In mid-December, a Federal District Court in Texas issued a ruling in a highly watched lawsuit filed by multiple Republican-leaning governors, attorneys general, and individuals.
The lawsuit sought to nullify the Patient Protection and Affordable Care Act on the grounds that without the excise tax associated with failure of individuals to obtain minimum essential coverage, the Affordable Care Act cannot be considered an extension of our government’s authority to tax, and therefore is unconstitutional. The District Court ruled in favor of the plaintiffs — in a suit where the Trump Administration opted not to defend the individual mandate. In the ruling, the court deemed the Affordable Care Act unconstitutional, but did not issue an injunction. The Trump Administration has indicated they will continue to enforce the ACA’s requirements as the case makes its way through the appeals process — with a likely date with the Supreme Court.
What does that mean for employers?
In the short term: in the absence of an injunction and with the Trump Administration enforcing the ACA requirements, nothing has changed. Employers should continue to work diligently on production of their Tax Year 2018 IRS Forms 1094/1095 and continue respond timely to any penalty notices that are received from the IRS. This court case likely has a few more chapters in it before we can definitively determine the outcome — and experts are not unanimous in their expectations for the outcome. Don’t make any assumptions, and continue to work within the current requirements.
Longer term: it will depend on the rulings from the appellate courts and Supreme Court. If they eventually rule the ACA is unconstitutional, all the market reforms attached to the Affordable Care Act will be eliminated, including prohibition of pre-existing conditions, Age 26 requirements, and other popular requirements, along with other less popular items such as the individual mandate and employer mandate reporting. Additionally, the various health care marketplaces and premium tax subsidies used by many to obtain coverage would also go away.
If the ruling is overturned: the ACA will remain in place and regulations will continue as they are today.
We will continue to watch this case as it navigates the court system. But, it is a safe assumption that this will be a multi-round fight, such that the final decision will not be immediate.
Employers should also be aware of state individual mandate regulations. As the Federal government eliminates individual mandates, several Democratic-leaning states have instituted their own state-level individual mandates. These mandates may include employer reporting requirements. States with individual mandates include New Jersey (effective 1/1/19), Massachusetts (in effect for 2019), Vermont (effective 1/1/19) and Washington DC (effective 1/1/20).
If you want a more in-depth look at the 2019 compliance forecast, watch our on-demand webinar below.