What If… the PPACA Mandate is Overturned?

supreme-courtDesigned to extend health care protection to millions of Americans who lack coverage, the individual mandate is a central part of the Patient Protection and Affordable Care Act recently debated in oral arguments before the U.S. Supreme Court. While no one can predict the outcome, we thought it might be appropriate to consider a few possible scenarios that could arise.

  • If the court finds the mandate requiring most Americans to purchase health care coverage or pay a fee to be constitutional, employers would continue to implement health care reform laws as required. Under this scenario, many expect that employer-sponsored health benefit plans would continue to fade away as more and more employers, especially small business owners, opt to pay penalties and send former plan participants to state-run exchanges.
  • If the court finds the individual mandate unconstitutional but not severable from other parts of the PPACA law, they would then need to determine if the law can remain relevant without the mandate.
  • A third option is that the Supreme Court could find the individual mandate to be unconstitutional, but severable from the remainder of the PPACA law. Many see this as a real possibility since this was the outcome in the 11th Circuit Court. If this happens, employers could modify their plans while keeping those provisions that have already been implemented.

All Up or All Down

It is probably fair to say that most experts hope that the court either keeps the entire law in tact or declares it all unconstitutional, since any compromise would cause continued confusion. If the mandate goes away and requirements such as guaranteed issue and pre-existing condition exclusions remain, costs could skyrocket as people with chronic health concerns enter the marketplace and healthy, young individuals hold off. Limited open enrollment periods and penalties could be adopted to encourage young people to buy health coverage.

Over time, employer-sponsored plans would likely suffer as employers choose to pay penalties and send plan participants to exchanges. If the entire law is found unconstitutional, employers would need to decide if they want to maintain features like extending the maximum age for adult dependents to 26 and eliminating lifetime dollar limits on essential benefits. With the Supreme Court expected to rule in late June, speculation will hopefully be replaced by action, as we continue to help your plan respond to the outcome.

To view other articles from the SIP Spring Newsletter, please click here.

In cooperation with NAEBA

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