On June 28, 2012, the United States Supreme Court announced its long-awaited ruling on the constitutionality of the individual mandate (the requirement that virtually all individuals purchase health insurance), which was at the heart of health care reform. The Obama Administration had argued that the mandate was constitutional under the Commerce clause of the constitution, which grants Congress the power to regulate interstate commerce. Chief Justice John Roberts announced that the Supreme Court found that the mandate was not constitutional under the Commerce clause; however, the court found that the mandate is constitutional under the Congressional power to levy taxes. The Obama Administration had contradicted itself in its arguments before the court, saying in one situation that the penalty for failing to purchase insurance is not a tax and saying in another situation that it is a tax. Even though President Obama had promised not to raise taxes on the middle class, the Supreme Court’s decision is still a big win for the President.
The ruling came on a 5-4 vote, with Chief Justice Roberts casting the deciding vote. Many observers had speculated that Justice Kennedy would be the swing vote; however, he voted to strike down the entire law as unconstitutional.
The battle over health care reform is far from over. The subject will be a major factor in the Presidential election this Fall and perhaps for many years to come. Every Republican Presidential candidate until 1952 had campaigned with a promise to repeal Social Security and health care reform may similarly be argued during the next few Presidential elections.
Even if Republicans can gain control of the White House, keep control of the House of Representatives and gain a majority of the Senate, few knowledgeable observers have speculated that the Republicans are likely to gain a filibuster-proof majority in the Senate. That means that gridlock is likely when it comes to any efforts to repeal health care reform before most of the provisions go into effect in 2014.
Should the Republicans gain control of the White House, the new Administration will likely use its executive powers to slow down or even roll back implementation of parts of health care reform. A Republican Administration would be likely to offer states more flexibility and waivers. Budget pressures could lead to cutbacks in number of people covered under Medicaid and/or subsidies. Efforts to turn Medicare into a voucher program could be expected from a Republican-controlled Congress, as well as efforts to repeal Medicare’s Independent Payment Advisory Board. The eligibility age for Medicare may be increased. The Federal role in health care exchanges may be cut back. Minor modifications to insurance reform could be passed, but key provisions like guaranteed issue and community rating are unlikely to be repealed.
Even if President Obama is re-elected, many states are likely to continue to be hesitant to implement exchanges and expand Medicaid. One of the decisions the Supreme Court had to make was whether the expansion of Medicaid imposed such a burden on the states that it was unconstitutional. The Supreme Court ruled that the health care reform expansions of Medicaid must be optional for each state. Prior to this ruling, any state that failed to expand Medicaid would have lost all the Medicaid funds they had been receiving in the past.
Now that we know that health care reform has been upheld, employers need to focus on the many aspects of implementation that remain. Even though the Administration has issued many regulations, many more need to be written. Among the key regulations we need are rules on how to determine who is a full-time employee, how to determine if a plan meets the minimum-value test, how to implement the automatic enrollment provisions that apply to employers with more than 200 full-time equivalent employees and requirements to inform employees about the new exchanges. Final rules on essential health benefits that must be covered are also needed; indications are that the Federal government will allow each state to define what is essential.
Employers need to continue with plans to report the value of health insurance on W-2s issued next year for 2012. A requirement that hits even sooner is the requirement to provide a Summary of Benefits and Coverage during open enrollment periods that begin September 23, 2012 or later. Effective for plan years beginning January 1, 2013 and later, flexible spending accounts for health care will need to be limited to a a maximum of $2,500. Self-funded employers will have to pay a new comparative effectiveness research fee. Employers will also need to decide what to do when the new exchanges go into effect and any employee will be able to purchase insurance through an exchange, with some eligible to receive subsidies for doing so.