SUPREME COURT UPHOLDS HEALTH CARE REFORM LAW
The U.S. Supreme Court has upheld the individual
mandate in the Patient Protection and Affordable Care Act (the health care
reform law, or “the Act”). The mandate generally requires that most U.S.
citizens and legal residents maintain “minimum essential coverage” for tax
years ending after December 31, 2013, or pay a penalty. Minimal essential
coverage includes health care coverage under eligible employer-sponsored plans,
plans in the individual marketplace, government-sponsored programs (such as
Medicare and Medicaid), and certain “grandfathered” group health plans.
The majority of the Court held that the mandate was a valid
exercise of Congress’s authority under the U.S. Constitution’s Tax Clause. In essence,
the majority of the Court ruled that one possible reading of the individual
mandate is that it doesn’t so much mandate individuals to buy insurance, but
rather imposes a penalty on those who choose not to do so. And the imposition
of a tax upon someone who refuses to buy health insurance is a kind of tax that
Congress can impose under its taxing authority.
While the individual mandate provision of the Act
survived the Supreme Court’s scrutiny, the Court determined that a provision
that required states to comply with new eligibility requirements for Medicaid,
or risk losing their funding, was not constitutionally permissible. In that
regard, the Court held that the provision would be constitutional only as long
as states would only lose new
Medicaid funding, but not
all of their funding, if they didn’t comply with the Act’s requirements.
As a result of the Court’s ruling, the provisions of
the Act are set to go into effect as of their various effective dates. Some of
the law’s provisions are already in place (e.g., the small employer health
insurance credit and the qualification of children under age 27 as dependents
for employer-provided and other health coverage).
Other provisions are scheduled to go into effect this
year or in 2013. Some examples:
- Form W-2 reporting
requirement for health care benefits for 2012 tax year;
- $2,500 limit on employee
contributions to health flexible spending accounts for plan years
beginning in 2013;
- Summary of Benefits and
Coverage requirements for open enrollment periods starting on or after
September 23, 2012; and
- Additional 3.8% FICA tax on
unearned income and 0.9% increase in Medicare tax, both applied to high
income individuals starting with the 2013 tax year.
It is expected that the Act will continue to be
controversial as other provisions are set to become effective, and the law will
likely be a significant issue throughout the upcoming election season — and