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 thee 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 a 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 for 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
coverage 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 2013 Open Enrollment package for all enrollees.
4) Complete updates to its Summary Plan Descriptions and
plan documents to provide 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 "P.C.O.R
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.
