ACA Obligations Remain in Place Despite Court Ruling

A controversial decision on the ACA’s constitutionality is headed to the Supreme Court

Stephen Miller, CEBS By Stephen Miller, CEBS December 17, 2018
ACA Obligations Remain in Place Despite Court Ruling

updated on December 31, 2018

Despite a new ruling by a federal judge in Texas that the Affordable Care Act (ACA) is unconstitutional, all ACA coverage and reporting obligations for employers remain in place.

The court's ruling in Texas v. United States "is sure to be appealed and will certainly land in the Supreme Court's lap again," said Edward Fensholt, senior vice president and director of compliance services at Lockton, a benefits brokerage and consultancy based in Kansas City, Mo. 

"Nothing will change now or for the foreseeable future," said Tiffani Greene, an attorney with Fisher Phillips in Charlotte, N.C.

The ruling "is a declaratory judgment and not an injunction to freeze the ACA. This means at this point the ruling doesn’t impact anyone," explained Chatrane Birbal, director of policy engagement at the Society for Human Resource Management. "Compliance with the ACA’s employer mandate and employer-reporting requirements are still in effect and employers should continue to comply with these requirements until the Supreme Court upholds or overturns the recent decision.”

Removing any doubts about ACA compliance, the Department of Health and Human Services stated on Dec. 17 that it will "continue administering and enforcing all aspects of the ACA as it had before the court issued its decision."

Employers that are subject to the ACA should be preparing to distribute to employees and file with the IRS information-reporting Forms 1095-B or 1095-C in early 2019.

On Dec. 31, O'Connor issued a stay that keeps the ACA in place while his ruling is appealed.

Legal Issues

District court judge Reed O'Connor ruled on Dec. 14 that because Congress eliminated the penalty on individuals without ACA-compliant health coverage effective Jan. 1, 2019, the ACA's individual mandate requiring people to have health insurance "can no longer be sustained as an exercise of Congress's tax power." O'Connor then struck down the ACA in full, concluding the individual mandate is so connected to the law that Congress would not have passed the ACA without it.

The ruling by O'Connor, who was appointed to the bench by former President George W. Bush, was a victory for 20 states with Republican attorneys general who brought the case against the ACA. A group of 17 Democratic attorneys general defended the law during the Texas litigation and have announced that they will do the same at the appellate court level.

When the case makes its way to the U.S. Supreme Court, "the reliably liberal block of the court, Justices Ginsberg, Breyer, Sotomayor and Kagan, are all expected to vote to uphold the ACA, as they did in 2012," when the Supreme Court ruled 5 to 4 that the ACA's individual mandate was constitutional, Fensholt said. In that decision, Chief Justice John Roberts unexpectedly joined with the court's liberals to uphold the ACA, and "it appears that—like in 2012—the fate of the ACA will once again be in the hands of Chief Justice Roberts," he predicted.

[SHRM members-only toolkit:
Complying with and Leveraging the Affordable Care Act]

What's Next?

What happens next in the appeals process is not entirely clear, Fensholt noted. The district court's ruling doesn't take effect until 2019, "when the individual mandate tax goes away," he pointed out. The ruling, however, will be appealed to the Fifth Circuit Court of Appeals in New Orleans, which is likely to stay the Texas court's action against the ACA while the appeal is decided. After that, "no matter how the appeals court rules, the matter is certain to move on to the Supreme Court," Fensholt said.

Laurence Tribe, an ACA advocate who teaches constitutional law at Harvard Law School, wrote that "there is every reason to believe that a strong, nonpartisan majority of justices" will uphold the law.

However, "No one can predict how an appeals court or the U.S. Supreme Court will treat this decision as the case winds its way up the judicial system on review," Greene said.

Even if the Supreme Court were to affirm the district court's ruling, many feel that the ACA's key protections would be quickly reinstated.

"The ACA has been fully woven into the fabric of the American health care system. Pulling the emergency brake on the entirety of the law would be logistically impossible," blogged Josh Blackman, a professor at South Texas College of Law who closely follows ACA-related litigation.

With Democrats back in charge of the House of Representatives, Birbal expects to see legislation introduced in the next Congress "to preserve and defend the ACA, including proposals to reaffirm protections such as guaranteed renewability of coverage and the elimination of pre-existing conditions restrictions."

Blackman noted that a large majority of the public now supports protections for people with pre-existing conditions, and if the Supreme Court were to hold that the ACA was unconstitutional, "I suspect that Congress would re-enact those provisions with broad bipartisan support."

Greene noted, however, that "it remains to be seen whether a fractured Congress and the president can develop revisions to the law that would satisfy the courts and the American people."

SHRM supports congressional reforms to strengthen and improve the employer-based health care system, Birbal noted, including bipartisan proposals to repeal the "Cadillac tax" and legislation to ease ACA employer reporting requirements.

Another Scenario

Others predict that striking down the ACA would pave the way for Democrats to pass a national health insurance "Medicare for All" bill.

"As Democrats prepare to take control of the House, the party's left wing is eager to open a new front in the health care wars," wrote Will Marshall, president of the Progressive Policy Institute, a liberal think tank, following the district court decision. "Emboldened by midterm gains and polls that show voters favor major changes in the U.S. health care system, they are demanding that party leaders make 'Medicare for all' a top priority in the new Congress."

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