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Supreme Court Upholds Health Care Reform Law
06/29/2012

In its much-anticipated decision yesterday, the Supreme Court upheld the Patient Protection and Affordable Care Act (PPACA), putting an end to the constitutional challenges that have threatened the law since the day it was enacted.

The manner in which the law was upheld came as a surprise to many. Rather than conclude that the law reflected a constitutional exercise of Congress's commerce power, the Court seized upon the government's back-up argument and upheld the law as a valid exercise of Congress's taxing power. And in a further twist, it was Chief Justice John Roberts, generally viewed as a political conservative, who cast the decisive vote, siding with four justices who are generally considered political liberals.

Although the legal underpinnings of the Court’s decision are somewhat complex, the bottom line for employers is clear: Nothing has changed. The law that went into effect March 23, 2010, and has been in effect ever since, remains intact.

In theory, this means employers should not need to do anything more than maintain business as usual, continuing their efforts to implement the law as its provisions become effective.  But in reality many employers will have been sitting on the sidelines, waiting to see how the case would be resolved.  Those employers may now find themselves playing catch-up.

In the short term, employers need to be preparing to comply with new measures that are coming into effect in the next few months—things like the uniform summary of benefits and coverage (SBC), the PCORI trust-fund taxes, W-2 reporting, and the $2,500 cap on health FSAs.

In the longer term, the Court’s ruling solidifies the need to plan for the wave of mandates and requirements that will come into effect in 2014. In particular, employers will need to earnestly analyze the impact of the play-or-pay penalties, determining whether they are subject to the penalties or not and, if they are, whether they want to play or pay. It is also clear now that all employer health plans will be subject to nondiscrimination rules that are likely to apply at least by 2014, so employers will need to consider how those rules, along with the penalties, impact plan designs.

All of this may well be complicated by other elements of health care reform that are not directly applicable to employers. The insurance exchanges are a good example. It remains largely unclear at this point whether and how most states will be implementing the exchange requirements. Like employers, many states have delayed action on exchanges until the Court clarified the status of the law. This may leave them practically unable to develop robust exchanges by 2014, which could indirectly impact things like the premium tax credit, the affordability standards under the penalty rules, and even the individual mandate. Any uncertainties regarding those pieces of the health-care-reform puzzle are likely to trickle through the whole system.

It also remains to be seen, of course, what impact this fall's political elections may have. But any legislative action on the law is unlikely to happen any sooner than the spring of 2013. And even if there is a sea-change in power in Washington, it is difficult to predict at this point what that might mean for the health care law.

So while the Court’s decision technically means it’s business as usual for employers, there’s really more to it than that.  There will need to be a concerted re-focusing on both short-term and long-term compliance and on strategic planning for the full impact of the law as its centerpieces come online in the next two years.  In short, there is still much work to be done, and the Court’s decision brings a new sense of urgency to that.

 


Editors
Don Berner Image
Don Berner, the Labor Law, OSHA, & Immigration Law Guy
Boyd Byers Image
Boyd Byers, the General Employment Law Guy
Jason Lacey Image
Jason Lacey, the Employee Benefits Guy
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