By: Josh Johanningmeier | IIAW General Counsel

Not since the Thrilla in Manila has a third bout been as eagerly anticipated as the upcoming United States Supreme Court hearing of the latest challenge to Obamacare. Well, perhaps comparing the case to the 1975 finale of the Ali - Frazier rivalry is unfair (to Ali and Frazier), but the case does merit attention. Earlier this month, the Supreme Court agreed to again hear a case concerning the validity of the Affordable Care Act (“ACA”), President Obama’s signature healthcare legislation. If the Court takes this opportunity to overturn the law, the provision of health insurance in this country could fundamentally change. This change would be especially impactful for your business clients. 

Case Background

In 2017, congressional Republicans began their efforts to repeal and replace the ACA. When those efforts failed, Republicans changed tactics and instead, chipped away at one of the act’s most well-known, and unpopular, provisions: the individual mandate. To be clear, Congress did not eliminate the individual mandate itself, but, rather, eliminated the tax penalty for failing to acquire health insurance. President Trump quickly signed this change into law. 

Seeing an opportunity, a group of 20 states brought suit in the United States District Court for the Northern District of Texas, arguing that the entire ACA is invalid because of the changes to the law. In a previous challenge, the Supreme Court upheld the individual mandate as an exercise of Congress’ taxing power. The states challenging the ACA asserted that, with no tax penalty for violations, the individual mandate can no longer fall under Congress’ taxation powers and must be considered unconstitutional as a violation of individual liberty. Going further, the states argued that the individual mandate is a fundamental component of the ACA, and, as a result, the entire law must be overturned. In a December 2018 decision, District Judge Reed O’Connor agreed and ruled the ACA unconstitutional. 

Shortly thereafter, several groups, including Democratic state attorneys general and the House of Representatives, under Democratic control at that point, appealed the decision to the Fifth Circuit Court of Appeals. Given a choice between finding the individual mandate constitutional and overturning the entire law, the Fifth Circuit chose a middle way. The court agreed with Judge O’Connor that the individual mandate is unconstitutional, but sent the case back to the lower court to reconsider if such a holding renders the entire act invalid. The House and the states led by Democratic attorneys general appealed that the decision to the United States Supreme Court, which agreed to hear the case. Based on standard timeframes, the Court will likely issue a decision in spring or summer of 2021. 

Now What? 

Importantly, it is not clear how the Supreme Court will rule on this case. The ACA has come before the Court on two previous occasions, and it has upheld the law both times. While the makeup of the Court has changed significantly in recent years, all five Justices making up the majority in both decisions remain on the Court. However, the law has now changed, and in ways relevant to the Court’s previous opinions. The takeaway: while it is entirely possible the law will be upheld, you and your agencies should be prepared for it to be overturned. 

If the entire law is invalidated, a key impact will be the elimination of the “employer mandate.” As you are likely aware, currently, employers with 50 or more full-time employees, or full-time equivalents, must provide health insurance to 95% of those 

full-time employees and their children that is both affordable and ensures minimum value. Coverage is considered “affordable” if employee contributions do not exceed a specified percentage of that employee’s household income (9.78% in 2020). A plan provides “minimum value” if it pays for at least 60% of covered services (including deductibles, copays and coinsurance). If employers violate their mandate, they face a monetary penalty. 

If the ACA is overturned, however, there will be of course no employer mandate. This will likely result in many of your business clients evaluating changes to their employee health plans. It is critical that you and your agencies work with legal counsel so that you can make informed decisions when it comes time to design plans responsive to your clients’ needs. 

Conclusion

While it is unclear if the Supreme Court will take this opportunity to overturn the ACA, it is crucial to be prepared in the event that it does. Keep an eye on this column and other IIAW publications for developments on this case, and make sure to work with legal counsel to ensure that you and your agencies are able to successfully navigate what could be a complex path forward.