Striking individual mandate poses potential employer challenges

After hearing oral arguments regarding the constitutionality of health care reform’s individual mandate, the Supreme Court justices are to decide whether the bill should be left alone, partially overturned or struck down in its entirety, says Jennifer Kraft, partner at national employment law firm Seyfarth Shaw in Chicago.

If the Supreme Court rules that the individual mandate is unconstitutional but leaves the rest of the bill intact, this could negatively impact employers, Kraft says. By overturning only part of the bill, an unbalanced system would be left functioning as it was not designed, which could create even more problems. This is especially true for employers that decide to move to the exchange system in 2014 because fewer participants would be in the market for health insurance.

“You won’t have the individual mandate, so there won’t be that incentive for people to go get health insurance,” Kraft says. “Because of that, you might not have as many people looking to buy health insurance at the exchanges, and if you have a smaller pool, then you’re going to have higher costs, so it could impact the exchanges by making that coverage more expensive.”

Only striking down the individual mandate also puts employers in a position where they must implement the rest of health care reform’s provisions, which could be challenging, Kraft says. Employers will still be required to provide affordable health insurance or pay a penalty; however, they will not have the influx in the insurance market from the individual mandate to help balance costs.

“If that’s the case, I think that would be more of a challenge for employers because they would find themselves still in the position of having to implement all their health care reform changes, which drive up the cost of health care, but they wouldn’t have the offsetting impact of the individual mandate,” Kraft says.

A ruling is expected to be handed down in June, but even Kraft is unsure of the final outcome. After hearing all of the oral arguments, the justices seemed to conceal the direction they were leaning, though the decision is likely to be close, Kraft says.

“It’s hard to tell where the Supreme Court is leaning, but based on their questioning, it seems like they’ll be very closely divided as to the constitutionality issue,” Kraft says. “On the severability issue, the sense I get is that they’re not inclined to pick and choose which provisions of the act should be struck down and which ones should stay but whether they land on whether the whole axe needs to be struck down or just the individual mandate needs to be tossed out. It will be a pretty close call.”


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