Three Strikes You’re Out -- The Affordable Care Act Survives a Third Legal Challenge: Let’s Move On to the Consolidated Appropriations Act

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For employers holding out hope that some or all of the Affordable Care Act (“ACA”) would be overturned in its most recent challenge, that will not be the case, at least not by the hand of the United States Supreme Court. On June 17, in a 7-2 ruling, the Supreme Court held that none of the plaintiffs in California et. al v. Texas et. al, two individuals and over a dozen states, had standing to bring the case. Accordingly, the whole of ACA survives. This means employers and their group health plans must continue complying with its requirements.

At issue in the case was a ruling by the U.S. District Court for the Northern District of Texas that the entire ACA was unconstitutional as a result of the repeal of the tax on the individual mandate. The Fifth Circuit, on appeal, affirmed the individual mandate was unconstitutional without the tax. However, the Fifth Circuit remanded the case to the District Court for a more thorough analysis on the severability of the remaining ACA provisions. Before that happened, the case was appealed to the Supreme Court where it received the support of the Trump Administration to invalidate all of the ACA. A coalition of 20 states and the District of Columbia defended the ACA.

Many legal scholars considered the lower court rulings overly broad and believed that judicial invalidation of the ACA in its entirety, when Congress only repealed the tax on the individual mandate, violated the doctrine of severability. Accordingly, the Supreme Court’s holding today is not all that shocking to those who have followed the case closely.

Now that we know the ACA remains the law of the land (for a third and perhaps last time), employers can move on to comply with the Consolidated Appropriations Act (“CAA”). The CAA was passed and signed into law in December 2020. While some of the CAA changes have already taken effect, many take effect December 27, 2021 or for plan years beginning on or after January 1, 2022. These effective dates do not give employers and their service providers much time to gear up for the extensive changes made by the CAA.

See our CAA chart that provides a more detailed summary of the principal requirements that apply to employer-sponsored group health plans. We expect regulations on some of the key provisions of the CAA to be issued before July 1, 2021.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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