Last week’s ruling by the U.S. Court of Appeals for the Fifth Circuit in Texas v US does not have any immediate effect on the Affordable Care Act (ACA) or on how it operates. All current provisions of the ACA, including the employer mandate (so-called “play or pay”), employer reporting requirements, and protections for pre-existing conditions, continue to apply.
In a split 2-1 decision, the Fifth Circuit has affirmed last year’s ruling by a Texas district court that the ACA’s individual mandate is unconstitutional. (Separately, Congress reduced the mandate’s penalty to zero starting in 2019 so it no longer applies regardless of the constitutionality issue.)
The key issue before the Fifth Circuit was whether the individual mandate was essential to and inseverable from the ACA. In other words, is the entire ACA invalid without the mandate? Yesterday’s decision does not rule on that issue, however, and instead sends the matter back to the district court. In the meantime, the ACA continues as is.
The lower court originally had the case for many months, followed by many more months at the appeals court level. Now that it is going back to the lower court, it is unclear how long it will be before we see another ruling. Most observers expect that the matter ultimately will go up to the Supreme Court. It may be worth noting that five Supreme Court justices, including Chief Justice John Roberts, who upheld the ACA in both 2012 and 2015, continue to sit on the high court.
To recap, there has not been any change in the ACA. All requirements pertaining to employers, including the play or pay rules and the employer information reporting rules, continue in effect.
(Note regarding state laws: The ACA is federal law. Separately, several states require their residents to maintain health coverage in order to avoid a state tax penalty. Individual mandates currently apply in Massachusetts, New Jersey, and the District of Columbia, and similar mandates take effect 2020 in California, Rhode Island, and Vermont. These state laws are not affected by the federal court case.)
We will continue to monitor and report on ACA developments that impact employers and their group health plans.