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Join the Movement. Blog 4 Good

Individual Mandate of the Affordable Care Act Ruled Unconstitutional in Texas v. U.S.

By Holly Wheeler & Mark Williams
January 9, 2020
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On December 18, 2019, a federal appeals court ruled that the Affordable Care Act’s (ACA) individual mandate is unconstitutional, since the mandate tax penalty had been reduced to zero. The individual mandate, the requirement that everyone have health insurance coverage, was previously challenged as unconstitutional. In 2012, the Supreme Court ruled that the individual mandate was valid as a tax, noting that it would not be valid under the Commerce Clause power.

The 2017 Tax Cut and Jobs Act repealed the individual mandate penalty on individuals without insurance, effective in 2019. Although the penalty was nullified, the individual mandate remained in the statute. Texas and other states filed suit challenging the constitutionality of the mandate claiming that since it no longer raised revenue for the government, it could not be upheld as a tax.

In December 2018, a federal district court agreed with Texas, finding that the individual mandate penalty was unconstitutional since it no longer functioned as a tax. In addition, the court stated that since the individual mandate was essential to the Affordable Care Act, the entire Act was unconstitutional.

On December 18, 2019, the Fifth Circuit appeals court held that the Texas district court was partially correct, in that the individual mandate, without a penalty, was unconstitutional. However, the appeals court did not uphold the portion of the decision to strike down the entire ACA.  The court remanded that aspect of the case back to the federal district court to determine whether the mandate can be severed from the rest of the ACA. The appeals court also instructed the federal district court to analyze the individual mandate’s interplay with other ACA provisions.

On January 3, certain Democratic states’ attorneys general and the U.S. House of Representatives, defending the ACA, filed petitions requesting that the Supreme Court immediately weigh in on the constitutionality of the mandate, as well as the viability of remainder of the ACA.

Employers should continue to comply with ACA, including the requirement for large employers (over 50 full-time employees) to provide affordable insurance to its full-time employees and report such coverage to the IRS (Form 1095-C). Note that all other ACA provisions, such as guaranteed issue, no annual or lifetime limits, age 26 coverage for adult children, etc., remain in effect.

Stay tuned!

Photo of Holly Wheeler Holly Wheeler

Holly G. Wheeler is an associate in Carmody Torrance Sandak & Hennessey’s Business Services and Labor and Employment groups. Holly’s practice focuses primarily on assisting businesses in all aspects of their operations including entity formation, mergers and acquisitions, and corporate governance.

Read more about Holly WheelerEmail
Photo of Mark Williams Mark Williams

Mark F. Williams‘ practice includes all aspects of employee benefits, including both tax and ERISA issues that arise in connection with employee benefit plans for both large and small clients. Mark advises employers on the design of their qualified pension plans, including 401(k)…

Mark F. Williams‘ practice includes all aspects of employee benefits, including both tax and ERISA issues that arise in connection with employee benefit plans for both large and small clients. Mark advises employers on the design of their qualified pension plans, including 401(k) and 403(b) plans.  Mark also designs and drafts nonqualified deferred compensation plans, such as Supplemental Executive Retirement Plans, and assures compliance with IRC Section 409A, which governs nonqualified arrangements.  Mark has also advised employers on compliance with the Affordable Care Act. Additionally, Mark has experience in structuring golden parachute, change in control arrangements, and deferred compensation arrangements for non-profits.

Read more about Mark WilliamsEmail
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  • Posted in:
    Employment & Labor
  • Blog:
    Carmody @ Work
  • Organization:
    Carmody Torrance Sandak & Hennessey LLP
  • Article: View Original Source

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