The Supreme Court case in which the Justices consider whether the Affordable Care Act is unconstitutional without the Individual Mandate will see a judicial decision any day now.
If the court decides to strike down the law, nearly 30 million Americans will lose healthcare coverage and nearly 1.2 million would lose their jobs, according to data from the Economic Policy Institute.
But that’s not likely to happen.
Based on the oral arguments the Court held for the California v. Texas court case, it appears the Supreme Court is against striking down the ACA. Key Justices Brett Kavanaugh and John Roberts both voiced skepticism with the idea of striking down the ACA in its entirety. Roberts told Texas Solicitor General Kyle Hawkins, “I think it’s hard for you to argue that Congress intended the entire act to fall if the mandate were struck down when the same Congress that lowered the penalty to zero did not even try to repeal the rest of the act.”
Kavanaugh iterated a similar sentiment, suggesting that the Individual Mandate be severed from the rest of the ACA. “It does seem fairly clear that the proper remedy would be to sever the mandate provision and leave the rest of the act in place, the provisions regarding pre-existing conditions and the rest.”
If both Roberts and Kavanaugh side with the liberal-leaning justices, the court will rule that the Individual Mandate is constitutional, and will uphold the ACA. While that is a probable outcome, we wanted to discuss the other two possibilities as well. Both involve the federal doctrine of severability.
Severability essentially examines a portion of legislation and determines whether the law can exist without a certain component of it. In this case, it’s the Individual Mandate and whether the ACA can exist without it. When the ACA was first introduced, the Individual Mandate was a critical component because it required Americans to obtain coverage or face a penalty. As part of the Tax Cuts and Jobs Act of 2017, congress reduced the penalty amount associated with the Individual Mandate to $0, effectively nullifying it.
Those arguing against the ACA say that the Individual Mandate is unconstitutional now that the penalty amount has been zeroed out. If the court agrees and finds the ACA can exist without it, it could sever the Individual Mandate and leave the rest of the ACA intact, as opposed to completely striking it down. This possibility is similar to the first in that the ACA would remain largely as is, only the Individual Mandate would be extracted from the regulations.
The last, and most unlikely outcome, is that the Supreme Court rules that the Individual Mandate is unconstitutional and finds that it cannot be severed from the ACA. This outcome would lead to the removal of the ACA, leaving millions of Americans without healthcare coverage, including over 12 million Americans who would lose Medicaid coverage, which has expanded in the majority of states across the U.S. because of the ACA. Additionally, this outcome would pose extreme compliance burdens on employers, as individual states have already passed their own versions of the Individual Mandate following the Tax Cuts and Jobs Act of 2017. Individual states could also pass their own versions of the Employer Mandate, creating a patchwork of compliance obligations.
As we’ve recently seen with Biden’s recent advancements to the ACA, more Americans are obtaining ACA coverage from federal and state health exchanges. As part of the American Rescue Plan, monthly premiums and deductibles were reduced and eligibility was expanded. Americans who earn 400% and beyond the Federal Poverty Line (FPL) are able to pay no more than 8.5% of their monthly household income.
All of that would disappear if the ACA were to go away, and it seems that’s far too much to risk during one of the greatest health crises of our time.
The Supreme Court historically reserves the most important and controversial cases for June, its final month before breaking. According to a post by CNN, “the court announces specific decisions days each week” so new information regarding the ACA’s future is imminent.
Based on recent events, it is likely that the ACA will remain the law of the land, either in its full capacity or some modification moving forward. And the move would largely be well-received, as the healthcare law has been receiving significant support from the Biden administration.
In the event the Individual Mandate is severed from the rest of the ACA, or if it’s deemed constitutional and left as is, employers will still need to comply with the healthcare law’s Employer Mandate.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs) are employers with 50 or more full-time employees and full-time equivalent employees) and are required to offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
Employers that need assistance in complying with the ACA’s Employer Mandate should download The 2021 ACA Essential Guide for Employers to learn what is required of you as well as discover best practices for maximizing compliance and minimizing IRS penalty risk.
If your organization needs assistance identifying ACA penalty exposure this year, contact us to have have an ACA Penalty Risk Assessment performed at no cost to you.