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On December 18, 2019, the 5th Circuit Court of Appeals ruled that the Affordable Care Act (ACA) individual mandate was unconstitutional. However, unlike the lower court, the 5th Circuit declined to decide whether the ACA in its entirety was also unconstitutional. The 5th Circuit has instead sent the case back to the lower court to reconsider whether the other provisions of the ACA are still valid without the individual mandate. In the meantime, the ACA will remain in effect and continue to be enforced.

 

ACA Individual Mandate

The individual mandate is a provision of the ACA that requires individuals to maintain certain healthcare coverage or face a tax penalty. In 2012, the Supreme Court upheld the individual mandate as a constitutional exercise of Congress’ taxing power. In 2017, Congress reduced the individual mandate penalty to $0, essentially eliminating the provision.

 

District Court Decision

On December 14, 2018, a federal district court found the entire ACA was unconstitutional. The court found that the individual mandate was unconstitutional after Congress reduced it to $0 because the mandate was no longer an exercise of Congress’ taxation power (since it was no longer a tax). In addition, the court found that the individual mandate could not be separated, or was “inseverable,” from the rest of the ACA (including, but not limited to, the employer mandate, Medicaid expansion, premium tax credits, and coverage of pre-existing conditions), thereby making the entire ACA unconstitutional. The case was then appealed to the 5th Circuit.

 

5th Circuit Decision

The 5th Circuit agreed with the lower court that the individual mandate was unconstitutional because it could no longer be considered a tax and Congress had no other constitutional power to enforce the mandate. The 5th Circuit declined to decide whether the unconstitutionality of the individual mandate invalidated the entire ACA. Instead, the 5th Circuit remanded the case to the lower court to provide additional analysis on whether the individual mandate could be “separated” from the rest of the ACA or whether all other ACA provisions should be struck down, as well.

 

What’s Next

Parties will now have to submit new briefs and reargue the case before the district court. Any decision will likely be appealed again and ultimately the case may make its way up to the Supreme Court. This means that the case will likely continue to be litigated for years to come. In the meantime, the ACA will remain in effect and will be enforced.

 

Bottom Line for Employers

Employers subject to the ACA, including the employer mandate and reporting provisions, should continue to comply for the foreseeable future.

 

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.

Emerald Law – Emerald is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music and writing non-fiction.