ACA Ruled Unconstitutional: What's the Impact?

 December 18 2018     Diane Cross
Last week, a federal judge ruled in Texas v. United States that the Affordable Care Act (ACA) is invalid. More specifically, the Court held that since the individual mandate penalty is eliminated (as of 2019), the entire ACA is unconstitutional. As expected, employers want to know what this means for their employee benefits administration.  For now, the ACA remains in place and employers’ group health plans are not impacted.


In 2012, the U.S. Supreme Court upheld the ACA on the basis that the individual mandate is a valid tax. Fast forward a few years, and this current lawsuit was filed by twenty states following the 2017 Tax Cuts and Jobs Act (which reduced the individual mandate penalty to zero effective January 1, 2019). The plaintiffs argued that without a penalty, the individual mandate can no longer be considered a tax - in line with the previous Supreme Court ruling - and is therefore unconstitutional. The plaintiffs further argued that because the individual mandate is not severable from the ACA (i.e. other ACA provisions could not remain in place without the individual mandate), the entire law is invalid. With the penalty’s elimination, the Court ruled that the ACA is no longer valid under the U.S. Constitution.

Impact to Employers
This ruling is expected to be appealed, and likely heard by the Supreme Court. While appeals are pending, all existing ACA provisions are applicable and enforced. From a statement by the Department of Health and Human Services (HHS), “The recent U.S. District Court decision regarding the Affordable Care Act is not an injunction that halts the enforcement of the law and not a final judgment. Therefore, HHS will continue administering and enforcing all aspects of the ACA as it had before the court issued its decision.”

Even though the individual mandate penalty is reduced to zero beginning in 2019, employers and individuals must continue to comply with all other applicable ACA requirements. As mentioned above, this ruling is not expected to impact the ACA’s employer shared responsibility (pay or play) penalties and related reporting requirements, or any other applicable ACA requirement at this time. While it is currently “business as usual”, HORAN will continue to monitor and keep you updated on the status of this case. Please contact your HORAN representative with questions.