As employers anxiously await the Supreme Court's decision on health care reform (expected by late June), there are many things employers should be thinking about now. The Supreme Court will most likely make one of four decisions on health care reform. Below, we describe how each of those possible decisions may affect employers.
Constitutionality Not Ripe or Law Upheld as Constitutional
First, although unlikely, the Supreme Court may decide that a decision on the constitutionality of health care reform is not ripe for review. Second, the Supreme Court may decide to uphold the entire law as constitutional. Under either of these scenarios, employers need to be ready for "business as usual" — that is, they should continue their efforts to comply with health care reform. Among the many new health care reform provisions that take effect in 2012 and 2013, employers will need to be ready to (1) issue new summaries of benefits and coverage during open enrollment for the 2013 plan year, (2) issue Forms W-2 that report the value of employer-provided health coverage provided in 2012 beginning in January 2013, (3) provide notices to employees beginning in 2013 about the new health insurance exchanges that will become available in 2014; and (4) administer the new statutory health flexible spending account contribution limits and new Medicare taxes on high-income employees beginning in 2013.
Portions Unconstitutional But Severable
A third possible outcome is that the Supreme Court may find the Medicare or individual mandate portions of the law unconstitutional but will strike down only those portions of the law, and perhaps, for the individual mandate, the insurance reforms that were tied specifically to the individual mandate (guaranteed issue and community rating). This scenario would also not change much for employers in the short term. Health care reform compliance efforts, including those described above, would need to continue.
Unconstitutional and Not Severable
Finally, it is possible the Supreme Court will find part of the health care reform law unconstitutional and strike down the entire law. Although many commentators believe this outcome is unlikely, it would cause the greatest change for employers. Under this outcome, employers would need to undo—or at least reconsider—all of the changes that they have made since 2010 to comply with the enactment of health care reform. Essentially, employers could return to operating their health plans as they existed before health care reform was enacted in March 2010.
For example, health plans would no longer be required to cover adult children under age 26, and coverage for most adult children up to age 26 would become taxable. Employers would be required to make changes to their financial statements for the post-65 retiree subsidy. Insured health plans would no longer be subject to the new nondiscrimination rules. Employers would regain the flexibility to apply HIPAA-compliant pre-existing condition limitations and exclusions to children, to apply annual and lifetime limits on plan coverage, and to impose limits on preventive care (instead of providing first dollar coverage). As a practical matter, many employees likely viewed these changes as positives and it may be difficult for employers to roll them back. Perhaps the biggest outcome of health care reform being struck down is that employers will not need to spend as much time and as many resources on health care reform compliance and can instead focus on efforts to control health care costs.
Impact of Elections
While the Supreme Court decision will likely bring some certainty at least for the short-term, the other element at play here is the November presidential and congressional elections. Republican candidates have largely pledged to repeal health care reform, if elected. And, even if full repeal is unlikely, we may well see changes to some provisions after the elections.
The waiting game continues. Wise employers will take action now to continue preparing to comply with health care reform provisions scheduled to become effective in 2012 and 2013, while at the same time preparing for possible change.