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The Supreme Court has agreed to rule on the constitutionality of the Affordable Care Act, for a second time.
This unusual turn of events comes after the Fifth Circuit handed down a ruling regarding the constitutionality late last year affirming a prior trial court decision finding the individual mandate, with the tax penalty zeroed out, to be unconstitutional but remanding the case for further factual analysis on whether the unconstitutional portion of the law could be severed from the remainder of the ACA.
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 stayed pending appeal.
Usually the Supreme Court would wait for the trial court process to play out and an updated decision regarding the severability question. Instead, at the urging of the Attorney Generals from several democratic states, who have been defending the law, the Court has added the case to its fall 2020 oral argument calendar.
The Supreme Court will rule on two separate questions. First, whether the federal Individual Mandate, with the penalty set to $0, is constitutional and second, if the mandate is unconstitutional, to what extent can it be severed from the remainder of the ACA.
After oral arguments this fall, a decision is expected by mid-2021.
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 brings home the reality that the law is becoming more ingrained into the 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.
As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), 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.
