Waiting on the Supreme Court

October 2011

In late September, the Obama administration petitioned the U.S. Supreme Court to decide on the constitutionality of health care reform’s individual mandate, which requires most Americans to purchase health insurance or pay a penalty.

The petition also asks the Supreme Court to decide if a tax law called the Anti-Injunction Act applies to the cases filed against health care reform. This law prohibits lawsuits that seek to restrain the collection or assessment of taxes, before someone has actually paid the tax. And the insurance mandate health care penalty is considered a form of taxation.

No one has yet paid the tax, because the penalty for not purchasing insurance does not take effect until 2014. So, the court could potentially rule that the lawsuit can’t move forward. An appellate court issued a similar ruling on that point earlier this fall.

Two other appellate courts have made separate rulings on whether the requirement that most individuals obtain health insurance in 2014 or pay a penalty lies within the powers of Congress to regulate interstate commerce. One upheld the requirement as constitutional and the other said it exceeds the power of Congress.

The Supreme Court is expected to review the case before the current court session ends next summer.

Impact on employers — It is too early to say, because the court could rule to uphold the law, to strike it down, or to allow only certain provisions. If the mandate is struck down, health insurers and/or the government will likely look for other ways to get healthy people to enroll to avoid a pool of high-risk participants that could result in even higher premium rates.

Impact on employees — This also is too early to project. If the entire law is struck down, it is not certain whether insurers would continue to uphold certain coverage requirements, such as the removal of lifetime and annual benefit maximums, which would no longer be legally mandated.