On March 2, 2020, the U.S. Supreme Court granted two petitions by interested states asking the Court to review the constitutionality of the individual health coverage mandate in the Affordable Care Act (ACA) and, if unconstitutional, determine whether other provisions of the ACA also are invalid.
In 2017, Congress changed the penalty tax associated with the individual mandate to zero as part of the Tax Cuts and Jobs Act of 2017. Following that change, a group of states challenged whether the individual health coverage mandate, with no associated penalty for an individual’s failure to purchase coverage, could still be upheld under the taxing power of Congress. In 2018, a Texas district court agreed and held that the other provisions of the ACA also are invalid as they are so closely linked to the individual mandate that they are inseverable. The recent petitions to the Supreme Court followed a ruling issued by the U.S. Court of Appeals for the Fifth Circuit that upheld the Texas district court’s 2018 finding that the individual mandate is unconstitutional, but sent back for further review the district court’s finding that the rest of the ACA also is invalid. This will be the Supreme Court’s third time reviewing the ACA since its enactment in 2010.
The Supreme Court likely will hear oral arguments in its next term, which starts in October 2020, but a ruling is not likely until 2021. Possible results vary greatly from upholding the ACA with or without the individual mandate, to finding the entire ACA invalid, to a finding with less substance ─ for example, that the parties do not have standing to sue. The path the ACA will take continues to be difficult to predict, and we encourage employers to follow developments closely. With possible implications for the employer health coverage mandate, market reforms such as adult child eligibility and preventive services coverage, and many other provisions, any decision has the potential to greatly impact employer health plan sponsors and health plan design.