ACA Compliance

The Possible Fate of the ACA

 Stay the Course to Ensure Continuing Compliance

Executive Summary

  • Because of a provision of the new tax law that was enacted in 2017 that reduced the Affordable Care Act’s (ACA) Shared Responsibility Penalty payable by individuals who did not have appropriate medical insurance coverage to $0.00, once again the fate of the ACA has been placed back in the hands of the judiciary.
  • Guided by the logic that the Supreme Court applied when in 2012 it initially affirmed the constitutionality of the ACA, in 2018 a Federal District Court in Texas ruled that the ACA in its entirety was unconstitutional.
  • That decision was appealed to the Fifth Circuit Court of Appeals in New Orleans. That court heard oral arguments from the litigants on July 9, 2019.
  • On December 18, 2019 a three-judge panel of the Fifth Circuit Court issued a 2-1 split decision. In summary, the Appeals Court agreed with the District Court that the Individual Mandate was unconstitutional.  However, it was not satisfied with the analysis provided by the District Court Judge in support of his findings that the entire law should be deemed unconstitutional. As such, the Appeals Court remanded the case back to the District Court with instructions to develop a more in-depth analysis.
  • As of this point, the only thing we can be confident about is that there will be no final judicial determination as to the constitutionality of the ACA in the immediate future. The Appeals Court ruling has created a potentially lengthy and time-consuming detour on the adjudicatory path to the Supreme Court.
  • No matter which litigation path is followed, in the absence of any legislative actions, the Supreme Court is destined to once again decide whether the Affordable Care Act is constitutional.
  • Given the amount of renewed attention and uncertainty stemming from the ongoing litigation, employers are pondering what steps, if any, they should take in anticipation of the possible nullification of the ACA by the courts.
  • The eBenefits Team believes that it would be unwise and unnecessarily risky to act based on the assumption that the ACA will be nullified, and if so when that would occur, and finally how Congress and the President might respond to the law’s demise.
  • Furthermore, even if at some point the ACA were to be revoked, employers should be prepared for the possibility that some of their current ACA related compliance obligations could remain functionally operative at least through part of 2020.

Therefore, until all questions as to whether the law will be upheld are resolved, we continue to believe that the best approach for employers to adopt is to stay the course they are already on by following all existing policies, practices and procedures that ensure their ongoing compliance with the ACA.  


Since even before its complicated legislative birth, immediately followed by a very difficult infancy, the continuing presence of the Affordable Care Act (ACA) and its progeny of regulations, has been and continues to be a highly divisive and polarizing political issue for the American public.

However, there is no disagreement that since its passage in 2010 the ACA has had a significant transformative impact on the entire healthcare system in the United States, and by extension our entire economy. In effect, despite the lingering insistent echoes of criticism voiced over the last decade, our country has by necessity become acclimated to realities attributable to the law.

Now, as a result of the confluence of a number of political and legal realities, we may be on the threshold of a series of events that collectively could bring about massive disruptions to the complex operational mechanisms that currently govern how the delivery of healthcare services are regulated and paid for in the United States.

The purpose of this article is to not to criticize nor extoll the virtues of the ACA, opine on the competing legal theories about the basic constitutionality of the law, or predict what the actual final outcomes will be.

Rather we will identify and provide background information about possible scenarios that may emerge in the coming months and years, to assist those of us who are involved in the design and administration of health insurance programs, begin to think about how to best respond to possible dramatic changes in what may become a highly challenging operating environment.


Original Supreme Court Case – Shortly after its passage, opponents of the ACA tried to have the law overturned through litigation in the federal courts, with the hope that ultimately the Supreme Court would rule that the law was unconstitutional. Those litigants were disappointed by the actual outcome.

One of the arguments made by the law’s opponents was that Congress did not have the constitutional authority to impose an Individual Mandate on Americans, requiring them to maintain minimal essential health insurance coverage for themselves and their dependents, or pay penalties to the Internal Revenue Service (IRS).  

As a practical matter, individuals who do not obtain the required coverage from an employer sponsored group plan, or from a governmental plan, would be compelled to purchase individual policies from private insurance companies, or face financial penalties (aka Shared Responsibility Payments) at rates that were scheduled to increase annually.

In his written opinion, Chief Justice Roberts ruled that the Congress did not have the power to impose a requirement on individuals to obtain health insurance coverage either under the Commerce or the Necessary and Proper Clauses of the Constitution.

However, Chief Justice Roberts accepted the government’s position that notwithstanding the fact that the actual wording of the legislation characterizes the shared responsibility payment as a “penalty” and not a “tax”; “the Shared Responsibility Payment” may for constitutional purposes be considered a tax that is collected by the IRS.

As such, Congress acted within its constitutional authority to lay and collect taxes. Therefore, the Individual Mandate provision of the ACA was ruled to be constitutional.

New Tax Law – In 2017 Congress passed a new tax bill that the President signed into law. Among the broad array of tax matters covered in the legislation was a provision that reduced the Shared Responsibility Penalty to $0.00 after 2018.

Technically the Individual Mandate provision that had been a key provision of the ACA, was not repealed because of this change. However, the absence of negative financial consequences for people who chose not to have healthcare insurance, effectively rendered the Individual Mandate to be little more than an aspirational suggestion.   

Commentators have opined that a mandate without some tangible form of noncompliance penalty is not really a mandate and therefore can be ignored with impunity. Furthermore, a nonexistent penalty should not be considered a tax in the way Chief Justice Roberts’ original analysis contemplates.

These supposed distinctions without differences have served as a catalyst for renewed litigation in the federal courts intended to overturn the ACA.

New Litigation at the Federal District Court Level – Soon after the passage of the new tax law, Governors and Attorneys General from twenty states sued in Federal District Court in Texas seeking to enjoin the federal government from enforcing the ACA.

The plaintiff’s position was that since the current Shared Responsibility Penalty for noncompliance had been reduced to zero, it could no longer be characterized as a tax.

Extending that logic further, if the penalty was not a tax, then in accordance with the reasoning provided in Chief Justice John Robert’s original opinion, the Individual Mandate provision had been effectively rendered unconstitutional.

The final rung of their legal position was that since the Individual Mandate provision was unconstitutional, the entire ACA was unconstitutional and could not be saved by simply isolating and severing the Individual Mandate provision from the entire ACA.

Although unusual but not without precedent, the federal Department of Justice did not defend the constitutionality of the ACA at the District Court level. Responsibility for defending the constitutionality of the ACA was assumed by Attorneys General from twenty-one states, the District of Columbia and the U.S. House of Representatives.

On December 14, 2018 the Federal District Court in Texas ruled that the ACA was unconstitutional.

Federal Appellate Litigation – Fifth Circuit Court of Appeals – The initial decision of the Federal District Court in Texas decision was appealed to Fifth Circuit Court of Appeals in New Orleans, seeking to have the District Court’s ruling reversed.

On July 9, 2019 a panel of three Federal Appeals Court judges heard oral arguments from the litigants. On December 18, 2019 the Fifth Circuit Court issued a 2-1 split decision.

In her in her written majority opinion Judge Jenifer Walker Elrod upheld the portion of the District Court’s finding that since the Shared Responsibility Penalty had been reduced to $0.00, the Individual Mandate portion of the ACA was unconstitutional.

However, the Appeals Court neither accepted nor rejected the District Court’s finding that since the Individual Mandate portion of the ACA was unconstitutional, their entire ACA was unconstitutional and unenforceable. Instead, it sent the case back to the District Court with instructions to provide a more in-depth legal analysis that could support its initial finding.

Planning Ahead – What to Expect in 2020 and Beyond

As of this point, the only thing we can be confident about is that there will be no final judicial determination as to the constitutionality of the ACA in the immediate future.

  • The most likely path forward would be for the original District Court Judge in to hear arguments from the litigants, review written briefs, and submit a more detailed written opinion as to whether portions or the entire ACA should be deemed unconstitutional back to the Fifth Circuit Court of Appeals for their further consideration.
  • Possible but less likely paths would be for the litigants’ request to have the Appeals Court decision be reviewed by all the twenty-six Judges of the Fifth Circuit (i.e. En Banc Rehearing) granted, or alternatively have their petition the Supreme Court to review the Appeals Court decision granted without further review by lower level courts.    

No matter which litigation path is followed the Supreme Court is destined to once again decide whether the Affordable Care Act is constitutional.

  1. Given the usual slow and deliberative pace of the judicial processes, it is highly unlikely that the courts will arrive at any final decisions in the near future that will serve to relieve employer organizations of their ACA compliance responsibilities. Therefore, the most prudent course for employers to follow is to continue to take all steps necessary to ensure they have implemented and maintained those practices and protocols necessary to ensure compliance with all current ACA requirements.
  • Although while there is a wide range of conflicting opinions being expressed, many respected legal scholars believe the District Court’s finding that the entire ACA is unconstitutional is incorrect and unsustainable.

If their analysis proves to be correct and the District Court’s ruling is ultimately overturned, in the absence of any new legislative or executive actions, the status quo with respect employer’s ACA compliance responsibilities will continue for the foreseeable future.

  • As anticipated, in addition to triggering further judicial involvement, the Fifth Circuit’s ruling that affirmed part of the District Court’s decision, has sent shock waves across the country.

The enhanced possibility that the entire ACA and its supporting regulatory infrastructure might be scrapped has already intensified the debates among politicians, academicians, healthcare professionals, insurance company executives and the public about how healthcare services should be delivered, financed and regulated, that are already underway in connection with the upcoming 2020 election.

Although a possibility, any predictions as to whether legislative or executive actions (either at the Federal or State levels) might be taken in the near term that would preemptively inoculate the country from the fallout of a potential final ruling that the entire ACA was unconstitutional, would as of this date be purely speculative.

  • If the Supreme Court ultimately rules that the entire ACA is unconstitutional, in the absence of new legislative or executive actions (either at the Federal or State Levels), the short-term impact on employers in 2020 should be minimal.
  • It is unlikely that employers (or their insurance carriers) would make any changes to their health insurance program offerings (e.g. Plan Features; Eligibility Rules; Employee Premium Levels; Coverage of Young Adult Dependents, etc.) in the middle of their 2020 plan years.
  • If relieved of their ACA responsibilities, we can expect that employers will on a prospective basis take advantage of their expanded ability to assess and consider modifying the features and contours of their health insurance benefit programs applicable to future plan years.
  • Employers’ compliance responsibilities pursuant to ERISA, HIPAA, COBRA and applicable state/local laws would remain in-force.
  • We can expect that employers will attempt to seek refunds of any assessed Shared Responsibility Payment penalties, or penalties stemming from failing to satisfy ACA’s Reporting Requirements that were attributable to periods following the enactment of the Tax Cuts and Jobs Act of 2017.  
  • The potentially most dramatic short-term consequences that would follow the elimination of the ACA will not be borne by employer organizations that sponsor health insurance programs for their employees. Rather those most likely to be negatively impacted would be those
  • People who obtain individual coverage through the marketplace that may become unaffordable due to the loss of the Premium Support and Cost Sharing Reduction (CSR) subsidies provided by the ACA;
  • People who obtain individual coverage through the marketplace that becomes unaffordable due to higher underwriting risk-based premiums that are prohibited by the ACA;
  • People who obtain individual coverage through the marketplace that may become unaffordable since the anticipated reductions in overall enrollments will compel health insurance carriers to raise the premium rates paid by the remaining insureds;
  • People who obtain individual coverage through the marketplace that may not be sufficiently robust to adequately meet their healthcare needs in the absence of the ACA’s benefit level standards;
  • People who are among those who became eligible for Medicaid Benefits in those states that chose to take advantage of financial support provided pursuant to the ACA as an inducement to expand qualification criteria.

If the ACA is found to be unconstitutional it its entirety, tremendous political pressure would most likely be brought to bear on Congress and the President to at a very minimum provide on a short-term basis, new financial support mechanisms that would replace the subsidies that had previously been available through the ACA.  


Almost a decade has passed since the ACA became law and significantly altered many aspects as to how we as a nation deliver, regulate and pay for healthcare services. Despite these efforts and the good intentions of the proponents of the ACA, there is still a great deal of dissatisfaction being expressed across the full political spectrum about varying disappointing aspects of the current state of our healthcare system.  

Now, at an early stage of the 2020 election cycle it should come as no surprise that healthcare has already surfaced as one of the most important campaign issues being debated and fiercely fought over by candidates for the presidency. If at some point in 2020 the ACA is ruled unconstitutional, the intensity and stridency of the political discourse and posturing surrounding the healthcare issue will be enormous.

No matter how the courts ultimately resolve the ACA’s constitutionality status question, any major governmental actions that would bring about long-term fundamental changes to our healthcare system are unlikely to occur until after the new Congress convenes in 2021.  

Given the highly uncertain, polarized and fluid nature of the times we live in, it could be a serious mistake to simply assume, one way or the other, how the courts will rule on the constitutionality of the ACA. Therefore, it is our continuing recommendation that the most appropriate and prudent course for employers to follow now is to act as though the ACA will survive, and that they should continue to take all necessary steps to ensure their current ongoing ACA related compliance responsibilities will be fully met, on an indefinite basis.

Finally, regardless of how the status of the ACA is ultimately settled, please be assured that the eBenefits Team will always be well positioned to assist our clients to operate effectively in a challenging and ever evolving legislative or regulatory environment.

Disclaimer: The information contained in this document represents only a general overview of the subject matters covered. It is not intended to be legal and/or tax advice and should not be relied upon as such. Readers who have any questions or concerns about the matters covered in the document are advised to consult with their lawyers or tax advisors for advice and guidance that is applicable to their specific individual situations.