Despite Recent Ruling, ACA Obligations Remain
On Friday, December 14, U.S. District Court Judge Reed O’Connor issued a ruling in a lawsuit filed by a group of Republican governors and state attorneys general back in February, challenging the constitutionality of the Individual Mandate portion of the Affordable Care Act (ACA). You might recall that the 2017 tax act reduced to zero the tax penalty for individuals without health coverage. Now, fast-forward 12-months and O’Connor ruled that this repeal means the mandate is no longer a tax and “can no longer be sustained as an exercise of Congress’s tax power.” The Texas Federal judge then struck down the ACA in full, concluding the individual mandate is inseverable from the law, and Congress would not have passed the ACA without it.
Many news sources immediately took this ruling as declaration that the ACA itself was deemed unconstitutional, which is not the case. Additionally, despite the ruling, there is no real change taking place now or for the immediate future. District courts, where the ruling took place, are the first level of the federal court system. This ruling is anticipated to be appealed to the second level, the Circuit Court of Appeals. Regardless of how the appeals court rules, the matter is certain to move on to the Supreme Court as has occurred in the past.
Over the weekend, the White House and other government agencies put out statements which reflect the anticipated challenges ahead, and maintenance of the status-quo. The White House, in a statement late Friday, said: “We expect this ruling will be appealed to the Supreme Court. Pending the appeal process, the law remains in place.” Seema Verma, the administrator of the Centers for Medicare & Medicaid Services, (CMS) which oversees the insurance exchanges, said in a tweet: “The recent federal court decision is still moving through the courts, and the exchanges are still open for business and we will continue with open enrollment. There is no impact to current coverage or coverage in a 2019 plan.” This statement is reiterated on the federal site for insurance, Healthcare.gov, which is running a banner that reads, “Court’s decision does not affect 2019 enrollment coverage.”
The bottom line: Everything today is as it was last week, nothing’s changed. The Individual Mandate penalty will be reduced to zero after January 1, as scheduled, but the ACA’s mandate that employers with 50 or more full-time equivalent employees offer their full-time workers ACA-compliant health coverage remains. Employers should not take this recent ruling as a sign to change anything they’ve done during open enrollment, and just as importantly, for those subject to IRC Section 6055 or IRC Section 6056, you must continue your reporting requirements for Tax Year 2018.