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A federal district court recently ruled that, at the pleadings stage, Oklahoma established standing to pursue its suit to bar enforcement of the Affordable Care Act’s (“ACA”) shared responsibility penalty provisions. Oklahoma ex rel. Pruitt v. Sebelius, No. CIV-11-30, 2013 WL 4052610 (E.D. Okla. Aug. 12, 2013).

ACA contains a shared responsibility provision (also known as the “Employer Mandate”) under which, effective for 2015, large employers (those that employ 50 or more full-time equivalent employees) have to pay a shared responsibility payment if they do not offer minimum value, affordable coverage to their full-time employees. 26 U.S.C. § 4980H. As discussed in our May 31, 2013, blog post, there are two different penalties that could apply depending on whether an employer either (a) offers no health care coverage to at least 95% of its full-time employees or (b) offers full-time employees coverage that is unaffordable or does not provide minimum value. In either case, at least one full-time employee must qualify for a premium tax credit subsidy to purchase health insurance through a health care exchange before penalties apply.

The Affordable Care Act (ACA) is significantly changing employer health care obligations under the Employee Retirement Income Security Act (ERISA).  Prior to ACA, the Supreme Court held that ERISA did not require employers to offer any level or type of welfare benefits, such as health care benefits. Now that ACA has passed constitutional muster, effective 2014, employers with more than 50 full-time employees will be required to provide “affordable” health care coverage to their full-time employees or face financial penalties.  Because the penalties are calculated based on the number of full-time employees, employers should carefully examine the legal risks of realigning their workforces to minimize the use of full-time employees in favor of employees whose status would not trigger ACA’s coverage mandate.  This article discusses the ACA whistleblower and ERISA Section 510 claims that might arise from such workforce restructurings or other attempts by employers to avoid ACA’s coverage requirements and corresponding tax penalties.