In a highly anticipated decision, a divided Supreme Court upheld almost all provisions of the Affordable Care Act (ACA), often referred to as “Obamacare.” Specifically, the Court held that the individual mandate is constitutional as a permissible exercise of the power of Congress to levy taxes. The Supreme Court also upheld the provisions of ACA extending Medicaid coverage to individuals with income less than 133¹/₃ percent of the poverty level, except that it overturned the authority of the Secretary of Health and Human Services to withhold existing Medicaid funding to any states that refuse to provide the increased coverage. With that limited exception, ACA remains in force.

Immediate Impact on Employers 

Some employers may have delayed compliance in the hope that ACA would be held unconstitutional.  Now, employers will have to accelerate efforts to comply with ACA’s requirements, some of which go into effect in the very near future.  The most immediate requirements generally include:

• SBCs.  Employees who participate in a group health plan must be provided with a Summary of Benefit Coverage in a specific format for open enrollment periods beginning on or after September 23, 2012.  Employers must make sure that the required forms are provided.  You can read our earlier discussion on this requirement here.
• Form W-2 Reporting.  Beginning with 2012 Forms W-2 issued in January 2013, most employers with 250 or more employees must report the cost of employer-provided health coverage on the Forms W-2 they issue.
• Medicare Tax Increase.  Beginning in 2013, the employee portion of the Medicare tax is increased by the imposition of an additional 0.9 percent tax on wages over $200,000.  The employer will be responsible for withholding this additional tax.
• Patient-Centered Outcomes Research Fee.  Starting for plan years ending after September 30, 2012, ACA imposes a fee of $2.00 ($1.00 for the first plan year) for each individual covered under a group health plan to pay for research to assess the value of health care treatment options. In the case of a self-insured plan, the employer must pay the fee. Our prior alert on this topic is here.

Longer Term Impact

Many of the core provisions of ACA are scheduled to take effect in 2014, including state-based insurance exchanges, the individual mandate, the tax on large employers who do not provide affordable coverage to their employees, the subsidy for individuals with compensation less than 400 percent of the poverty level to purchase coverage through the exchanges, and the expansion of Medicaid. Between now and then, employers should evaluate the impact of those changes, including whether to implement new group health plans or modify existing plans (so as to avoid the employer penalty), or to terminate existing group health plans (and pay the employer penalty and allow employees to enroll for coverage under the exchanges).

Of course, ACA continues to be contentious. The election and actions by Congress, the regulatory agencies and the states may all impact the extent to which ACA is implemented.  More fundamentally, the impact of ACA or any other health care reform measures on medical coverage costs remains to be seen.  Employers will have to keep abreast of all of these developments between now and 2014.

Save the Date!

We stand ready to assist companies with these efforts.  In addition, we will be holding a client seminar at 8:30 a.m. Wednesday, August 1, 2012, at the Sammy’s at One Cleveland Center (1375 East Ninth Street, Cleveland, Ohio), to discuss the practical implications of the decision for plan sponsors. More information about this seminar will be provided soon.

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For additional information and discussion on this topic, please get in touch with your regular Calfee contact or one of the Employee Benefits and Executive Compensation attorneys listed below:

Richard J. Hauer
216.622.8430
rhauer@calfee.com 

Wade D. Clark
216.622.8389
wclark@calfee.com  

Robert A. Miller
216.622.8363
rmiller@calfee.com 

Brian M. Murray
216.622.8569
bmurray@calfee.com 

Gretchen H. Rogge
216.622.8410
grogge@calfee.com 

This alert is provided by Calfee, Halter & Griswold LLP for education and information purposes only. This alert is not intended to provide legal advice on specific subjects. The resolution of legal issues depends upon the specific facts of a particular situation and the laws involved. This alert may be considered advertising under applicable laws.