The United States Supreme Court (the “Court”) issued a historic holding today, June 28, 2012. The Court has ruled that the Patient Protection and Affordable Care Act of 2010, together with the Health Care and Education Tax Credits Reconciliation Act of 2010 (collectively, the “Health Reform Act”), which had been signed into law in late March of 2010, is almost entirely constitutional.
The Court, in a 5 to 4 decision, opined that the portions of the Health Reform Act that most directly impact employers are lawful, including the polarizing individual coverage mandate taking effect in 2014. The Court’s rationale for upholding the individual mandate was not that Congress can force individuals to buy health insurance (as the Court found that the mandate would actually violate the Commerce Clause), but rather that Congress, under its power to “lay and collect taxes,” is permitted to impose a tax on individuals for failing to have insurance.
The immediate impact of this holding on employers is fully discussed in Akerman’s Practice Group Update. In summary, the following main points should be kept in mind: (1) small employers with average wages of less than $50,000 who pay at least 50% of the premium for employees’ health insurance will be able to take an income tax credit equal to a percentage of premiums paid; (2) plan mandates continue to apply, such as (i) certain restrictions on pre-existing condition exclusions; (ii) the reduction/elimination of lifetime dollar limits and caps on annual limits on essential health benefits; (iii) the restrictions on rescission of coverage; and (iv) the extension of dependent coverage to age 26 (though this requirement does not apply to grandfathered plans if the dependent is otherwise eligible for another employer-sponsored health plan); (3) a summary of benefits and coverage must be provided commencing in the fall of 2012; (4) the aggregate cost of health coverage must be included in the 2012 W-2 for employees; (5) the $2,500 limit on health FSA spending applies for plan years after January 1, 2013; (6) state exchanges for small business health option programs must be established by 2014; and (7) large employers with over 50 employees will be subjected to fines or penalties if they don’t offer insurance, or the offered insurance is too expensive for employees, commencing in 2014.