What the Recent ACA Ruling Means for Employers

Thursday February 13th, 2020

In December of 2019, the 5th U.S. Circuit Court of Appeals ruled that the individual mandate of the Affordable Care Act was unconstitutional. This ruling was made by a vote of two to one, resulting in some uncertainty among both employers and employees. The individual mandate of the ACA previously required most Americans to carry health insurance.

Since the ruling, many questions have come up among those who are familiar with the ACA and its regulations. Some wondered whether employer-sponsored health insurance costs would go up, while others were curious as to whether this ruling would cause the entire ACA to be overturned. It also raised questions about purchasing insurance from the marketplace and whether credits and penalties would still be in play.

Although this ruling has dictated that a portion of the ACA is unconstitutional, employers should still comply with the regulations that are still in effect. The individual mandate impacts individual employees, not employers, so this change doesn’t impact whether an organization needs to send out required forms and offer coverage to eligible employees.

How the Ruling Came to Be

In 2017, a bill eliminated the tax penalty for those who didn’t comply with the individual mandate of the ACA. This bill was a precursor for the ruling made in the 5th U.S. Circuit Court of Appeals. Since the bill eliminated the tax mechanism, Congress could no longer apply its powers of taxation to enforce the mandate, resulting in it being deemed unconstitutional. 

All other aspects of the ACA have been sent back to a federal trial court to determine a final conclusion to the 2017 bill. It is expected that the bill will go back to the Supreme Court for a final outcome.

ACA Requirements Still in Effect

For employers, there are several ACA requirements that remain unchanged by the ruling. These include:

  • Offering health insurance to employees (and their dependents) – required of all companies with 50 or more full-time/full-time equivalent employees (Applicable Large Employers (ALEs))
  • Providing 1095 Forms to employees (ALEs and/or those that are self-insured
  • Filing 1094 and 1095 Forms with the IRS (ALEs and/or those that are self-insured