Sometime in the next two weeks or so, we expect to see the much-anticipated ruling from the Supreme Court on the constitutionality of PPACA. What that ruling will look like remains anybody's guess. But from the issues that were argued at the Court, we can identify some possible outcomes and begin to consider what that might mean for employers.
At its core, the litigation over health care reform involves the constitutionality of one small piece of the law: the individual mandate. The question is whether Congress has the power to require Americans to obtain health insurance or pay a penalty.
The case also touches on two related points that are relevant in considering possible outcomes. (1) Does an arcane tax statute called the Anti-Injunction Act prohibit the Court from even considering the case before the individual mandate goes into effect in 2014? (2) If the individual mandate is unconstitutional, can it be "severed" from the rest of the legislation and tossed aside by itself, or does the whole law fail?
The Possible Outcomes
Given these issues, there are at least four possible outcomes for the case.
- Wait and See. The Court could decide the Anti-Injunction Act applies, thereby precluding a decision at least until 2014. (Most people following the case think this outcome is unlikely, but it remains a possibility.)
- Full Speed Ahead. The Court could decide the individual mandate is valid, leaving the law fully intact.
- Partial Invalidity. The Court could decide the individual mandate is unconstitutional but severable, leaving at least a portion of the law in effect.
- Total Invalidity. The Court could decide the individual mandate is unconstitutional and unseverable, rendering the entire act invalid.
The Impact on Employers
Each of these outcomes would mean different things for employers.
If the Anti-Injunction Act precludes a ruling until 2014 (or later), the law will remain in place and continued compliance will be required. Employers will need to prepare for the changes that go into effect in 2013 and 2014 -- things like the SBC, W-2 reporting, the PCORI trust-fund tax, and the play-or-pay penalties. But significant uncertainty regarding the long-term application of the law will remain.
If the law is upheld as constitutional, all of those same compliance requirements will need to be prepared for, but there will be more certainty (for better or worse). At least until the fall elections.
If there is partial invalidity, it will be necessary to understand what has been eliminated and what remains. If features of the law that have already gone into effect are eliminated, there may be difficult questions about both what that means going forward (transitioning back to the "old" law) and what the consequence will be for having complied with a now-invalid law. To take a simple example, consider the rule extending dependent-child coverage to age 26 and allowing that coverage to be provided tax-free. If that rule is undone, will employees be taxed on the prior coverage that has been provided to their non-tax-dependent children? Presumably there will be some reasonable transition relief afforded by the appropriate administrative agencies (IRS, DOL, and HHS), but that will need to be evaluated.
If there is total invalidity, compliance with yet-to-be-implemented mandates can be foregone. But there will still be transitional problems like the one described above, as we migrate back to prior law and think about what that means for everything that has happened in 2010, 2011, and 2012.
In short, regardless of how the case is resolved, there is likely to be work ahead.