The recent Supreme Court decision clears away some of the uncertainty that employers have been facing about the future of health care reform and how to plan their benefits strategies. The bottom line is employers will need to continue to develop and implement solutions to comply with the Patient Protection and Affordable Care Act (PPACA) requirements that continue to take effect later this year and next, as well as in the years ahead. 

Court's ruling means 'business as usual' for employers — with an eye toward compliance

jim-oconnell.jpgThe recent Supreme Court decision clears away some of the uncertainty that employers have been facing about the future of health care reform and how to plan their benefits strategies. The bottom line is employers will need to continue to develop and implement solutions to comply with the Patient Protection and Affordable Care Act (PPACA) requirements that continue to take effect later this year and next, as well as in the years ahead.

"Litigation around the health care reform law is over and employers need to refocus on being in compliance with the law's mandates as they're written," said Jim O'Connell, longtime Capitol Hill consultant for Ceridian. 

In brief, here is what the Supreme Court decided:

  • The penalty for not complying with the individual mandate is a valid exercise of Congress's taxing power and is constitutional.
  • The Medicaid expansion is also constitutional, although states cannot be stripped of existing federal Medicaid funding for not complying with expansion provisions.

"Employers need to change their focus now from litigation to implementation." 

- Jim O'Connell

Still, some uncertainty remains. The final fate of the 2010 health care reform law won't be known until after the elections in November. Republicans have vowed to dismantle it, and they caution that even if President Obama wins re-election, implementation of the state health insurance exchanges, a key component of the law, could 
be delayed.

Below, O'Connell talks about what the recent decision means to employers:

Ceridian: First, as someone who has closely followed this issue, were you surprised by the Supreme Court ruling upholding the constitutionality of the health care reform legislation?
Jim O'Connell: I was not surprised by the result, but I was surprised by the way the majority got to the result. I think most people had dismissed the tax angle controlling the constitutionality of the individual mandate because the lower courts had really not given it much attention. They had simply discarded the tax argument because the language used throughout the statute was that it was a penalty, and the framers of the law had gone to some length to say it was not a tax. 

Do you think some employers will be still be taking a wait-and-see approach to reform changes, perhaps until the outcome of the November presidential election? 
I do not think they will do that. I don't think their HR administrator or legal counsel will advise them to hold off. Litigation around the health care reform law is now at an end. So from a legal standpoint, employers now need to redouble their efforts to come into compliance with all the mandates, and the timeline for all of those mandates. 

Yes, there is likely to be legislation in the future. But I doubt very much that future legislation would completely repeal PPACA. There are a lot of provisions in that law already in effect that the public strongly supports: the ban on pre-existing condition exclusions; the eligibility of dependents up to age 26 to remain on their parents' health care plans; the availability of preventive health services with no cost sharing; the prohibition on annual coverage limits; as well as other provisions that are going to be taking effect in the near future.

So I think that it would be prudent for employers to assume the law will remain in some form.

I must also say that no one believes, not even President Obama, that the law is perfect in the way it was enacted in 2009 and 2010. I think we can expect subsequent rounds of legislation. But again, employers need to focus on the here-and-now and being in compliance with the mandates as they're written. 

So, it's business as usual for employers.
Yes, that's one way to put it. Employers need to change their focus now from litigation to implementation.

When we look at what's been implemented up to this point, does the law appear to be working as intended?
What might be called the insurance reforms that took effect in 2010, 2011 and this year are working as intended. As I understand it, more than 2.5 million young people under the age of 26 have become enrolled in their parents' health plans because of that one provision. And certainly, the ban on pre-existing condition exclusions for children that has already taken effect has been a tremendous help to those parents. We also had the very interesting statement made recently by some of the major insurance companies — Aetna, United Health Care and others — that regardless of how the Supreme Court ruled on the individual mandate, those companies intended to continue, on a voluntary basis, certain insurance reforms. So that tells us something about how well they're being received.

As far as addressing rising health care costs, that's still something of an unknown with this law, isn't it?
As soon as you utter the word "cost" you are now in the domain of one of the vast uncertainties of PPACA. We don't really know what is going to happen to health insurance premiums because of this law. Going forward, the estimated 30 million more people who will become insured is obviously going to have some impact on cost. 

But there is another aspect of cost I think is even more important: What is going to be the impact on federal government spending as a result of this law? There are many scenarios under which the impact could be much, much greater than was originally estimated. When the bill became law, the 10-year cost estimate came in at less than $1 trillion. But there are now some estimates that the 10-year spending impact could be $2 trillion. 

What in this law might help employers combat rising costs?
The trend toward consumer-driven health care — empowering employees to manage their own health insurance profile and assume greater responsibility for their families' wellness — has been under way for some years. But in some ways, health care reform can act as a catalyst. I think the recent trend to redefine employee benefits, to sharpen decision-making, to share costs, could almost be seen as having been an incremental evolution. But what PPACA could potentially do is really bring about a revolution in thinking — innovation in employee health care benefits and the design of employee benefits in ways that we haven't even imagined yet, all under the big tent of defined contribution plans. 

When would we see that innovation come to the forefront?
As we look at the law going forward, 2014 becomes a flashpoint for employer planning. The individual mandate, the employer mandate and the health insurance exchanges all occur in 2014, and that's less than two years away. That is going to be a very sticky wicket from an employer standpoint because it involves a lot of federal government prescription on health plan design and affordability. From a planning standpoint, I would hazard to guess that many, many employers are not only thinking about open enrollment in 2012 for their 2013 plan, but are really thinking much longer range about health benefits and how to partner with workers and their families to create the best outcomes.

What should employers be paying attention to right now?
First, be compliant. Make sure you have a compliance plan and that you have C-level executive oversight of that plan, not just because of the liability associated with not being in compliance but also because of the importance from an employee-relations standpoint that you are fully compliant with the letter and the spirit of the health care law. Know what mandates take effect and when, especially this year and next when the FSA cap, W-2 reporting, employee notice about state exchanges, additional Medicare tax withholding for high-wage workers and the mandated summary of benefits and coverage all take effect. And make sure that the benefits leadership of the company is on top of 
all of that.

Second, once you have that completely buttoned down, I would task the same team and others with thinking longer term about where you want to be in two years, five years and ten years from now from an employee health
benefits standpoint.

Is your company prepared for health care reform compliance? Add your comments below.

For more information:

  • Download our updated employer health care reform checklist
  • Read Jim O'Connell's HR Legislation blog
  • View the Supreme Court decision