Prepare for the U.S. Supreme Court's Health Care Decision

News Updates

After three riveting days of oral arguments in March 2012, employers were left anxiously awaiting the decision of the U.S. Supreme Court about the fate of the Patient Protection and Affordable Care Act, expected near the end of June 2012.

During this period, employers should take interim steps in order to prepare for the eventual decisions. These steps should take into account the full range of possibilities and should position employer group health plans to react to the possible outcomes, respond to inquiries and requests from internal stakeholders, and consider administrative and design issues presented by the possible Supreme Court decisions.

Upheld Fully

It is possible that the Supreme Court will leave the act unchanged and on course to take full effect in 2014. Because of this possibility, employers should continue to address implementation steps for 2012 and beyond, such as fulfilling upcoming requirements relating to: 

Given how soon many of these implementation steps impact group health plan design and operation, delaying action while waiting for the Supreme Court decisions might jeopardize 2012 or 2013 compliance with the act.

Upheld Partially

It is possible the Supreme Court will strike down only portions of the act, such as the individual mandate or Medicaid rules. From the perspective of employer group health plans, these deletions would leave the act's provisions applicable to employer group health plans basically unchanged. While such a result would lead to calls for broader changes to shore up or strip away other portions of the act, political realities might delay any such action until after the November 2012 elections. As a consequence, employers should continue to take the steps outlined above in the event that the act is upheld partially.

Struck Down

There is a significant possibility that the Supreme Court will strike down the entire act, particularly if the court finds that the individual mandate is unconstitutional and that the act functions only as an indivisible whole. Such a result would cause immediate chaos for employer group health plans, would lead to loud calls for legislative action and would require quick agency guidance in a number of difficult areas. In order to prepare for this possibility, employers should, while awaiting the decision, do the following:

  • Determine whether they have retained the right to change their group health plans.
  • Analyze the cost and desirability of retaining already implemented act provisions for the balance of 2012 or beyond.
  • Identify adult children and prepare to allow midyear coverage changes if such coverage becomes taxable to employees.
  • Prepare employee communication material addressing "what's next?" issues that could impact plan operation during the remainder of 2012.
  • Identify administrative deadlines for 2013 design changes, administration modifications and communication projects.
  • Ask carriers and third-party administrators whether 2012 medical flexible spending account claims can be readjudicated to include over-the-counter drugs and whether retiree medical drug claims must be reprocessed to reflect the reversion to prior Medicare Part D rules.
  • Determine accounting consequences and timing issues related to the return to prior Medicare Part D subsidy taxation rules and the unwinding of any Cadillac tax accounting steps.
  • Consider postponing plans to spend Early Retiree Reinsurance Program proceeds and Medical Loss Ratio rebates.

While these interim steps might seem daunting, it is likely that, whatever the result of the Supreme Court's ruling, employers should expect a period of heightened federal activity associated with the act, its possible modification and a possible future replacement.

Finally, even if the entire act falls and Congress is unable or unwilling to pass a replacement, the result could reinvigorate state and local interest in addressing health care access issues similar to actions taken in Massachusetts and San Francisco.

With 22 offices in the United States, Europe, and Asia, the law firm Morgan Lewis provides transactional, litigation, labor and employment, regulatory, and intellectual property legal services to clients of all sizes.

© 2012, Morgan, Lewis & Bockius LLP. All rights reserved. This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

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