Guest Commentary

Kim Wilcoxon and Julia Ann Love, Thompson Hine LLP

Today, the United States Supreme Court announced its decision to uphold the individual mandate under the Patient Protection and Affordable Care Act (PPACA).

What does this decision mean in the short-term for employer-sponsored group health plans?  None of the PPACA provisions applicable to employer-sponsored group health plans were found unconstitutional.  As a result, to the extent that an employer-sponsored group health plan was required to do so before this decision was issued, the employer-sponsored group health plan must continue to:

  • cover children to age 26,
  • cover preventive care services at 100% with no cost sharing,
  • refrain from imposing pre-existing condition limitations on enrollees under age 19,
  • provide essential health benefits without annual and lifetime limits,
  • provide enhanced claims and appeals processes, and
  • provide external review processes.

In addition, employer-sponsored group health plans must continue to prepare their 4-page summaries of benefits and coverage for open enrollment for the 2013 plan year, prepare to report the value of 2012 group health plan coverage to the IRS on Forms W-2 issued beginning in 2013, and prepare to limit flexible spending account reimbursements to $2,500 beginning in 2013.

While the decision provides more certainty to employers in the short term, there are still many aspects of PPACA that require additional guidance. For example, we still do not know how to calculate the new comparative effectiveness research fees that are due next year, how the nondiscrimination rules will apply to insured group health plans, and when and how the automatic enrollment requirements will apply.

What does this decision mean in the long-term for employer-sponsored group health plans?  This decision does not have a definitive impact on how employer-sponsored group health plans will be required to comply with PPACA in 2014 and beyond.  Uncertainty still exists because:

  • the decision did not specifically address any of the PPACA provisions that apply to employer-sponsored group health plans, so it does not preclude future judicial challenges to those provisions; and
  • certain members of Congress have indicated that there will be legislative efforts to repeal or modify PPACA.

The pending November elections and the current lack of clear guidance may encourage employers to postpone preparing for the employer “pay or play” mandate that will take effect in 2014.  However, employers would be wise not to wait too long.  There are currently many ways that employers can begin to prepare.

How did the Supreme Court uphold the individual mandate?  The Supreme Court determined that “[o]ur precedent demonstrates that Congress had the power to impose the exaction in Section 5000A [of PPACA] under the taxing power, and that Section 5000A [of PPACA] need not be read to do more than impose a tax. This is sufficient to sustain it.”  The Supreme Court however noted, that “[t]he individual mandate cannot be upheld as an exercise of Congress’s power under the Commerce Clause.  That Clause authorizes Congress to regulate interstate commerce, not to order individuals to engage in it.”

All this means that the Supreme Court’s failure to uphold the individual mandate under the Commerce Clause has no effect on PPACA because the Supreme Court otherwise upheld the individual mandate under Congress’s taxing authority.

What does this mean for the remaining provisions of the Act?  Because the Supreme Court upheld the individual mandate, it did not rule on whether other parts of PPACA are constitutional, other that the requirement of the States to enhance their Medicaid programs or risk loss of federal funding.  On that provision, the Supreme Court ruled that the requirement is Constitutional so long as the only funding at risk is the funding attributable to the enhanced programs.