After months of anticipation and speculation, the U.S. Supreme Court has upheld the massive health care reform law, the Patient Protection and Affordable Care Act (ACA). Surprising many who predicted the demise of the law's individual mandate and, perhaps, the rest of the ACA with it, the Court concluded that Congress had the constitutional authority under its taxing power to require most Americans to obtain health insurance in 2014 or pay a penalty. By a 5-4 margin – Chief Justice Roberts cast the deciding vote – the Court voted in favor of upholding the individual mandate as a tax—despite its label as a penalty—although the Chief Justice, along with Justices Scalia, Kennedy, Thomas, and Alito, rejected the Obama administration's primary argument that the individual mandate fell within Congress's power to regulate interstate commerce. The Court also concluded that the government cannot penalize states for not expanding their Medicaid programs by taking away existing Medicaid funding.
While the law's individual mandate has survived constitutional scrutiny, many questions and challenges for employers and other stakeholders remain. Activity will now shift from the Court to Congress, the regulatory agencies, the states, and stakeholders as they react to the ruling. And, with the November presidential and congressional elections nearing, the political debate over the future of health care reform is far from over.
Meanwhile, employers face a renewed urgency to understand and implement the statute and its voluminous regulations. Employers must make critical decisions about their health care coverage as key provisions of the ACA become effective. The following is a discussion of the background of the ACA, the litigation, the Court's decision, and what it means for employers.
Background of Statute
The Affordable Care Act (ACA) made sweeping changes in several areas that affect employer health plans. Because employer coverage delivers health care for two-thirds of the non-Medicare-eligible population, nearly 170 million individuals are covered by plans affected by these changes. Some of the changes impose requirements and prohibitions on plan design, while others affect administrative processing of employer plans.
When combined with the mandate for employers to offer coverage (pay or play rules) and the requirement that all individuals obtained insurance coverage (the individual mandate), the changes enacted by the ACA restructure the framework of health care coverage for the vast majority of Americans. While Littler has reported on the revamped structure in detail previously, it is summarized below to provide context for the Court's decision.
Employer Plan Changes
The ACA attempted to both broaden and standardize the coverage provided by employers. The list of changes affecting employer plans is as follows (with parenthetical reference to (1) effective dates—generally shown here as the first year that calendar year plans were or are required to comply—and (2) the changes that only affect non-grandfathered plans):
Plans must provide dependent coverage for children up to age 26 (effective in 2011; until 2014, grandfathered plans need not provide coverage to dependents who are eligible for other employer-provided coverage). Plans must provide for preventive care without cost-sharing (effective in 2011; non-grandfathered plans only). Plans must provide an enhanced internal appeals process and an external independent review stage (effective in 2011; non-grandfathered plans only). Plans must not rescind coverage retroactively, except in situations involving fraud (effective in 2011). Plans must not impose pre-existing condition exclusions for participants under the age of 19 (effective in 2011) and for all participants (effective in 2014). Insured plans must not discriminate in favor of highly compensated participants, under rules similar to the nondiscrimination rules already applicable to self-insured plans (effective in 2011, but enforcement delayed until regulations are issued; non-grandfathered plans only). Plans must not place lifetime limits on essential health benefits (effective in 2011) and may only place annual dollar limits that are at or above specified levels (with no annual limit permitted from and after 2014). Plans must provide an eight-page Summary of Benefits and Coverage upon application, enrollment, and re-enrollment in the plan. Also, a notice of material modifications describing plan changes must be provided 60 days before modifications are effective (both effective in 2013). Flexible spending account contributions by an employee must be limited to $2,500 per year (effective in 2013). Plans must not have waiting periods for entry into a plan in excess of 90 days (effective in 2014). Employers with more than 200 employees must automatically enroll full-time employees (delayed until regulations are issued—will not be effective by the original 2014 effective date). The level of penalties/incentives for wellness plans may be as much as 30% of the cost of coverage—an increase from the current 20%; may rise...