ACA to Remain Following Fifth Circuit Court Decision
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On Wednesday of this week, the Fifth Circuit handed down a ruling regarding the constitutionality of the Affordable Care Act. The majority of the ACA will continue to remain the law of the land, possibly for good.
The Fifth Circuit decision arises from a suit brought by a number of Republican states and several individuals in the Federal District Court in Fort Worth Texas. They argued that the Individual Mandate, with the tax penalty zeroed out by Congress, was unconstitutional and that the entire ACA needed to be struck down as a result. The District Court in Fort Worth agreed and struck down the whole ACA in December of 2018. That decision was stayed pending appeal.
While the Fifth Circuit affirmed that the ACA’s Individual Mandate is unconstitutional now that the tax penalty has been set to $0, they sent the case back to the District Court in Texas for a new decision on the issue of Severability or whether the other provisions of the ACA can exist without the Individual Mandate.
Severability is a longstanding Federal judicial doctrine that dictates that the court only strike down the unconstitutional portion of legislation and those provisions that are inextricably linked to it. The Fifth Circuit found that the District Court did not go through the necessary fact finding to determine which provisions of the ACA were inextricably linked to the Individual Mandate when it invalidated the entire ACA.
With no credible Republican health care proposals on the horizon, the possibility of a complete ACA repeal and replace is growing smaller and smaller.
At this time, it is likely that the ACA will survive, even if it lives on without the federal Individual Mandate. With individual states passing their own Individual Mandate legislation, it rings home the reality that the law is becoming more ingrained into U.S. health care ecosystem.
Already, states such as California, New Jersey, Massachusetts, Vermont, Rhode Island and the District of Columbia have passed their own state-wide individual mandate. More are likely to follow.
Employers, this means that complying with the ACA’s Employer Mandate is still a major requirement to be met.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs) (organizations with 50 or more full-time employees and full-time equivalent employees) are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
With the ACA remaining intact, the IRS will continue to increase their enforcement activities around compliance with the law, as we have already seen.
The tax agency is currently issuing Letter 226J penalty notices for the 2017 tax year and is expected to begin issuing penalties for the 2018 tax year shortly. Organizations should elect to undergo an ACA Penalty Risk Assessment to learn their penalty exposure and implement course-correction to avoid any future exposure.
Contact us today to get started with meeting the ACA deadlines on time and with accuracy for the 2019 tax year.
To learn more about ACA compliance for the 2019 tax year, click here.
For ACA reporting deadlines in 2020 for the 2019 tax year, organizations should review this link for important dates and requirements.
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