What Will Health Care Reform Decision Mean to Employer Plans?

Supreme Court

With the Supreme Court decision regarding Health Care Reform due any day, I asked our human capital legal expert, Jay Kirschbaum, to weigh in on the possible scenarios. ~ WillisWire HR blogger Jim Blaney

The U.S. Supreme Court heard oral arguments regarding several issues associated with the Patient Protection and Affordable Care Act (“PPACA”) in March and is expected publish its decision this month. The main issue that the Court had to decide was whether the “individual mandate” is a constitutional exercise of Congress’s power under the Commerce Clause or whether it exceeded the limits in the Constitution. If the Court rules the individual mandate unconstitutional, the Court will then determine whether:

  • the individual mandate could be severed from the rest of the Act
  • the entire Act has to be overturned as well
  • or some portion of the Act could be overturned while maintaining the remainder of PPACA

It is difficult to infer how the Justices will rule from oral arguments, although that does not keep people from trying. The view held by many is that the individual mandate will be overturned but only the individual mandate.

Human Capital Practice Alert: Health Care Reform Bill

For a great deal of additional detail and analysis, read our Alert on the Health Care Reform Bill.

However the Court rules, though, employers will be in a reactive mode to figure out how the Court ruling and subsequent political fallout will affect their group medical plans. Here is our overview of the issues associated with each possible outcome. (For a great deal of additional detail and analysis, read our Alert on the Health Care Reform Bill.)

Individual Mandate Holds

If PPACA is completely upheld employers will have to move forward with the plans they have put in place (hopefully!).  Even those employers who had been hoping to avoid making hard decisions will have to think through the effect of PPACA on their plans and how they fit within their compensation strategy to make some decisions of how to move forward.

Individual Mandate Overturned

If only the individual mandate is overturned, employers will likely need to think through how viable the state exchanges will be long term. Both sides of the debate acknowledge that the long-term viability of the individual-coverage market depends on the individual mandate–only by requiring people to buy medical insurance coverage can the PPACA reforms (guaranteed issue, prohibition of preexisting condition exclusions, and community rating) be financially untenable.

Individual Mandate and Reforms Overturned

If the insurance reforms are overturned along with the individual mandate, the employer mandates will still be in effect. Therefore, employers will still be required to offer coverage or potentially pay a penalty.  Presumably the individual market will remain a relatively expensive option so employers will continue to have competitive incentive to  offer coverage.

Entire Act Overturned

If the entire Act is overturned employers will still have to consider the impact of that result on their plans. Unfortunately, that decision will leave many employers with unanswered questions about the mandates that are currently in force such as the adult child coverage mandate, the elimination of dollar limits on benefits, the insurance reforms and others. Employers will not be able to go back to the status quo ante without causing disruption to their workforces.


About Jay Kirschbaum

Jay spent 22 years as a tax attorney specializing in employee benefits before joining Willis in 2001. He is current…
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