With the ACA's individual mandate ruled unconstitutional, what now?

Tuesday February 4th, 2020

When the 5th U.S. Circuit Court of Appeals ruled 2-1 that the Affordable Care Act’s individual mandate was unconstitutional on Dec. 18, 2019, there was a moment of hesitation and uncertainty for employees and employers alike.

Would this decision result in the wholesale overturning of the ACA? Would employer-sponsored health insurance packages become more expensive? Would individuals purchasing health insurance privately in the marketplace no longer face tax penalties or receive credits?

Let’s review some of the key outcomes of the December ruling and what realities HR managers now face in the realm of employee benefits plans.

Continue full compliance with ACA

The CliffsNotes understanding of the current ACA climate is that employers should still fully comply with any and all applicable ACA stipulations as they did in previous years.

The reason why is that the individual mandate most prominently affects individuals themselves - not businesses. The individual mandate was but one component of the larger ACA apparatus that levied tax penalties against persons who opted not to own health insurance. 

For those under extenuating financial circumstances, the federal government provided subsidies to offset barriers to insurance purchasing.

The backstory, explained

The recent court decision was triggered by a 2017 bill that zeroed out the tax penalty for individuals not complying with the individual mandate. As such, without a tax mechanism in place, the ACA, as written, effectively no longer had any teeth because Congress couldn’t use its explicit taxing powers to enforce the mandate.

Without those powers, the individual mandate could not constitutionally stand, as the current legal interpretation goes.

That said, the 5th U.S. Circuit Court of Appeals has sent the remainder of the ACA - sans individual mandate - back to a federal trial court to adjudicate a final constitutional conclusion to the bill. Legal experts expect the bill to eventually end up back with the Supreme Court.

All this is to say, there is still much movement occurring, and today’s legal opinions may not stand tomorrow under the jurisdiction of another court.

ACA within the context of employer-based plans

The ACA is still the law of the land, albeit with a nixed individual mandate. This means employers must still conduct business as usual in the realm of employee benefits administration.

Some of the key components of ACA governance of employers are:

  • Companies with 50 or more full-time or full-time equivalent employees must still offer health insurance to employees and their dependents.
  • 1095 Forms must still be provided to employees.
  • 1094 and 1095 Forms must still be filed with the IRS.

Business owners and HR teams should not expect further court rulings on the ACA until after the 2020 presidential election.

Until then, employees and employers alike should maintain their current plans, where applicable or preferable. 

Self-service HR tools that provide visibility into health insurance options and policy updates allow employees to answer questions on their own and communicate with their benefits providers on their own terms. Plus, platforms like iSolved make it easier for companies to comply with the ACA with a bespoke ACA compliance add-on feature.