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Deal to End the Government Shutdown and its Impact on Health Care Reform

Filed under: Health Care Reform

On Oct. 16, 2013, Congress reached an agreement to end the government shutdown. The agreement funds the federal government through Jan. 15, 2014, increases the debt limit through Feb. 7, 2014, and provides back pay to federal employees who were furloughed.

The agreement also makes one minor change to the Affordable Care Act (ACA), requiring individual eligibility for federal subsidies under the health care reform law to be verified.


The U.S. Constitution requires Congress to pass a bill establishing a federal budget, often called a spending bill. For a spending bill to pass, the Senate and the House of Representatives must all agree upon the bill, which must then be approved by the President. When Congress is unable to agree upon a federal budget, or when the President vetoes it, before the budget cycle ends, a government shutdown occurs.

Due to Congress' inability to reach an agreement on a spending bill, a government shutdown began on Oct. 1, 2013, following the end of the federal government's fiscal year. Although the Republican-controlled House of Representatives passed several spending bills that maintained spending levels, the bills did not provide funding to implement the ACA. The Democratic-controlled Senate refused to take up any bill that did not fully fund the ACA.

The agreement to end the government shutdown was passed by the Senate in an 81–18 vote and by the House of Representatives in a 285–144 vote. The President then signed the bill into law.

What happens during a government shutdown?

Similar to a lockout in the private sector, during a government shutdown, the government stops providing all "non-essential" services. This means that many government functions stopped, and many federal employees were furloughed.

However, military personnel and other "essential" employees were not furloughed. In addition, other "essential" government functions and services continued. These functions and services include:

  • Social Security, Medicare and certain types of veterans' benefits;
  • National security, including the U.S. military and embassies;
  • Public safety, including air traffic control, emergency medical care, border patrol, federal prisons, most law enforcement, emergency and disaster assistance, overseeing the banking system, operating the power grid and guarding federal property;
  • All agencies with independent sources of funding, including the U.S. Postal Service and the Federal Reserve; and
  • Members of Congress, including essential Congressional staffers (but not those that are non-essential).

The government shutdown lasted 16 days. As of Oct. 17, 2013, all government functions resumed, and all federal employees were expected to return to work.

Essential employees who remained at work during the shutdown either received their regular pay and benefits or will be paid retroactively for their unpaid working time.

Furloughed federal employees, or those that were not permitted to work, did not receive paychecks during the government shutdown. The Oct. 16 agreement provides back pay to most of these employees. However, under the agreement, government contractors will not receive back pay for the period of the shutdown.

Impact on the ACA

The ACA created health insurance subsidies, in the form of premium tax credits and cost-sharing reductions, to help eligible individuals and families purchase health insurance through an Exchange. Subsidies will be available beginning in 2014, at the same time the Exchanges are scheduled to become operational.

  • Premium tax credits are available for people with somewhat higher incomes (up to 400% of FPL), and reduce out-of-pocket premium costs for the taxpayer.
  • Reduced cost-sharing is available for individuals with lower incomes (up to 250% of FPL), and reduce out-of-pocket costs at the point of service (for example, lower deductibles and copayments).
  • The agreement to end the government shutdown includes a requirement that Exchanges verify individual eligibility for these subsidies. Under the agreement, the secretary of Health and Human Services must:
  • Ensure that Exchanges verify individual eligibility for tax credits or cost-sharing reductions; and
  • Certify to Congress that the Exchanges are verifying eligibility.

The Secretary is required to report to Congress by Jan. 1, 2014, regarding the procedures that Exchanges are using to verify eligibility.

More Information

A copy of the agreement to end the government shutdown is available on the Library of Congress' website.
Please contact Fickewirth Benefits Advisors for more information on the Affordable Care Act.

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

© 2013 Zywave, Inc. All rights reserved.

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