Affordable Care Act: What You Should Do

(This is a guest post written by Gary B. Kushner, for SHRM)

By a narrow 5-4 decision, the Supreme Court of the United States (SCOTUS) upheld the constitutionality of the Patient Protection and Affordable Care Act (PPACA) on the grounds that the individual mandate penalty is a tax. Because the Constitution clearly gives Congress the ability to impose a tax, the Court ruled, all of the other questions surrounding the mandate are moot.

In writing for the majority in the National Federation of Independent Business vs. Sebelius decision, Chief Justice John Roberts stated that, “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.” Chief Justice Roberts was joined in the majority decision by Justices Stephen Breyer, Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan.

While the individual mandate was deemed by a majority of the Court to violate the Commerce Clause and the Necessary and Proper Clause of the Constitution, it was ruled constitutional because Congress has the authority to impose a tax on individuals who go without insurance.

What HR Professionals Should Do Now

Today’s ruling is clearly not the end of the debate over health care reform, but rather only the first act. U.S. health costs are projected to be significantly higher than the rest of the developed world, while health outcomes in the U.S. trail other industrialized nations — often badly. Providing expanded coverage, increasing the health status of our citizens, and better controlling costs are all goals that, while addressed in the PPACA, have a long way to go.

The ruling today sends a clear message — organizations need to review their plans and seize this opportunity to create better strategies around their health plans, both in design and employee communication.



For human resource professionals (and all organizations), the message here is very clear — move forward with implementing and complying with PPACA, since major portions of it take effect in 2014 (a mere 18 months away) and other provisions take effect later this year and in 2013. For example, many employers soon will be required to report the value of employer coverage on IRS Form W-2, and all employers must issue a summary of benefits and coverages. Employers who were waiting to begin planning on how to comply (or whether to even offer or continue to offer health coverage) need to begin performing quantitative and qualitative analyses on their plans. More importantly, they need to begin looking at their health plans as part of an overall HR strategy for their organizations.

Key steps employers need to take NOW to plan for 2014:

1. Determine the strategic implications of whether or not to offer a plan. Health benefits are just one part of an overall total rewards strategy.  How does an organization’s having (or not having) health benefits impact other talent acquisition and talent management strategies?
2. Review the Supreme Court decision as to its impact on your organization.
3. If a plan is offered, perform a qualitative analysis on whether it makes sense to remain a grandfathered plan or become nongrandfathered by examining the seven PPACA provisions that apply only to nongrandfathered plans.
4. Perform a qualitative analysis to determine if existing plans meet qualifying eligibility and affordability standards.  In order for employers to avoid potential penalties, ensure that any health plans offered meet both standards.
5. Determine the true organizational costs of either offering or not offering health coverage after 2013.  For many organizations, this is not the “no-brainer” that it may first appear.
6. Perform a quantitative analysis to project the so-called “Cadillac tax” set to begin in 2018.

For the HR professional, this is a golden opportunity to reassert the strategic contribution of HR as it impacts an organization’s ability to attract and retain the right talent.  Further, it is perhaps a once-in-a-lifetime chance to position and communicate the value of the organization’s total rewards strategy.