Entire PPACA Held Constitutional
On Thursday, June 28, 2012, the U.S. Supreme Court surprised the nation with a decision upholding the controversial health care reform legislation known as the Patient Protection and Affordable Care Act (PPACA), as amended by the Health Care and Education Reconciliation Act of 2010.
Supreme Court’s Decision
The Supreme Court’s decision, (a 5-4 ruling, with Chief Justice John Roberts joining the majority) determined that PPACA, including the so-called individual mandate (which requires virtually all Americans to buy health insurance or pay a penalty) is constitutional. In the opinion, authored by Justice Roberts, the court determined that the individual mandate is a kind of tax and therefore falls under Congress’ taxing power. Therefore, although a majority of the court agreed that the enactment of the individual mandate exceeded Congress’ power under the Commerce Clause, the enactment of the individual mandate is constitutional.
Because the mandate survives, the Court did not need to decide what other parts of PPACA are constitutional, except for a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. On that question, the Court held that the provision is constitutional as long as states would only lose new funds if they did not comply with the new requirements (rather than all of their funding).
Implications for Employers
The good news of this decision is that the actions that employers and insurers have already taken to comply with PPACA will not need to be overturned. Importantly, employers will not need to unwind mandates they have already been complying with, such as covering dependents to age 26, not imposing pre-existing conditions exclusions to individuals under age 19, or other federally required mandates that have already gone into effect.
The decision also clarifies that employers that have been holding off on preparing for changes, such as whether to continue to offer coverage or pay a penalty, should assume that such mandates will continue at this time. Further, the decision paves the way for the Internal Revenue Service, the U.S. Department of Health and Human Services and the U.S. Department of Labor to finalize regulations, where such regulations may have only previously existed in Interim Final form.
Upcoming requirements applicable to most EBS schools include the following:
1. Certain preventive care services for women, including contraceptives, will be covered as part of the health reform law effective on the health plan's first renewal date on or after Aug. 1, 2012. Additional information on how our plans will cover this provision is being provided to all EBS schools under separate cover.
2. Prepare for distribution of the Summaries of Benefits and Coverage, which will be required for plan renewals and plan years beginning on or after September 23, 2012. UHC and Kaiser will be preparing these documents for EBS schools. EBS will be monitoring the carrier’s progress to ensure the summaries are distributed in a timely manner.
3. The aggregate cost of health coverage for the 2012 reporting year must be reported on the Form W-2s, required to be issued in January, 2013. However, in the case of the 2012 Forms W-2 and until the issuance of further guidance, an employer is not subject to the reporting requirement for any calendar year if the employer was required to file fewer than 250 Forms W-2 for the preceding calendar year.
4. Amend flexible medical spending account plans to comply with the $2,500 cap, applicable for plan years beginning on or after January 1, 2013;
5. Prepare to begin the additional Medicare tax withholding for certain high income earners. One of the ways expanded access required by the Affordable Care Act (ACA) will be funded is through an increase in Medicare tax for high wage earners. The Medicare tax increase, which takes effect January 1, 2013, imposes a 0.9% increase in the individual’s Medicare tax rate, applicable on earnings in excess of $200,000 in a calendar year. This additional Medicare tax increase does not apply to the employer’s share of the Medicare tax.
EBS will be keeping our schools informed as these and other deadlines approach. If you should have any questions, please feel free to contact our office.