Feature Article:
Does the Recent Court Case in Texas Mean the End of the ACA?
What Do We Tell Our Clients?
By: Dorothy M. Cociu, RHU, REBC, GBA, RPA
OCAHU V.P. Communications & Public Affairs
On December 14, 2018, a Federal District Judge, Judge Reed O’Connor, in Texas, struck down the ACA as unconstitutional. The judge ruled in favor of the plaintiffs by determining that the “individual mandate” is no longer a tax, and is therefore an unconstitutional exercise of congressional authority. This was somewhat expected. The judge also found that the individual mandate was inseverable from the remaining parts of the ACA, which makes the entire ACA, not just the guaranteed issue and community rating provisions, unconstitutional. According to Judge O’Connor, “The requirement is an essential part of this larger regulation of economic activity, and the absence of the requirement would undercut Federal regulation of the health insurance market,” and he based this on Congress’ own words about the individual mandate. He also reminded us that each of the nine Supreme Court justices in the 2012 case (see below) had agreed that the individual mandate was inseverable from at least some other ACA provisions (for example, the prohibition against pre-existing conditions.)1
The lawsuit of Texas v. United States related to the enforcement of the ACA, and according to several news sources, was filed on February 26, 2018 by Republican state attorneys general and governors from 20 states and 2 individuals, claiming that the individual mandate, as amended by the ACA, is unconstitutional, and is therefore not severable from the ACA. The Trump Administration reportedly declined to defend the case, but attorneys general reportedly from 16 states and the District of Columbia stepped in to defend the ACA.
You may recall that the individual mandate penalty was reduced to zero as part of the 2017 Tax Cuts and Jobs Act.
The ACA had originally been upheld in 2012 by the US Supreme Court in National Federation of Independent Businesses (NFIB) v. Sebelius, on the grounds that the individual mandate was a legitimate exercise of the congressional taxing power. The plaintiffs argued in the 2018 case that now that the penalty is $0 and no longer raises revenue for the government, the individual mandate is no longer a tax, and is therefore unconstitutional. The plaintiffs further argued that the entirety of the ACA relies on the continued existence of the individual mandate, making the individual mandate inseverable from the rest of the ACA. Thus, the plaintiffs allege, the individual mandate being unconstitutional makes the entire ACA unconstitutional.2
In response to the ruling on December 14, 2018, President Trump tweeted: “As predicted all along, Obamacare has been struck down as an UNCONSTITUTIONAL disaster! Now Congress must pass a STRONG Law that provides GREAT healthcare and protects pre-existing conditions.”
A stay was issued almost immediately, on December 30, 2018, pending appeal. If the ruling stands, which is questionable given that the appeal has been filed in the 5th Circuit, there could be some significant consequences.
According to John Hickman, Esq, and Ashley Gillihan, Esq, in a post-decision webinar for the Self-Insurance Institute of America in early 2019, the ruling will likely be heard sometime in late 2019. If the 5th Circuit affirms the decision, it will head to the Supreme Court, with a decision sometime in late 2020. If the 5th Circuit reverses the decision, the ACA will likely continue as it is currently.
But what do we tell our clients? I know mine have been asking me since December what this all means? What do we do? Can we stop tracking and reporting? Can we stop offering affordable coverage to our employees? What will change? If you’re getting these same questions, I’d like to address some of their questions, and assist you in some simple answers.
First, it’s good to let your clients know that even if the decision is upheld, and the entire ACA is declared unconstitutional, no changes in health plans are likely to happen before 2021, at the earliest. Therefore, life as we know it (and report on it) shall continue, as status quo, for the time being. So the simple answers are yes, you have to keep tracking and reporting if you’re a large employer, and no, you can’t stop offering affordable coverage to your employees (unless you want to pay penalties of course).
But what if the decision is upheld, meaning the end of the ACA? All we can do is speculate for now, but there is some simple logic that we can apply to all of this.
Changes could and will likely occur to post-ACA plans, that will in essence make them look like pre-ACA plans. Remember, annual and lifetime limits were removed due the ACA… If that goes away, we could see plans put these limits back in. Annual out-of-pocket maximums would likely also increase, because they were tied to metallic plans in the ACA. You may see some increased premiums, and employee contributions may likely increase, as the affordability provisions of the ACA would go away, and the government would no longer be defining the affordability of a plan. This could also mean the elimination of the 90 day maximum for waiting periods, and plans could go back to the first of the month following 90 days, or longer, if they so choose. Some of the burdensome requirements of plans would likely also be eliminated, including SBCs, and the employer reporting from Section 6055 and 6056 employer shared responsibility (ESR) and their related penalties.
However, there are some very popular things that came out of the ACA that may be less impacted by the elimination of the ACA. Keep in mind… It’s difficult to take things away once they’ve been given…
Items that could continue that were part of the ACA due to popularity include: 100% preventive care (you could likely see some variations, but plans may want to continue to offer 100% preventive care); no pre-existing conditions; dependent child coverage to age 26 (although it’s likely that we could see modifications, such as marriage and/or “other coverage” exclusions and related; and quite possibly we may continue to see some form of Minimum Value Coverage).
Things we’re not as sure about include the terms of the Employer Shared Responsibility provisions of the ACA. Again, it’s hard to take away what employees were previously given. We can venture to assume that there could be pre-ACA definitions of a full-time employee (i.e. 40 hours rather than 30 hours), and possibly some reinstatements of previously traditional exclusions included, such as seasonal and temporary employees.
Some have mentioned the resurgence of things like HRAs, because the integration rules would go away, which could possibly lead to more stand-alone HRAs for groups that were offered coverage solely because of the ESR rules. Smaller employers, some guess, may use HRAs to pay premiums for individual coverage without the limitations otherwise imposed on permissible premium reimbursement by the recent proposed rules.
So, what do we tell our clients that they should be doing in the meantime, until the case goes through the appeals process and possible supreme court? In short, nothing for the time being…. Continue to do what you’re doing, and wait and see.
Marilyn Monahan, attorney from Monahan Law Office, added some additional suggestions on this topic. “Employers and producers should keep an eye on state developments. First, we should remember that the California legislature has already codified many of the ACA’s provisions into California law. These provisions will not automatically go away if the ACA is found to be unconstitutional. Second, state politicians are looking at additional changes they can make into state law to address changes to the ACA being made at the federal level, and these discussions are likely to continue as we head into the 2020 election year. These factors are further reasons why employers should stay informed, but continue on the same course they are currently on.”
It’s also important, I think, to address what we know, rather than focusing on what we don’t know. For example, many regulatory and legal issues will continue indefinitely, because they are not part of the ACA. This includes the ERISA requirements, including 5500 reporting, Plan Document and SPD rules, Section 125 Pre-tax requirements, HIPAA Privacy & Security Rules, HITECH Rules, etc.
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Reference Sources:
1) The National Law Review: “Ho! Ho!Ho! Where Did It Go?” Texas Court ACA Ruled Unconstitutional, By Monique Warren, December 16, 2018
2) Texas v. United States – Texas Federal Court “Strikes Down” the ACA’; By Jordan Grushkin, Matthew Goldman & Melissa Gertler, December 19. 2019, Posted Affordable Care Act (ACA) Healthcare Reform
3) Alston & Bird, Texas v. U.S.: The End of the ACA? Webinar, Self-Insurance Institute of America
Other Reference Sources: Eversheds Sutherland, Legal Alerts. LEGAL ALERT: TEXAS V. UNITED STATES DECISION COULD IMPACT EMPLOYER-SPONSORED HEALTH PLANS, January 4, 2019 (online reference)
Author’s Note: I’d like to thank Marilyn Monahan for her assistance with this article (see Compliance Corner, Legal Briefs, each COIN issue!), as well as the Self-Insurance Institute of America and their attorney webinar hosts, John Hickman, Esq., and Ashley Gillihan, Esq., Alston & Bird, LLP.
