What You Need to Know

On Friday, December 14, 2018 a judge in the Northern District of Texas issued an opinion that the individual mandate in the Affordable Care Act (ACA) is unconstitutional and that, as a result, the entire ACA is invalid. The decision is not an injunction that halts the enforcement of the law. ACA remains in place and will be enforced during the appeals process. Employers should continue to comply with all ACA requirements.

Background

Texas vs. Azar was filed by 20 Republican state attorneys general and governors who argue that since the individual mandate was zeroed out by the Tax Cuts and Jobs Act of 2017 (TCJA), the rest of the ACA is invalid. The individual mandate requires taxpayers to obtain health coverage for themselves and their dependents or pay a penalty. The TCJA reduced the individual mandate penalty amount to $0 beginning January 1, 2019.

Ruling

In 2012, the U.S. Supreme Court upheld the constitutionality of the individual mandate based on Congress’s taxing power. With the elimination of the tax penalty by the TCJA, the court in the Northern District of Texas found in December 2018 that the individual mandate no longer constitutes an exercise of Congress’s tax power, and is, therefore, unconstitutional. Then, finding that the individual mandate is essential to the ACA as a whole, the court struck down the entire ACA.

Employer Implications

Nothing is changing for now. ACA remains in place and will be enforced. Employers should continue to comply with all ACA requirements. Keep in mind that some states have their own individual health coverage mandates.

If the district court’s ruling is upheld by the appellate courts, ACA provisions such as the following would be invalid:

• Employer shared responsibility
• Prohibitions on preexisting condition exclusions
• Dependent coverage until age 26
• Preventive health benefits without copays
• Prohibitions on annual and lifetime maximums

Check out a more detailed summary of potential implications in this blog by Robert Projansky, Paul M. Hamburger  and Damian A. Myers.

Next Steps

In a ruling issued Sunday, December 30, the judge confirmed that the ACA remains fully in effect while on appeal “because many everyday Americans would otherwise face great uncertainty.” On Thursday, January 3, the notice of appeal to the Fifth Circuit was filed. Legal experts say it’s likely the case will be ultimately decided by the Supreme Court. Employers need to stay the course for now.

Jenny Lucey, CEBS
Manager, Reference/Research Services at the International Foundation

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