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United States: Supreme Court Upholds The Constitutionality Of Affordable Care Act’s Individual Mandate: Implications For Employers And Group Health Plan Sponsors
The U.S. Supreme Court held today that the Patient Protection
and Affordable Care Act's (the "Act"'s)
requirement, effective beginning in 2014, that individuals either
purchase health insurance or pay a penalty to the federal
government was constitutional under Congress' power to assess
and collect taxes. The Court did hold a portion of the Act's
Medicare expansion was unconstitutional, but the Court declined to
strike down any other portions of the Act because of that
defect.
While the Act's long-term prospects remain uncertain due to
the November election and the presidential and Congressional
changes that it might bring, the Court's decision means that
the Act will remain in effect for the foreseeable future.
Accordingly, employers that sponsor group health plans should
continue with their efforts to comply with the Act's
requirements.1 Notable items include:
Employers and insurers must provide a summary of benefits and
coverage for open enrollment periods beginning on or after
September 23, 2012 (a different effective date applies for
enrollments occurring outside open enrollment such as new
hires).2
The aggregate cost of employer-sponsored health coverage must
be reported on Form W-2 for 2012 and later years (i.e., beginning
with the 2012 W-2 that will be issued in January of
2013).3
Self-insured plans must pay a fee to fund the Patient Centered
Outcomes Research Institute beginning with the 2012 plan year
(insurers pay the fee for fully insured plans).
Health FSAs must limit salary contributions to $2,500 for plan
years beginning on or after January 1, 2013.
Fully insured plans may not discriminate in favor of highly
compensated individuals once regulations implementing this
requirement are issued.
Beginning in 2014, large employers (defined as employers with
an average of 50 or more full-time employee equivalents determined
on a control group basis) are required to offer full time employees
(defined as employees employed an average of at least 30 hours per
week) health coverage or pay a penalty for each full time employee
if any full time employee is not offered coverage and receives an
income-based tax credit to participate in an insurance
exchange.
Beginning in 2014, large employers who provide health coverage
that is not valuable enough, because either the employee's
share of the premium would exceed 9.5 percent of the employee's
income or because the plan's share of the cost of benefits
available is less than 60 percent, will have to pay a penalty for
each full time employee who declines the coverage and receives an
income-based tax credit to participate in an insurance
exchange.
Beginning in 2014, plans may not impose waiting limits longer
than 90 days.
Beginning in 2014, annual limits for essential health benefits
are prohibited.
In conclusion, the Supreme Court's decision has eliminated
some of the uncertainty regarding the Affordable Care Act and
employers and group health plan sponsors should continue their
Affordable Care Act compliance efforts without delay.
The content of this article does not constitute legal advice
and should not be relied on in that way. Specific advice should be
sought about your specific circumstances.
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