bookmark this page

Welcome to Stat! Health Reform News. On this page, Sibson provides highlights of recent health care reform developments.

January 5, 2012

The U.S. Supreme Court has announced that it will rule on several questions concerning the legality of the Affordable Care Act.1 Specifically, it will address the following issues:

  • Whether the legality of Affordable Care Act’s requirement that individuals either purchase health insurance or pay a penalty (the law’s “individual mandate” or “minimum coverage provision”) can be determined now or must wait until after that provision of the law takes effect in 2014,
  • If a decision about the legality of the individual mandate can be made now, whether the mandate is constitutional,
  • If the individual mandate is deemed to be unconstitutional, whether it can be “severed” from the other provisions of the law, allowing the remainder of the Affordable Care Act to be implemented, and
  • Whether the law’s expansion of Medicaid to a broader group of low-income individuals is constitutional.

The cases that will be heard are National Federation of Independent Business v. Sebelius (No. 11-393), U.S. Department of Health and Human Services v. Florida (No. 11-398) and Florida v. Department of Health and Human Services (No. 11-400). On August 12, 2011, the U.S. Court of Appeals for the 11th Circuit in Atlanta ruled in these cases that although the individual mandate in the Affordable Care Act is unconstitutional it can be severed from the remainder of the Affordable Care Act.2

The Court scheduled the cases for five and one-half hours of oral argument on March 26-28, 2012. Two hours are reserved March 27 to focus exclusively on the constitutionality of the individual mandate. Two and one-half hours are allocated on March 28 to hear arguments over the severability of the individual mandate from the rest of the law and the constitutionality of the Medicaid expansion. One hour on March 26 will address whether the federal Anti-Injunction Act (AIA) effectively blocks a challenge to the individual mandate before it takes effect in 2014. The AIA generally prevents a lawsuit challenging assessment of a tax until the tax has actually been paid. Because the individual mandate penalty is a tax penalty, the argument is that until an individual pays the tax because they did not have health insurance, the lawsuit is premature.

Possible Supreme Court Actions

The Supreme Court will not necessarily issue an “up or down” decision on the Affordable Care Act. The range of possible decisions by the U.S. Supreme Court are listed below along with brief notes about what implications of each decision would be for health care reform:

  • Defer the Decision  It is possible that the Court could defer a decision on the law until 2014, when the individual mandate and other challenged provisions go into effect.
  • Uphold the Entire Law  The Court could find that the Affordable Care Act was entirely appropriate as enacted by Congress, and uphold the entire law. This decision would mean that there would be no changes to the Affordable Care Act and that implementation of the Affordable Care Act would continue. Existing regulations and programs enacted by the Affordable Care Act would be unchanged, as would the obligations of plan sponsors.
  • Throw Out the Individual Mandate and/or the Medicaid Expansion  The Court could determine that, although the individual mandate (also called the “minimum coverage provision”) is not constitutional, the rest of the Affordable Care Act works despite the lack of a mandate. This decision would result in some relatively modest changes to health care reform. For example, if the individual mandate did not exist, the health insurance marketplace could be affected because insurers may provide different products at different prices without the incentive of an individual mandate to increase the number of individuals purchasing insurance coverage. However, most group health mandates, such as the obligation to cover adult children or the grandfathered status rules, could continue unchanged. In arguments to the Court, the Justice Department stated, “Most of the Act’s myriad provisions have nothing to do with the minimum coverage provision [individual mandate] and many of them have already taken effect, demonstrating that Congress believed they could operate independently.”
  • Throw Out Everything Related to the Individual Mandate  The Court could undertake a more expansive review of the Affordable Care Act to determine what provisions are and are not “severable” from the individual mandate. For example, the Justice Department has taken the position that while many parts of the Affordable Care Act have nothing to do with the individual mandate, the guaranteed-issue and community-rating provisions should not be severed from the individual mandate. Beginning in 2014, the guaranteed-issue and community-rating provisions of the Affordable Care Act will bar insurers from refusing to issue health insurance coverage to a person because of a pre-existing medical condition and from charging higher premiums based on a person’s medical history. The Justice Department argues that without an individual mandate, community-rating and guaranteed-issue provisions could lead to a “death spiral” of individual insurance. If the Court reviewed the individual provisions of the Affordable Care Act to decide which are and are not “severable” from the individual mandate, it could overturn those that are not severable while leaving the severable portions intact. Many of the law’s provisions are not related to the individual mandate, and could be upheld in this scenario.
  • Throw Out the Entire Law  Finally, the Court could rule that the entire law is invalid. This decision would result in substantial changes for plan sponsors and participants. All of the group health plan mandates, the Medicare payment changes, the Medicare Part D program changes and other Affordable Care Act programs would all be overturned, resulting in substantial confusion among health plan administrators.

Time Line

The Court requested that briefs on the key issues be filed in early January. Reply briefs are due in early February. Final briefs are due in mid-March.3

The Supreme Court is expected to hand down what is likely to be a landmark decision in June or July 2012.

• • •

As with all issues involving the interpretation or application of laws, regulations and judicial decision, plan sponsors should rely on their attorneys for authoritative advice on the Affordable Care Act. Sibson Consulting can be retained to work with plan sponsors and their attorneys on all compliance issues related to health care reform.

1
The November 14, 2011 announcement is available on the following page of the U.S. Supreme Court’s website: http://www.supremecourt.gov/orders/courtorders/111411zor.pdf
2
The decision is available on the following page of the Court’s website: http://www.ca11.uscourts.gov/opinions/ops/201111021.pdf
3
The briefing schedule is available on the following page of the U.S. Supreme Court’s website: http://www.supremecourt.gov/docket/PDFs/120811zr.pdf

View Stat! Health Reform News archives