What’s Next? The Impact of the Supreme Court Decision on Employers
By Larry Grudzien, J.D.
September 2012 – The following is a review of the recent Supreme Court Decision on Patient Protection and Affordable Care Act (the Act) and outlines what steps an employer must take in 2012 and 2013 to comply.
The Supreme Court Decision
On June 28, 2012, the Supreme Court, in a 5-4 decision, ruled that payments required of individuals who do not maintain minimum health coverage under the “individual mandate” was not a penalty, but was a tax and allowed under the Congress’s power to tax under Article 1 of the Constitution. By determining that the mandate was a tax, the Supreme Court found the mandate was constitutional, but rejected the government’s arguments that the individual mandate was allowed under Constitution’s Commerce Clause or the Necessary and Proper Clause.
Chief Justice Roberts indicated in the majority opinion that since the mandate requires individuals to purchase health insurance or make a shared responsibility payment, it does not regulate existing commercial activity, but instead complies individuals to become active in commerce by purchasing a product. He reasoned that Congress is not permitted to regulate such inactivity, but only commercial activity. If Congress could regulate inactivity, it would justify a mandatory purchase to solve any problem.
In finding that the Necessary and Proper Clause of the Constitution did not apply, Chief Justice Roberts argued that the law must be the exercise of authority under a granted power and there was no power granted here. Even if the individual mandate was necessary, it was not proper.
In another part of the decision, the Supreme Court held that the Act’s Medicaid eligibility expansion provisions were unconstitutional because the government cannot coerce states to expand Medicaid by threatening to withhold existing federal Medicaid funds. As a result of this decision, even non-participating states must still receive existing Medicaid funding. The Supreme Court also decided that the unconstitutional part of the Medicaid provisions could be severed and remedied, leaving the remainder of the statute fully operable.
The Next Steps Employers Must Take to Comply
To comply with the Act in 2012 and 2013, an employer must:
1) Prepare to receive and properly distribute or apply any Medical Loss Ratio Rebate associated with 2011 insured health coverage.
2) Determine whether it must comply with the new Form W-2’s reporting requirement for 2012, distributed in January 2013 and, if so, obtain health coverage information (This applies if the employer filed 250 or more Form W-2s for 2011).
3) Finalize Summary of Benefits and Coverage material for inclusion in the 2013 Open Enrollment package for all enrollees.
4) Complete updates to its Summary Plan Descriptions and plan documents to provide for 2011 and 2012 changes.
5) Prepare for the inclusion of the $2,500 cap on salary deferral contributions in its health care flexible spending account for the 2013 plan year.
6) Determine if it is subject to the “PCOR fees,” paid by July 31, 2013 for 2012.
7) Notify its employees of the availability of health insurance exchanges by March 2013.
8) Prepare for 0.9% Medicare payroll tax increase on high income individuals for the 2013 tax year.
Larry Grudzien is an attorney practicing exclusively in the field of employee benefits. He has experience in dealing with qualified plans, health and welfare, fringe benefits and executive compensation areas. He has more than 35 years of experience in employee benefit law and is an adjunct faculty member of John Marshall Law School’s LL.M. program in employee benefits and at the Valparaiso University School of Law, where he teaches a number of courses.
September 2012 – The Michigan Business and Professional Association (MBPA) and its sister group, the Michigan Food and Beverage Association (MFBA), make it a top priority to keep you up to date on the federal health care law and how it affects you, your business, and/or clients. Recently there has been a decision made in terms of how Michigan will participate in the federal health care program.