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Health care reform: The law that might be

On September 28, 2011, Idaho joined twenty-five other states in a petition to the U. S. Supreme Court, asking that the Health Care Reform Act (formally known as the Patient Protection and Affordable Care Act) be struck down. On August 12, 2011, a Florida federal appellate court affirmed a holding by the lower district court finding the “individual mandate” – the requirement that every individual purchase health insurance or face a penalty – unconstitutional. The constitutionality of the Act will not be resolved until the U.S. Supreme Court decides the issue, which is likely to happen in 2012.

Legal analysts, understandably, are divided about what the U. S. Supreme Court will do. The legal opinions regarding constitutionality range from the jurisprudentially erudite to the blatantly political. The only agreement seems to be that the law will be expensive. Little is written, however, about the expenses our country faces if this law is declared invalid, and the health care system continues without significant reform.

Given the challenges to the constitutionality and the uncertainty of what, if anything, will be left of the law by 2014, what should businesses do?

First, a review of the elements of the law that affect businesses is in order. Most provisions already in effect under health care reform pertain to health care insurers and health care providers. Businesses have been relatively unscathed, to date. Implementation of a few provisions has been delayed until regulations are written. These include:

• W 2 reporting

• Auto enrollment

• Fully insured plan

• Nondiscrimination requirements.

The more wide-reaching provisions go into effect in 2014. These include the employer “pay or play” mandate, which requires employers with 50 or more employees to provide health insurance for every employee, or pay annual fines for every employee who is not insured. Health care insurance exchanges are slated to come online. If the U.S. Supreme Court reverses the Florida appellate court, individuals who are not insured by their employer will have to buy health insurance.

Despite the uncertainty, it is more prudent to plan as if the law were going into effect. Businesses should know why and how they are providing health care benefits for their employees.

Every business should ask itself these questions: Why does our business offer health insurance to employees? What are the pros and cons of discontinuing the health insurance coverage – must we increase salaries given the mandate on individuals to purchase insurance? Can we design our plan to limit exposure to penalties? Are penalties less expensive than providing the insurance, even though the penalty is not tax deductible? Should we self-insure, join a multi-employer health care plan, or be fully insured? How can we best project the increase in overhead? How must we change our pricing structure in order to capture the increased expenses of health care for our employees?

If the law withstands judicial and political challenge, it will require major adjustment by most businesses as well as our entire economy. Consult your benefits advisor and your financial advisors about how to plan for these. But be ready to throw the plans out the window if the law is repealed or declared unconstitutional.

Patricia Olsson is a partner at Moffatt Thomas Barrett Rock & Fields in Boise. Her areas of specialization include employment  and health care law.

About Patricia Olsson