Archived Insight | December 18, 2018
Late on December 14, 2018, hours before the end of the 2019 open enrollment season for coverage on the Affordable Care Act’s (ACA) federal Marketplace or state Exchanges, a District Court Judge in Texas ruled that the law’s individual mandate is unconstitutional and, therefore, the entire law is invalid.
Plan sponsors are not required to take any action at this time. The case will likely continue to work its way through the courts for some time.
Share this page
Seema Verma, Administrator of the Centers for Medicare & Medicaid Services (CMS) tweeted at 11:12 pm Friday night that the decision would not stop the final day of ACA open enrollment:
The recent federal court decision is still moving through the courts, and the exchanges are still open for business and we will continue with open enrollment. There is no impact to current coverage or coverage in a 2019 plan. — Administrator Seema Verma (@SeemaCMS) December 15, 2018
Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas issued his ruling Friday night in litigation brought by two individuals and 20 Republican Attorneys General to declare the insurance mandates of the ACA unconstitutional.
While the U.S. Supreme Court upheld the constitutionality of the ACA on previous occasions, this lawsuit presented a fresh challenge to the law.
In 2012, Chief Justice Roberts, joined by Justices Ginsberg, Breyer, Sotomayor and Kagan, held that the individual mandate was constitutional because Congress has the power to tax individuals who do not purchase health insurance.
Plaintiffs in this Texas case argued that in 2017, when Congress repealed the penalty for violating the individual shared responsibility mandate to obtain health insurance coverage, the mandate could no longer be upheld under Congress’s taxation power.
The plaintiffs stated that due to the 2012 U.S. Supreme Court ruling, the mandate became an unenforceable and unconstitutional exercise of congressional power when the tax penalty was reduced to zero.
In addition, the plaintiffs argued, since the ACA was built on the three-legged stool of the individual mandate, guaranteed issue, and community rating, all three provisions of the ACA must be invalid.
Judge O’Connor agreed with these arguments.
This decision raises several questions. First, the Judge extended his determination of unconstitutionality to the entire ACA, without discussion of the various provisions in the law, many of which are unrelated to both the individual mandate or individual insurance market.
There is also no discussion of the parts of the ACA that have already been implemented, such as the early retirement reinsurance payment or the closing of the Medicare Part D coverage gap.
Sponsors of employer group health plans should note that there is nothing in the decision about the ACA’s group health plan mandates. Although the Cadillac Tax and Health Insurance Tax are mentioned in passing, there is no comment as to the implications of this decision on those taxes.
It is not apparent that the decision has any impact outside of the immediate parties to the litigation, if that.
Some legal experts believe we should expect an immediate stay of the decision. Moreover, California’s Attorney General announced Friday he will appeal the decision to the Fifth Circuit Court of Appeals.
Some legal scholars predict the decision will be overturned by the Fifth Circuit, while others anticipate the question of the ACA’s constitutionality will return to the Supreme Court.
In anticipation of an adverse decision from Texas, in September Maryland’s Attorney General filed a lawsuit seeking a judgment that the ACA is constitutional. That lawsuit has yet to be heard.
If the Maryland Attorney General is successful, the dueling Texas and Maryland decisions could result in the U.S. Supreme Court accepting the cases for decision at a later date.
This decision may also encourage Congress and President Trump to act. Both sides of the aisle will need to determine what strategy to take on the healthcare debate, with an eye towards the next Presidential election in 2020.
Health, Public Sector, Multiemployer Plans, Healthcare Industry, Higher Education, Architecture Engineering & Construction, Pharmaceutical, Corporate
Retirement, Health, Communications, Multiemployer Plans, Public Sector, Healthcare Industry, Higher Education, Architecture Engineering & Construction, Consulting Innovation, Corporate, ERISA@50
Retirement, Health, Public Sector, Higher Education, Communications, Healthcare Industry
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
© 2024 by The Segal Group, Inc.Terms & Conditions Privacy Policy California Residents Sitemap Disclosure of Compensation Required Notices
We use cookies to collect information about how you use segalco.com.
We use this information to make the website work as well as possible and improve our offering to you.