Supreme Court Ruling Upholds Individual Mandate Provisions of Health Care Reform – What Does it mean for Employers?

Contributed by Rebecca Dobbs

On June 28, 2012, the Supreme Court issued its highly anticipated and long-awaited ruling on Health Care Reform.  Primarily, the court was reviewing two provisions in the Act: 1) the individual mandate and 2) Medicaid expansion.  Because the ruling with regard to the Medicaid expansion provision does not directly impact employers, this article will focus only on the ruling with regard to the individual mandate.

Justice Roberts wrote the decision for the majority.  In it, he acknowledged the individual mandate was a “penalty” for purposes of jurisdictional issues which allowed the court to render a ruling.  But, for purposes of determining Congress’ power to issue the mandate, the court held that the mandate was a “tax.”  For those of you who aren’t aware, Congress’ power to tax is much, much broader than the power granted to them under the commerce clause of the Constitution.  This reasoning allowed the court to uphold the individual mandate while determining at the same time that the individual mandate was outside Congress’ authority under the commerce clause. 

We have reiterated before that the employer mandates within Health Care Reform were not directly an issue before the court – a common misconception.  The employer mandates would have been indirectly affected had the court ruled the individual mandates were unconstitutional and then also went on to hold that they rendered the entire act unconstitutional because they could not be severed from the rest of the provisions within the act.

What does this mean for employers?  If you were within the category of employers that had been preparing for upcoming compliance requirements without regard to the outcome of today’s decision, your preparation efforts were not wasted activities.  If you were within the category of employers that was disregarding upcoming compliance requirements in the hope that the Supreme Court would save you from them, you need to immediately redesign your current strategy.