Supreme Court Decision Looming on Health Care Reform

The Supreme Court is expected to issue its ruling on health care reform by the end of June, but some reports claim that it may come as early as this week. There has been a great deal of speculation as to the decision as well as its impact on employer provided benefit plans.

Whatever the outcome, the decision will be lengthy and complicated, and we will likely see separate opinions from several of the Justices; however, there are a limited number of paths the Court may take, each with its own set of issues and unknowns.

The various paths the Court can choose are briefly outlined below...

If the Court Upholds Health Care Reform

The Court can uphold the constitutionality of the individual mandate, which would effectively end the challenge to health care reform. In this case, the status quo would be retained and we will continue to have to deal with the unknowns and complexities we are currently addressing in complying with and preparing for the ongoing implementation of PPACA.

If health care reform survives the challenge for the immediate future, employers will need to address the following issues for 2012/2013:

• Production and distribution of the Summary of Benefits and Coverage

• W-2 reporting of the value of employer provided health benefits

• Additional women’s preventive care coverage (begins August 2012)

• The $2,500 limit on health FSAs, beginning in 2013

• Reporting and paying the new Patient Centered Outcomes Research fee

• The new nondiscrimination rules for non-grandfathered insured plans that will become effective (once guidance is issued).

For 2014, when full implementation of the reform kicks in, employers will be seeking out guidance on how the Exchanges will work and how they will impact employer penalty provisions.

Further guidance will be required on the definition of “essential benefits;” ( the minmum level of coverage which will be permitted by law)  clarification of the employer penalty provisions, including minimum value, affordability issues and the individual premium tax subsidy; the levels of coverage and cost of the benchmark offerings on the Exchanges; and how the automatic enrollment rules will work for larger plans ( effectively employers will be required to enroll new employees automatically, until they decline coverage) .

If the Court Strikes Down Health Care Reform

The Court can find the individual mandate unconstitutional and rule that the entire law is not viable without it, effectively ending health care reform.

In this case, we will be left trying to determine how to unwind provisions that have already been implemented, which include such key provisions as first dollar preventive care, elimination of lifetime and annual maximums, extension of coverage to young adult dependents and new claims appeal procedures.

Although the prohibitions on pre-existing condition exclusions for children and on rescissions are primarily individual health insurance issues, we could see an indirect impact on employer sponsored plans. If such rules are retained, the costs to insurers could significantly affect their pricing in the employer plan market. We may also see the preservation of certain immediate reforms such as first dollar preventive care and young adult coverage, since such preservation could certainly serve the interests of both political parties in the upcoming election.

If the Court Strikes Down the Individual Mandate but not all of the Health Reform

If the Court strikes down the individual mandate as unconstitutional, but rules that the rest of the health care reform law, or certain parts of it, can continue, it may be the most challenging result and probably the worst case scenario.

Parsing through which provisions would survive would not be easy. If this is the case, we will need to look to the Court’s decision on which provisions will or will not survive, who will make these decisions and how, and what the timeframe will be and how that will affect ongoing implementation. It does not seem likely that the Court will take on the burden of picking and choosing which provisions should and should not survive.

It also seems unlikely that Congress would come together on this issue, especially when we are facing an impending election. Other challenges with this scenario include (a) how the Exchanges will be able to function where insurers are not able to expand their risk pools to include the healthy lives that the individual mandate was intended to deliver to them, (b) whether affordable coverages can be offered to the public under the Exchanges without the premium flow from health individuals, and (c) whether the employer penalties will work if the Exchanges are impaired.

If the Court Defers or Delays a Decision

The Court can find a technical ground to avoid or defer a decision – which has happened in the past.  If this is the case, the Court would avoid some of the issues discussed above and would be insulated from allegations that it is making a political decision or legislating.

The Court could rule that making a decision now would be premature because the penalties for non-compliance with the individual mandate would not be imposed until after the requirement goes into effect in 2014.

However during the oral arguments most of the Justices did not show much support for this position. If the decision is deferred or delayed, we will be left with confusion. Key aspects of the reform implementation, including many that involve significant grant money, tax imposition and unfunded mandates for the state will likely be challenged.

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