Today's New Member Special: Save $15 & Get a Tote!
Employers are offering creative perks to attract and retain today’s workers.
Plus all the HR resources you need to be more efficient and effective this fall!
Prepare for your exam with the guidance of a SHRM-certified instructor in Boston, Oct. 24-26.
Learn how to make the business case for diversity, October 25-27.
The U.S. Supreme Court announced its much-anticipated decision on the Obama administration’s health care reform law at 10:07 a.m. on June 28, 2012, ruling 5-4 that the controversial individual mandate, which requires virtually all Americans to buy health insurance, is constitutional. Although much of the debate on the Patient Protection and Affordable Care Act (PPACA) centered on the reach of the U.S. Constitution’s Commerce Clause, the court upheld the law as a permissible tax, concluding that the penalty that the law imposed for refusing to buy insurance was the kind of measure that Congress can impose under its taxing power.
Because the court upheld the mandate, it did not have to resolve the severability issues raised by the lawsuit, questioning what parts of the law would survive if the mandate did not. The court upheld the entire law but limited one provision that would require states to comply with eligibility requirements for Medicaid or risk losing their funding. The court held that the provision is constitutional as long as states would lose only new funds if they didn't comply with the new requirements, rather than lose all of their funding.
The majority decision, written by Chief Justice John Roberts, stated that the mandate did not survive scrutiny under the Commerce Clause. However, a separate concurring opinion written by Justice Ruth Bader Ginsburg, joined by Justices Stephen Breyer, Sonya Sotomayor and Elena Kagan, went further, saying the mandate was permissible under the Commerce Clause as well as pursuant to Congress’s taxing authority.
The four dissenting justices, in an opinion written by Justice Anthony Kennedy and joined by Justices Antonin Scalia, Clarence Thomas and Samuel Alito, concluded that the whole law should have been struck down as unconstitutional.
The court’s ruling is massive. The chief justice’s opinion is 59 pages, Ginsburg's opinion is 61 pages, and the opinion of the four dissenters runs 65 pages, followed by a separate two-page dissent by Thomas.
Employers and HR Need to Act Now
Now that the high court has upheld the constitutionality of the PPACA, “everything is back to business as usual,” James Napoli of Proskauer’s Washington, D.C., office told SHRM Online. Employers and providers need to consider how to implement the law’s myriad provisions, he said.
“Whether the ruling is good or bad from a constitutional perspective, I’ll leave to academics," Napoli noted. “But, it is a stabilizing factor for the employer-provided health care system,” he emphasized. “At a minimum, employers now know what set of rules they are working under.”
What this means, he added, is that employers and providers need to turn their attention to the many mandates contained in the law that go into effect in 2013 and 2014.
It’s not that employers have stopped implementing the law’s provisions, but many have slowed down while waiting for the court’s ruling, Napoli said. It will take lots of time and resources to make some of the changes. “Now that the court has ruled, employers are free to once again commence implementing the reforms in a shortened period of time,” he said.
And some of these changes are quite significant, said Sandy Feingerts of the New Orleans office of Fisher & Phillips. Under the law, she noted, employers will have to subsidize insurance more heavily for some employees. Another change involves the Internal Revenue Service rule concerning nondiscrimination by health plans, which has not been enforced aggressively but is incorporated in the reform law. Under this rule, health plans can’t discriminate as to eligibility or benefits. So, for example, a health plan cannot have instant eligibility for management and a waiting period for staff, and the plan cannot offer high-level employees more comprehensive benefits than those offered to low-level employees.
Also, employers must report the value of employer coverage on IRS Form W-2, cap dollar limits on health care flexible spending arrangements, and increase Medicare withholding for high earners (those earning more than $200,000 per year). And they must comply with the reforms already in effect, such as coverage of dependents up to age 26.
By 2014, health insurance exchanges must be operating in every state, offering community-rated insurance to certain small employers and individuals, with federal premium tax credits available to help some people buy that coverage. Some states have been slow to move ahead with exchanges while waiting for the high court to act.
HR is the first place employees will go with their health care questions, Feingerts noted. Employees might not have been paying too much attention to the reform law, but now they might focus on the individual mandate and ask what it means for them.
“HR in particular will have to understand the individual mandate and will have to have good communications with the employees,” she said. For example, employees might ask such questions as whether they have to opt for the employer’s insurance or whether they may choose to find another plan--or what happens if they choose no insurance.
HR professionals need to begin educating themselves now, she concluded.
Joanne Deschenaux, J.D., is SHRM’s senior legal editor.
SHRM Online Health Care Reform Resource Page
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
CA Resources at Your Fingertips
SHRM’s HR Vendor Directory contains over 3,200 companies