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June 29, 2012

The Supreme Court has spoken...now what?

The Supreme Court’s decision returns the debate over health care to Congress, and it is sure to be a hotly debated topic in this election year. In summary, what the Supreme Court has ruled is that the law has remained in full force and effect with the limited narrowing of the Medicaid provision. All changes made by the law that have already been implemented remain in-force.

For employers, what is most important now is to:
  1. Prepare for distribution of their Summaries of Benefits and Coverage, which will be required for plan renewals and plan years beginning on or after September 23, 2012.
  2. Prepare for the reporting of the aggregate cost of health coverage for the 2012 reporting year on the Form W-2s, required to be issued in January 2013.
  3. Amend flexible medical spending account plans to comply with the $2,500 cap, applicable for plan years beginning on or after January 1, 2013.
  4. Prepare to begin the additional Medicare tax withholding for certain high income earners.
  5. Specifically for employers employing 50 or more full-time employees, to look down the road to 2014, with an eye on what impact the shared responsibility tax may have on their business and employee population.
June 28, 2012 will surely go down in history as a pivotal point for health care, and specifically, health care access in America. It is the day that the Supreme Court of the United States deemed that the Patient Protection and Affordable Care Act (ACA) represents a valid exercise of Congressional authority.

In a 5-4 decision, the Justices upheld the individual mandate on the grounds of Congress’ power to tax and spend. The Court did not uphold the individual mandate under the Commerce Clause of the Constitution.  This distinction may well prove to be very important in future matters.

But, for today, what this means is that the ACA, enacted in March 2010, remains the law of the land, and, at least for the foreseeable future, all systems are ‘Go’ for its continued implementation.

As a practical matter, what this means is that the governing agencies, specifically the Departments of Health and Human Services, Labor and Treasury will continue to issue regulations to implement the law.

One of the centerpieces of the law is the establishment of Exchanges beginning in 2014, the same year in which the individual mandate (the requirement for most Americans to maintain a minimum level of coverage) will take effect. If a state cannot accomplish the establishment of exchanges by 2014, then a federal Exchange will be imposed. An Exchange is intended to be a one stop marketplace available to individuals and certain employers for the purchase of health coverage. Eligible employers are able, but not obligated, to buy coverage through the Exchange.

While the Court has upheld the law in its entirety, it has very narrowly construed the provisions relating to Medicaid expansion. The law provides that in order to receive federal funds, states will be obligated to expand Medicaid to a significantly larger population, specifically, those who fall below 133 percent of the federal poverty level. The Supreme Court held that the government cannot withhold federal funds that states are entitled to the extent that the state complies with the current Medicaid requirements, regardless of whether the state implements the expanded requirements. The federal government may withhold any additional funds to which a state would become entitled, however, if the state would not agree to expand Medicaid to a broader group of people.

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