On Dec. 14, 2018, a federal judge in the U.S. District Court for the Northern District of Texas held, in Texas v. U.S., that the ACA’s individual mandate is unconstitutional and therefore the entire ACA is invalid. The ruling is a result of a challenge to the ACA brought by a coalition of Republican-led states, including Texas. Because the current administration refused to defend the ACA, several Democratic-led states intervened to defend the law. The challenge is focused on the ACA’s individual mandate — the requirement for all US citizens to purchase health insurance or pay a penalty tax.
As background, in 2012, the U.S. Supreme Court held the individual mandate (and thereby the ACA) constitutional, stating that the individual mandate was actually a tax, and that imposing a tax is a valid exercise of Congress’s authority. The coalition of states in Texas v. U.S. argued that Congress erased that constitutional basis for the individual mandate when it reduced the tax penalty to $0 under the Tax Cuts and Jobs Act of 2017. The district court agreed, stating that because the penalty tax is now gone, there’s no constitutional justification for the individual mandate; and because the individual mandate is “essential to” and “inseverable from” the other provisions of the ACA, the entire ACA falls.
On Dec. 30, 2018, Judge O’Connor granted the intervenor states’ request for final judgement based on the Dec. 14 decision and a stay of that judgement. This means that the coalition of intervening states can now appeal the law. An appeal would likely go to the U.S. Court of Appeals for the Fifth Circuit. Many legal experts believe the case is headed to the U.S. Supreme Court, meaning the ACA’s future could once again be in the hands of the highest court in the land. There is also a chance Congress could revisit health care as an issue in 2019, although with Democrats taking control of the House, any legislative changes would require bipartisan support.
If the district court’s ruling is ultimately upheld, the ACA would be deemed invalid. That would have far-reaching consequences, as the ACA goes beyond just the exchanges, premium tax credits and employer obligations most people are familiar with. For employers, though, while the employer mandate, reporting and other obligations would disappear, so would some of the more popular provisions. For example, plans could once again exclude adult children, impose cost-sharing for preventive services and annual exams, and exclude or impose surcharges for individuals with pre-existing conditions. While there does appear to be bipartisan congressional support for those more popular provisions of the ACA, it remains to be seen whether Congress would enact new legislation that would maintain those protections.
As for impact on employers, because the ACA remains the law for now, employer-related requirements remain in place. This includes the employer mandate, employer reporting (Forms 1094/95-C), Summary of Benefits and Coverage, W-2 reporting of employer-sponsored coverage, and all insurance mandates: coverage of dependents up to age 26, coverage of preventive services without cost-sharing, and the prohibitions on annual limits for essential health benefits and pre-existing condition exclusions. In addition, the exchanges remain open for business for individuals; people who enrolled by the Dec. 15, 2018, deadline received coverage effective Jan. 1, 2019. Employers should continue to monitor their compliance obligations.
As always, NFP’s Benefits Compliance team will continue to track and report on future developments on this issue.