Health Care Reform Update: Supreme Court Ruling Mandates Timely Employer Actions (PDF-201kb)
Health Care Reform Update: Supreme Court Ruling Mandates Timely Employer Actions Authors: Mark Jones, Susan P. Serota, Christine L. Richardson
The Supreme Court’s decision in National Federation of Independent Business v. Sibelius upholding the Patient Protection and Affordable Care Act (PPACA) leaves in place the market reforms and tax provisions that have become effective under health care reform over the last two years and gives a green light to the continued implementation of these measures. All health plan sponsors and administrators should continue to take action to comply with these requirements as they become effective. Employers whose plans fail the PPACA’s minimum standards of coverage or affordability should consider restructuring their benefits to avoid heavy penalties.
Majority Opinion Upholds Individual Mandate
The majority opinion, written by Chief Justice John Roberts, found that the requirement imposed by PPACA to maintain minimum essential health insurance coverage or make a “shared responsibility payment,” while outside Congress’ authority under the Commerce Clause, could be read in a manner that comports with Congress’ power to tax and spend. The Court also found that the authority given to the Secretary of Health and Human Services (HHS) to withhold all federal Medicaid funding from states that failed to expand Medicaid eligibility in accordance with PPACA exceeded Congress’ power under the Spending Clause, but could be severed from the rest of the statute so that only new Medicaid funds are conditioned on a state’s compliance.
Impact on Employers
Prior Changes Remain in Place. Because of the Court’s ruling upholding PPACA, all of the health insurance reforms that have already been implemented remain in place. These include:
- the prohibition on retroactive rescission of coverage, other than in cases of fraud or intentional misrepresentation of material facts;
- the prohibition on lifetime dollar limits and floors on annual dollar limits for essential health benefits, absent a waiver from HHS;
- the elimination of preexisting condition exclusions for children under the age of 19 (to be extended to adults for plan years beginning on or after January 1, 2014);
- the extension of coverage to adult children under the age of 26, other than children of employees participating in grandfathered plans who are eligible to enroll in another employer-sponsored plan (to be extended to all adult children under the age of 26 for plan years beginning on or after January 1, 2014);
- the prohibition on the imposition of copayments, coinsurance fees and deductibles for recommended preventive services under non-grandfathered plans; and
- new internal and external claims procedures applicable to non-grandfathered plans.
Similarly, the changes to the Internal Revenue Code that have shaped the PPACA’s funding and financial incentives remain in place, including:
- the prohibition on the use of flexible spending accounts (FSAs), health savings accounts (HSAs) and health reimbursement arrangements (HRAs) to purchase over-the-counter medicines; and
- the small business tax credit, for employers with no more than 25 full-time employees and average wages of $50,000 or less.
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