Planning for the Possible Future of the Affordable Care Act:
Stay the Course to Ensure Continuing Compliance
Even before its complicated legislative birth—which was immediately followed by a very difficult infancy—the Affordable Care Act (ACA) was highly divisive and polarizing for the American public.
However, there is no disagreement that, since its passage in 2010, the ACA has had a significant transformative effect on the entire health care system in the United States and, by extension, our entire economy. In effect, despite the lingering insistent echoes of criticism voiced over the past decade, our country has by necessity become acclimated to realities attributable to the law.
Now, as a result of the confluence of a number of political and legal realities, we may be on the threshold of a series of events that, collectively, could bring about massive disruptions to the complex operational mechanisms that govern how health care services are regulated and paid for in the United States.
The purpose of this article is not to criticize or extol the virtues of the ACA, opine on the competing legal theories about the basic constitutionality of the law, or predict what the actual final outcome will be. Rather, we will identify and provide background information about possible scenarios that may emerge in the coming months and years. The goals are to assist those of us who are involved in the design and administration of health insurance programs, and to begin to think about how to best respond to possible dramatic changes in what may become a highly disruptive operating environment.
Original Supreme Court Case: Shortly after its passage, opponents of the ACA tried to have the law overturned through litigation in the federal courts, with the hope that, ultimately, the Supreme Court would rule that the law was unconstitutional. Those litigants were disappointed by the actual outcome. 
One of the arguments made by the law’s opponents was that Congress did not have the constitutional authority to impose an individual mandate on Americans, requiring them to maintain minimal essential health insurance coverage for themselves and their dependents or pay penalties to the Internal Revenue Service (IRS).
As a practical matter, individuals who did not obtain the required coverage from an employer-sponsored group plan or a governmental plan would be compelled to purchase individual policies from private insurance companies or face financial penalties (also known as individual shared responsibility payments) at rates that were scheduled to increase annually.
In his written opinion, Chief Justice John Roberts ruled that Congress did not have the power to impose a requirement on individuals to obtain health insurance coverage either under the Commerce or the Necessary and Proper Clauses of the Constitution.
However, Justice Roberts accepted the government’s position that, notwithstanding the fact that the actual wording of the legislation characterizes the shared responsibility payment as a penalty and not a tax, the individual shared responsibility payment may for constitutional purposes be considered a tax that is collected by the IRS.
As such, the justices determined that Congress acted within its constitutional authority to lay and collect taxes and the individual mandate provision of the ACA was ruled to be constitutional.
New Tax Law: In 2017, Congress passed a new tax bill that the president signed into law. Among the broad array of tax matters covered in the legislation was a provision that reduced the individual shared responsibility penalty to $0 after the 2018 Tax Year. 
Technically, the individual mandate provision that had been a key provision of the ACA was not repealed because of this change. However, the absence of negative financial consequences for people who chose not to have health insurance effectively rendered the individual mandate to be little more than an aspirational suggestion.
Commentators have opined that a mandate—without some tangible noncompliance penalty—is not really a mandate and therefore can be ignored with impunity. Furthermore, a nonexistent penalty should not be considered a tax in the way Justice Roberts’ original analysis contemplates.
These supposed distinctions without differences have served as a catalyst for renewed litigation in the federal courts intended to overturn the ACA.
New Litigation at the Federal District Court Level: Soon after the passage of the new tax law, governors and attorneys general from 20 states sued in federal district court in Texas seeking to enjoin the federal government from enforcing the ACA. 
The plaintiff’s position was that since the individual shared responsibility penalty for noncompliance had been reduced to $0, it could no longer be characterized as a tax.
Extending that logic further, if the penalty was not a tax, then in accordance with the reasoning provided in Justice Roberts’ original opinion, the individual mandate provision had effectively been rendered unconstitutional.
The final rung of their legal position was that since the individual mandate provision was unconstitutional, the entire ACA was unconstitutional and could not be saved by simply isolating and severing the individual mandate provision from the ACA.
The Department of Justice did not defend the constitutionality of the ACA at the district court level. This was unusual but not without precedent. The responsibility for defending the constitutionality of the ACA was assumed by attorneys general from 21 states, the District of Columbia, and the U.S. House of Representatives.
On December 14, 2018, the federal district court in Texas ruled that the ACA was unconstitutional.
Federal Appellate Litigation—Fifth Circuit Court of Appeals: The initial decision of the federal district court in Texas was appealed to Fifth Circuit Court of Appeals in New Orleans, seeking to have the district court’s ruling reversed. 
On July 9, 2019, a panel of three federal appeals court judges heard oral arguments from the litigants. On December 18, 2019, the Fifth Circuit Court issued a 2-1 decision.
In her written majority opinion, Judge Jennifer Walker Elrod upheld the portion of the district court’s finding that because the individual shared responsibility penalty had been reduced to $0, the individual mandate portion of the ACA was unconstitutional.
However, the appeals court neither accepted nor rejected the district court’s finding that because the individual mandate portion of the ACA was unconstitutional, the entire ACA was unconstitutional and unenforceable. Instead, it sent the case back to the district court with instructions to provide a more in-depth legal analysis that could support the court’s initial finding.
Dissatisfied with the appeals court’s bifurcated approach, the House of Representatives and the state attorneys general who litigated in defense of the ACA’s constitutionality petitioned the Supreme Court to review, on an expedited basis, the appeals court’s ruling and make final determinations of all of the contested issues during its current term, which is scheduled to end on June 30, 2020.
On January 21, 2020, the Supreme Court issued a one-sentence order indicating that it would not grant the petitioners’ request for an expedited review during its current term.
On March 2, 2020 the Supreme Court announced that it did grant the same petitioners’ request to hear an appeal during its next term (which will begin in October 2020) of the Fifth Circuit Court of Appeals rulings that the Individual Mandate provision of the ACA was unconstitutional; and that the original parties that initiated the current litigation had standing to do so.
Planning Ahead: What to Expect in 2020 and Beyond
As of this point, the only thing we can be confident about is that there will be no final judicial determination as to the constitutionality of the ACA in the immediate future.
- Even if the Supreme Court were to schedule oral arguments at the beginning of its next term, the absolute earliest a final ruling would be issued would be at some point during the last quarter of 2020.
- Although the case has been placed on the Supreme Court’s docket for its next term, the original district court judge, in compliance with the Fifth Circuit Court of Appeals remand directive to give further consideration to the severability issue, will proceed to hear arguments from the litigants, review written briefs, and submit a detailed written opinion to the Fifth Circuit Court of Appeals on whether the entire ACA should be deemed unconstitutional if the Individual Mandate portion is deemed unconstitutional.
No matter how the district judge rules on the severability issue, we should not be surprised if the Supreme Court opts to add that issue to its deliberations.
- Given the usual slow and deliberative pace of the judicial process, especially at the Supreme Court level, we are skeptical that we can expect to receive a final decision in the near future that will potentially serve to relieve employer organizations of their ACA compliance responsibilities for the 2020 Tax Year. Therefore, in our view, the most prudent course for employers to follow is to continue to take all steps necessary to ensure they have implemented and maintained practices and protocols necessary to ensure their compliance with all current ACA requirements.
- Although a wide range of opinions have been expressed, some respected legal scholars believe that based on the Supreme Court’s prior ACA related rulings (Barring any changes to the Court’s current make-up) it is unlikely that the Court would rule that the entire ACA is unconstitutional.
If their analysis proves to be correct, in the absence of any new legislative or executive actions, the status quo with respect employers’ ACA compliance responsibilities will continue for the foreseeable future.
- The enhanced possibility that the entire ACA and its supporting regulatory infrastructure might be scrapped that was triggered by earlier rulings in the case has intensified debates among politicians, academicians, health care professionals, insurance company executives, and the public about how health care services should be delivered, financed, and regulated.
Any predictions as to whether legislative or executive actions (either at the federal or state levels) might be taken to inoculate the country from the fallout of the entire ACA being deemed unconstitutional would be speculative.
However, if in the latter part of 2020 the Supreme Court ultimately rules that the entire ACA is unconstitutional, in the absence of new legislative or executive actions (either at the federal or state levels), the impact on employers in 2020 should be minimal.
- It is unlikely that employers (or their insurance carriers) would make any changes to their health insurance program offerings (e.g. plan features, eligibility rules, employee premium levels, coverage of young adult dependents, etc.) close to the end of their 2020 plan years.
- If employers are relieved of their ACA responsibilities, we can expect that they will, on a prospective basis, take advantage of their expanded ability to assess and consider modifying the features and contours of their health insurance benefit programs applicable to future plan years.
- Employers’ compliance responsibilities pursuant to ERISA, HIPAA, COBRA, and applicable state/local laws would remain in force.
- We can expect employers to attempt to seek refunds of any assessed shared responsibility payment penalties or penalties stemming from failing to satisfy the ACA’s reporting requirements that were attributable to periods following the enactment of the Tax Cuts and Jobs Act of 2017.
- The potentially most dramatic short-term consequences that would follow the elimination of the ACA would not be borne by employer organizations that sponsor health insurance programs for their employees. Rather, those most likely to be negatively impacted would be:
- People who obtain individual coverage through the Marketplace who may find their insurance is unaffordable without the premium support and cost-sharing reduction (CSR) subsidies provided by the ACA.
- People who obtain individual coverage through the Marketplace who may find that their insurance is unaffordable because of higher underwriting risk-based premiums that are currently prohibited by the ACA.
- People who obtain individual coverage through the Marketplace who may find that their insurance is unaffordable because reductions in overall enrollments compel health insurance carriers to raise the premium rates paid by the remaining insureds.
- People who obtain individual coverage through the Marketplace who find that Marketplace coverage is no longer adequately meeting their health care needs in the absence of the ACA’s benefit level standards.
- Those who became eligible for Medicaid benefits in states that chose to take advantage of financial support provided pursuant to the ACA as an inducement to expand qualification criteria.
- If the ACA is found to be unconstitutional it its entirety, tremendous political pressure would most likely be brought to bear on Congress and the president to, at a very minimum, provide on a short-term basis new financial support mechanisms that would replace the subsidies that had been available through the ACA.
Almost a decade has passed since the ACA became law and significantly altered many aspects of how we as a nation deliver, regulate, and pay for health care services. Despite these efforts and the good intentions of the ACA’s proponents, there is still a great deal of dissatisfaction being expressed across the political spectrum about varying aspects of the current state of our health care system.
Now, in the midst of the 2020 national election cycle, it should come as no surprise that health care has surfaced as one of the most important campaign issues being debated and fiercely fought over by candidates for the presidency. If at some point in 2020 the ACA is ruled unconstitutional, the intensity and stridency of the political discourse and posturing surrounding the health care issue will be enormous.
No matter how the courts ultimately resolve the ACA’s constitutionality status question, any major governmental actions that would bring about long-term fundamental changes to our health care system are unlikely to occur until after the new Congress convenes in 2021.
Given the highly uncertain, polarized, and fluid nature of the times we live in, it could be a serious mistake to simply assume, one way or the other, how the courts will rule on the constitutionality of the ACA. Therefore, it is our continuing recommendation that the most appropriate and prudent course for employers to follow is to act as though the ACA will survive. We believe employers should continue to take all necessary steps to ensure that their ongoing ACA-related compliance responsibilities will be fully met, on an indefinite basis.
Finally, regardless of how the status of the ACA is ultimately settled, rest assured that the eBenefits team will always be well-positioned to assist our clients in operating effectively in a challenging and ever-evolving legislative or regulatory environment.
Disclaimer: The information contained in this document represents only a general overview of the subject matters covered. It is not intended to be legal and/or tax advice and should not be relied upon as such. Readers who have any questions or concerns about the matters covered in the document are advised to consult with their lawyers or tax advisers for advice and guidance that is applicable to their specific individual situations.
 NFIB v. Sebelius, 567 U.S. 519 (2012)
 Tax Cuts and Jobs Act (TCJA)
 Texas v. Azar
 State of Texas et al. v. United States of America