The fate of the nation's health care reform law and the future health care decisions of many employers, consumers, insurers and state officials could be determined by a historic Supreme Court decision due in late June 2012. 

4 things to look for in the PPACA Supreme Court ruling

Featuring Jim O'Connell, Ceridian's executive consultant in Washington, D.C.

jim-oconnell.jpg"Predicting how the High Court will rule on the individual mandate is like reading tea leaves. Predicting how the court will handle severability is like reading tea leaves through a crystal ball." 

- Jim O'Connell

The fate of the nation's health care reform law and the future health care decisions of many employers, consumers, insurers and state officials could be determined by a historic Supreme Court decision due in late June 2012.

Even as the nation awaits the court's decision, the Department of Labor (DOL) is actively enforcing the Patient Protection and Affordable Care Act (PPACA). According to compliance specialists at Proskauer Rose, LLC, a law firm that provides outside counsel to Ceridian, the DOL is auditing group health plans to ensure they meet the requirements that are already in effect.

Other than focusing on compliance, employers can only wait and see how the future of health care reform unfolds, including the fate of PPACA's individual mandate.

While much attention has been paid to the individual mandate, there are actually four important issues involved, said Jim O'Connell, Ceridian's executive consultant in Washington, D.C.: "The individual mandate, its severability from the rest of the health care reform law, Medicaid expansion, and the question of standing to bring a case long before anyone has paid a penalty." The Supreme Court has consolidated several cases into the four main arguments below.

Anti-Injunction Act

Before determining whether the individual mandate exceeds Congress' constitutional authority, the Supreme Court will have to decide whether the federal Anti-Injunction Act (AIA) prevents them from considering this case before the mandate has taken effect and before any penalty has been assessed.

The AIA only would apply if the penalty or "shared responsibility payment" qualifies as a federal tax. If it is ruled a federal tax, per the AIA the individual mandate would not be open to judicial review until 2015 when actual penalties would be paid for lacking minimum coverage as of Jan. 1, 2014.

Individual mandate constitutionality

The minimum coverage provision of PPACA, more commonly known as the individual mandate, requires every individual, with few exceptions, to purchase health insurance or pay a penalty. 

"The constitutionality of the individual mandate is the central question before the Supreme Court. And that question revolves around whether the Constitution gives the federal government unlimited power to regulate commerce, including requiring Americans to buy a specific product, in this case health insurance," O'Connell said.

The Obama administration argues that the individual mandate is rooted in Congress' power to oversee interstate commerce, known as the Commerce Clause, but the penalty would be imposed via the annual income tax payment process, which complicates the issue. 

Opponents say the mandate is unconstitutional because the Commerce Clause is a limited power; the Constitution does not give the federal government broad authority to mandate that citizens purchase a particular product or service so that the government can then regulate that activity. 

Individual mandate severability

Challengers to the individual mandate say that it is "inextricably intertwined" with the remaining provisions of PPACA, so striking it down should then invalidate the entire law. However, this remains to be seen. 

O'Connell said if the Supreme Court invalidates the individual mandate, they will then have to decide whether to: 

  1. Strike down the rest of the law in its entirety,
  2. Leave the rest of the law intact,
  3. Or surgically remove from the law only those provisions thought to be inextricably intertwined with the individual mandate, e.g., the requirement to cover pre-existing conditions.

"Predicting how the High Court will rule on the individual mandate is like reading tea leaves," he said. "Predicting how the court will handle severability is like reading tea leaves through a crystal ball." 

Striking the mandate along with the entire law would raise many questions. Would insurers reverse changes they've already made? Would some people lose coverage? For instance, 6.6 million young adults were added to their parents' health plans last year as a result of the law. A few major U.S. carriers have stated that they would most likely continue to cover dependents up to age 26, but not necessarily people with pre-existing conditions, regardless of the Supreme Court outcome.

If the individual mandate falls but the rest of the law is upheld, lawmakers would face a formidable challenge. Many PPACA reforms, such as state health insurance exchanges, would rely on nearly universal participation to create a large risk pool and to help make coverage more affordable for all.

Medicaid expansion provisions

The Supreme Court will also decide whether PPACA's expansion of the Medicaid program is constitutional. Today, Medicaid functions as a state and federal partnership, with costs shared by both, and the states participate voluntarily. 

PPACA significantly expands Medicaid to make it more accessible, but states opposing health care reform have argued that compliance with the expansion would be "economically catastrophic" and that they are being coerced into participation, which is an unconstitutional abuse of Congressional power.

Ceridian will be paying close attention to the Supreme Court's decisions on these four major health care reform issues. We will keep you posted on this topic in upcoming editions of CeridianVoice. Feel free to comment on this story below. 

For more information:

  • Read more about these four key issues
  • See employer predictions on the outcome
  • Visit Jim O'Connell's HR Legislation blog