Supreme Court Ruling on Health Care Reform

Supreme Court upholds PPACA, including the individual mandate, but allows states to opt out of expanding Medicaid

What does the Decision mean?

· The Supreme Court upheld the health care reform law and the individual insurance mandate, ruling that Congress may impose the penalty under its

taxing authority. (Even though it would violate the Constitution's commerce clause to compel people to buy insurance, Congress can impose

the penalty on people who fail to have adequate coverage).

· Separately, the justices upheld the ACA’s expansion of Medicaid to a large new group – childless adults under age 65 with incomes at or below 133% of the federal poverty level. But the court ruled that the expansion is voluntary, and that a state could opt not to expand its Medicaid program without losing all of its other federal Medicaid funds.

· It's not yet known which states will opt not to expand Medicaid, but employers in those states might expect increased enrollment in their health plans, and may expect other changes that could affect their benefit strategies.

Immediate action items for employers

· Although the law still faces a contentious political outlook, employers must redouble their compliance efforts.

· Employers must comply with the law or pay penalties and therefore must move forward with implementation of the law’s provisions

· Employers are also still on the hook to implement the provisions in the law that were kept intact, including new requirements for 2012 and 2013, such as providing benefit summary disclosures, complying with new dollar limits on health care flexible spending arrangements, and increased Medicare withholding for high earners, as well as previously-adopted mandates.

· Cost management efforts are even more important.

· Employers should conduct a ‘Health Care Reform Check-Up’ – they need to know how the law will affect their business. [NOTE: details/tool kit for HCR Check-Up to be posted this week]

Longer term planning

· Some employers may see a sharp spike in employee and dependent enrollment for 2014 and future years due to the individual mandate and mandated automatic enrollment of full-time employees into employer coverage. Beginning in 2014, employers that fail to offer full-time employees and their dependents affordable coverage with a minimum value will face penalties under the law’s shared responsibility (also known as play or pay) provision.

· By 2014 health insurance exchanges will be operating in every state, offering community-rated health insurance to certain small employers and individuals, with federal premium tax credits and available to help some people buy that coverage.

· Some states will expand their Medicaid programs to cover a larger group, which could include lower-wage employees

· In 2018, a 40% excise tax will apply to “high cost” employer-sponsored coverage.

Things to keep an eye on

· Employers also should continue to monitor actions of Congress and Administration, especially in light of November elections. Targeted litigation over particular provisions of the law will continue.