage meeting minimum value standards. For more information, see EBIA’s Health Care Reform manual at Sections V.H.2 (“Group Health Plans of Tribal Government Employers”), V.C.4 (“Individual Health Insurance Policies May Be Treated as Group Health Plans”), XXVIII.B.1 (“Who Is the ‘Employer’?”), and XXIX.D (“Exemptions for Certain Individuals”).

Contributing Editors: EBIA Staff.

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