We have received a number of questions about the Supreme Court’s possible decision (which it may hand down in June) and, in particular which specific provisions are at stake under various decision scenarios.
What Affordable Care Act (ACA) provisions impacting group health plans are at issue?
The only ACA requirement that the Supreme Court is deciding that directly impacts group health plans is the individual mandate. Generally, the ACA requires individuals to all have minimum essential coverage beginning in 2014 or be subject to a penalty that will be payable on their personal tax return in 2015 (for the 2014 tax year).
What if the Court decides the individual mandate is a tax under the Anti-Injunction Act?
One of the first questions the Court will decide will be whether it is able to hear the case at all. If the Court decides the penalty is actually a tax (as the Fourth Circuit Court of Appeals did), it may find that, under the Anti-Injunction Act, it cannot decide the case until the tax actually applies, which is not until 2015. In that case, all of the current and future ACA provisions that apply to group health plans will continue to apply. The issue then may be brought up again at a later date (2015 or later).
What if the Court decides the individual mandate is not a tax (so OK to go ahead and consider) and decides the individual mandate is constitutional?If the Court decides it can take up the question of the individual mandate, it next must decide if the mandate is within Congress’ powers under the Commerce Clause and is constitutional. If the Court finds that the individual mandate is constitutional, all of the ACA provisions that apply to group health plans will continue to apply with no changes.
What if the Court finds the individual mandate is unconstitutional?
If the Court finds that the individual mandate is unconstitutional, it next must decide whether the individual mandate is severable or can be separated from the other requirements of the law. Even if it may not be logical for the individual mandate to be considered separately from the rest of the law, it still may be legally possible for the rest of the law to remain, even if the individual mandate is dropped.
If the individual mandate is found unconstitutional and severable from the rest of the law, only the individual mandate will be void. The other requirements of the ACA, including age 26 rule, annual and lifetime limit rules, preventive care requirements, new summary of benefits document, employer "pay or play" mandates, new Exchange coverage, and Cadillac tax all will still apply.
If the individual mandate is found unconstitutional and NOT severable from the rest of the law (or so intertwined that with certain provisions that they cannot stand alone), these provisions or even the entire law may be struck down. The impact on group health plans may depend on whether the requirement is already applicable or not.
- Where a requirement that is struck down is not yet applicable, the requirement generally no longer will apply (so plans will not have to come into compliance with those provisions).
- Where a requirement is struck down and has already become applicable (such as the insurance market reforms), even if the law no longer requires compliance, these new rules likely already have become part of the plan through a plan amendment or contract term with an insurer or third party administrator. It may not be easy to unwind these requirements quickly. Plans likely will need to review their insurance policies, TPA agreements, plan documents, SPDs, and other communications and procedures to see what amendments may be required. TPA fees and insurance premiums may need to be re-negotiated.
Plans also may need to communicate changes to participants. ERISA requires a group health plan to provide a summary of material modification (SMM) where there is material reduction in covered health benefits within 60 days of adoption. A "material reduction" means any modification that, independently or in conjunction with other changes, would be considered by an average plan participant to be an important reduction in covered services or benefits. For example, if the plan decides to drop the age 26 rule because it no longer is required, and revert back to its original requirement of only covering dependents who are full-time students, the plan likely would need to send an SMM to plan participants within 60 days of adopting the new change. Plans will need to decide the best timing to adopt changes and avenue to deliver these types of notices.
Plan sponsors should be watching for the Supreme Court's decision so they can be ready to incorporate any plan changes or move forward with ACA compliance, regardless of the outcome.
Got a health-care reform question? You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions
You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html
Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C. She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare. She represents employers designing health plans as well as insurers designing new products. Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.
Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.
PLEASE NOTE: This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.