- Decision by U.S. District Court rendered ACA individual mandate unconstitutional and invalidated the rest of the law, but did not issue injunction to stop enforcement of the law.
- White House issues statement saying ACA still in effect.
- Appeal expected in Democrat-led states.
- Employers and individuals should continue to meet obligations under the law.
The U.S. District Court in Texas issued a decision in Texas v. U.S. invalidating the Affordable Care Act. Essentially, the opinion issued by the judge stated that the recent change zeroing out the individual mandate penalty rendered the ACA individual mandate unconstitutional. More importantly, the judge opined the remainder of ACA could not be severed from the mandate, invalidating the law in its entirety.
Although this seems impactful to ACA, nothing has changed. The ACA continues to be in effect. The court did not issue an injunction to stop the enforcement of the ACA. Consequently, the law remains intact as the case moves through the court system. The White House even issued a statement that the ACA is in effect while the case goes through the appeals process.
Reaction to decision includes talk of an appeal
The case is expected to be appealed by Democrat-led states, with California Attorney General Xavier Becerra stating his intent to file an appeal. U.S. Rep. Nancy Pelosi from California, who has the support to become the majority leader, made it clear in a released statement that House Democrats would intervene in this case when they took the gavel in January.
However, the process through the courts is typically lengthy, taking years to move from district court toward potentially being heard by the U.S. Supreme Court. There are many places along the way that may reverse this ruling or where conflicting opinions from various federal courts may ultimately need to be arbitrated. This is only the first of many arduous steps to determine what, if anything, will change with the ACA. Keep in mind, as was evident during the most recent mid-term elections, that Congress and even the administration makeup may change by the time this case meanders through the system.
The immediate impact of the court decision in Texas
As the news circulated nationwide following the decision, the most notable impact is confusion, especially among employers and individuals if the law remains. It’s important to understand that the obligation and benefits under ACA remain, except for the federal individual mandate that was changed by Congress and not the courts.
What do employers and individuals need to know?
Employers and Individuals should continue to ensure they are meeting their obligations under the law and evaluating what benefits they may be able to take advantage of under current law. This is particularly important for employers that have obligations under the Employer Shared Responsibility (ESR) provision of ACA as the deadline is fast-approaching to file their 1094/1095-Cs with the IRS and furnish their employees.
This gathering of complex data across multiple departments from payroll and benefits through human resources can be time-consuming. Employers should not delay or dismiss meeting their obligations, as the penalties can be hefty and the response to the IRS is difficult and time-consuming if the information was not accurate the first time. Essentially, the law remains and employers should stay the course.
Paychex will continue to monitor developments that may impact the ACA.