Industry Lawyers Give Their Own Verdict on PPACA

The Supreme Court decision upholding the Patient Protection and Affordable Care Act means that the 2010 legislation intended to reshape an industry that constitutes one-sixth of the nation’s annual economy will continue apace.

In a majority opinion written by Chief Justice John Roberts, the Court held that the individual mandate imposes a “tax” on individuals who fail to purchase health insurance coverage, and that the broad taxing powers in the Constitution give Congress authority to impose this tax, according to a legal bulletin by the Washington office of Covington & Burling.

Covington & Burling lawyers also cautioned that, “Many observers believe that the Supreme Court’s decision is just the first act in a drama that will play out in the November elections and beyond, as the law’s opponents seek to repeal the PPACA and it supporters rally to its defense.”

But James Napoli, head of the Health Care Reform Task Force at Proskauer and a senior counsel there, said that regardless of the headwinds or tailwinds, the law is currently the law.

“With this ruling, everything is back to business as usual, and everyone can continue implementing the PPACA’s various reforms and coverage mandates,” Napoli said.

“Whether the ruling is good or bad from a constitutional prospective is for the academics to debate,” Napoli said, “from a practical point of view, the ruling adds a certain measure of stability with respect to the rules that govern employer-sponsored health care benefits.”

He added that this measure of stability will be somewhat short-lived as Congress continues to modify PPACA’s rules as they are implemented. This will undoubtedly give rise to additional litigation challenging the implementation and administration of the PPACA’s various coverage mandates.

“That said, such litigation would have resulted—in one form or another—regardless of the Court’s ruling,” Napoli concluded.

Lawyers at Covington & Burling said in a bulletin to clients that “Employers have very little time remaining in which to comply with significant new health plan requirements that become effective this year or next. The PPACA requirements that take effect in 2012 and 2013 present significant challenges for employers.

Scott Sinder, a partner at Steptoe & Johnson in Washington and counsel to the Council of Insurance Agents and Brokers, added that, “As a practical matter, this means the law survives intact, but the Medicaid ruling creates a hole in the universal coverage promise that undergirded the legislation.”

In a bulletin to CIAB members, he said Steptoe thinks this means that, right after this fall’s elections, Congress will be forced to re-evaluate the PPACA’s individual mandate, the subsidies provided under the law, and the Medicaid financing scheme.

“Although the Supreme Court decision “settles the constitutional questions surrounding the ACA, it does not answer all outstanding issues surrounding the law’s implementation,” Sinder said.

“There remain many questions that must be resolved through rulemakings at the federal level and through state legislative and regulatory action,” he told the brokers. “These issues could provide opportunities for some significant re-thinking of the law in a number of areas, including issues affecting brokers and employers.

He also raised the specter that because states are lagging, for both operational and political reasons, in establishing healthcare exchanges, the centerpiece of the law, the Obama administration could decide to push back the rollout from January 2014 to January 2015.

“A minority of states have taken action to create exchanges; the remainder are not in a position to get their exchanges up and running on schedule,” Sinder said in a note to clients.

In addition, the Department of Health and Human Services has issued guidance regarding federally facilitated exchanges and discussing federal-state “partnerships,” in an effort to get lagging states on board.

“It is unclear what impact today’s ruling will have on the states’ decisions to move forward on exchanges, but it could very well put pressure on the Administration to delay implementation deadlines,” Sinder said, referring to a possible delay in implementing exchanges until 2015.

He made the point that using the subsidies and the potential huge budget savings for each year the implementation of the 2014 package of reforms (exchanges/subsidies/etc) is delayed would provide a pay-for that could form the basis for compromise in Congress in the fall, after the election. One example would be Republican de facto acquiescence to PPACA in return for Democratic acceptance for extension of the Bush tax cuts for an additional period of time.

“I think that one upshot of the Supreme Court’s opinion on Medicaid—with the prospect that some states may opt to not expand their Medicaid programs—is that it could create further pressure to rethink/delay,” Sinder said. “But, this is really just political conjecture; it is not driven by the text of the law in any way,” he cautioned.