Employers likely would have better luck predicting winning lottery numbers than how the Supreme Court will rule this summer on the constitutionality of the Patient Protection and Affordable Care Act's individual mandate. So many benefits practitioners, like Karrie Andes, SPHR, senior benefits manager for Kansas City-based virtual meeting provider PGi, have decided simply not to try to read the legal tea leaves. Rather, Andes and her team - while keeping a close eye on the legal challenges that mounted since the law's passage two years ago, and this month's oral arguments before the Supreme Court - opted for a business-as-usual approach to make sure PGi's health plans first and foremost continued "protecting associates and dependents on our health plan and also helping competitively with attracting talent," Andes says.

While she and her team immediately implemented certain health care reform changes and opted not to grandfather PGi's health plans, the company's 1,700 employees - not the nation's nine justices - remained their primary focus.

"We're [staying positive] in our communications that we implemented health care reform early, and we still will take the high road, versus hacking and whacking [away at our health coverage]," Andes says.

Ed Coates, senior manager of benefits and compensation at Texas Mutual Insurance Company, plans to examine all the moving parts to help his group strategize and manage their health benefits for the long term.

"Before the Supreme Court rules, we'll do modeling of our population to see how many fall into the various income categories that may qualify [them] for health subsidies or possibly going into the exchanges," he says.

His benefits team has not decided whether to discontinue health coverage once the exchanges go online. "It comes down to our compensation philosophy and what we need to provide our employees in order to attract and retain quality employees," he says.

 

Spectrum of scenarios

This month the Supreme Court will hear oral arguments about the constitutionality of the individual mandate that requires all individuals who can afford it to buy health insurance. The court also will determine whether the Medicaid expansion is constitutional, which may affect employers with retiree health care plans. The majority of employers are attuned to the court's decision on the individual mandate and how much of the law will survive if that provision is found unconstitutional.

Whatever the Supreme Court ultimately decides later this summer in U.S. Department of Health and Human Services v. Florida, EBN has outlined each potential ruling concerning the constitutionality of the individual mandate and how it affects plan sponsors and advisers.

1. The individual mandate is found constitutional and all of PPACA is upheld.

If the Supreme Court decides that the individual mandate falls within the constitutional bounds of Congress' powers under the commerce clause and declares all of health care reform constitutionally sound, experts say plan sponsors would continue to implement health care reform as required. (The challenge to the Medicaid expansion is not examined in this article.)

The main question would be whether employers stay in the game, rather than pay to have their employees enter the state-run exchanges.

"At that point, I believe that employer-sponsored health care coverage would diminish because ... there is a clear advantage to stop sponsoring health care and send employees to the exchanges once they are set up. Anybody can do the math," Andes says.

Coates agrees: "The [employer] penalties are so low that it looks like a no-brainer to [allow employees to purchase coverage through] the exchanges." However, he adds, "if you're in a competitive industry where other employers are going to continue to provide health care, you're going to need to make up that loss in the total compensation package and, in some instances, that may cost you more than providing the health care coverage."

The National Federation of Independent Business, a party in the legal suit challenging PPACA, states that if the mandate stays on the books, costs will increase in the individual market and for small-group coverage, which is where a bulk of employer-sponsored coverage lies.

Amanda Austin, director of federal public policy at NFIB, says that even if employers continue to offer coverage, they will need to shift costs, whether that is in the form of increased employee cost-sharing or major budget and personnel changes.

2. The individual mandate is found unconstitutional, yet cannot be severed from PPACA.

If the mandate is found unconstitutional, the Supreme Court then must decide whether the rest of the law functions without this piece. The justices may decide that all or parts of the health care reform legislation are too reliant on the individual mandate and declare the entire act unconstitutional because of the mandate.

Steve Wojcik, vice-president of public policy at the National Business Group on Health, believes if PPACA is struck down in its entirety, aspects of the law already implemented and popular with employees - such as extending the age limit of adult dependents to 26 and eliminating lifetime dollar limits on essential benefits - would remain.

"[Employers] would probably take it provision by provision," says Wojcik. "Those that were too much of a hassle, even though they were costly, they will probably [keep as well], but those that they still have to implement or were problematic, they'll get rid of. But it's too premature to talk about that because I don't really think that's going to happen."

Most experts agree that this scenario is a long shot because many parts in the law are unrelated to the individual mandate.

3. The individual mandate alone is unconstitutional.

So far, prominent conservative judges from the D.C. Circuit and 6th Circuit Courts of Appeals have penned opinions supporting the Obama position on the individual mandate. Another ruling from the 11th Circuit Court - the case that is now before the Supreme Court - ruled the mandate to be unconstitutional, but determined it is severable from the remainder of PPACA.

Andes believes this scenario would be the best decision the court could make. While she believes that many components of reform were beneficial, such as eliminating lifetime maximums, the individual mandate removes choice. She adds that the mandate was not created to protect the individual, but rather hospitals, state governments and insurance companies so that they might avoid insolvency because of the uninsured problem. In her opinion, if the mandate is struck down but health care reform remains, employers could tweak their plans while leaving in place already implemented provisions.

However, many experts argue that carving the individual mandate from the law without eliminating other closely tied provisions could have disastrous effects on the health insurance marketplace.

"The individual mandate is closely linked and intertwined [with other health care reform provisions, such as guaranteed issue, prohibiting pre-existing conditions exclusions, adjusted community rating], because the individual mandate is intended to guard against adverse selection that can occur when you have a guaranteed issue requirement, no underwriting, etc.," says Kathryn Wilber, senior counsel of health policy at the American Benefits Council.

She adds that about a dozen states tried to implement these insurance market reforms without a mandate, and "the insurance market collapsed. It's called the death spiral. [Insurers] say they 'can't do business here because we can't insure if we don't have a risk pool.'"

For this reason, many believe that if the mandate were found unconstitutional, the court would also remove certain provisions it deems inextricable from the mandate.

4. The individual mandate is found unconstitutional and certain closely linked provisions are severed from the law.

Coates thinks this option would have the same result as if the entire act were struck down.

Still, other mechanisms could be substituted for the mandate to balance the other dependent provisions. Limited open enrollment periods, penalties, longer contracts and deadlines could be used to incentivize individuals to purchase insurance before they get sick. A late enrollment fee draws from the Medicare Part D program, and another option "acts to encourage individuals to join when they can and not delay until they need it, because they may not be able to get in for another year at that point," says Wilber.

The real question in this scenario is whether Congress is able to act. Wilber wonders if politicians could find common ground, especially during an election year.

 

Factoring in the Tax Anti-Injunction Act

The Supreme Court also has hired a lawyer to argue whether the justices must follow the Tax Anti-Injunction Act in relation to the constitutionality of the individual mandate. This 1867 law requires that a tax (in this case the individual mandate would be defined as a tax, not a penalty) must first go into effect before a suit can be brought before the courts. If the justices followed this course, a prospective plaintiff could only bring a suit against the mandate after individuals begin paying the tax penalty to the IRS in 2015 for not purchasing insurance.

The 4th Circuit Court of Appeals determined that courts have no power to decide the mandate issue until 2015 because of the Tax Anti-Injunction Act, an opinion shared by Justice Brett Kavanaugh of the D.C. Circuit in his dissention.

Most experts find this a highly unlikely scenario, considering what a controversial issue health care reform has become.

Based on lower court precedent, most legal experts expect the Supreme Court will find the individual mandate constitutional and uphold the law. Ultimately, this would mean employers continue as they are now: complying with new regulations, reporting requirements and strategic considerations of the employer pay- or-play mandate, the insurance exchanges and the Cadillac tax.

Andes believes the court will find the individual mandate unconstitutional, but keep the remainder of PPACA in tact. She believes they should send the decision of how to increase insurance access to the states.

Coates says, "I think it will be difficult for employers to move forward with a partial ruling," and would prefer the court either uphold the law entirely or strike it down. Removing the individual mandate alone or with certain insurance market reforms would only increase the level of confusion for employers, he says.

"Up until now the Supreme Court has been pretty generous as far as what Congress can do under the commerce clause ... I think they're going to be careful on that because it has implications far beyond health care reform," says Debbie Harrison, a senior regulatory analyst at NBGH.

Coates advises employers that once regulations come out and the Supreme Court decision is made to "start acting immediately so [you're] not rushing to prepare for 2014 open enrollment, because there will be a lot of questions from employees. Communicate with employees on a regular basis about health care reform and how it impacts them so they don't have the uncertainty about what's going to happen to their benefits going forward."

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