Supreme Court Upholds Bulk of Health-Care Law

The justices rule that requiring all U.S. citizens to purchase health insurance if they don’t have it is constitutional.
Vincent RyanJune 28, 2012

The U.S. Supreme Court this morning upheld the constitutionality of the individual mandate, and therefore, in effect, virtually the entire Patient Protection and Affordable Care Act. The court ruled that the law’s provision requiring all U.S. citizens to buy health coverage if they don’t have it is a tax and therefore constitutional because it falls under Congress’s taxing powers. The ruling will have major repercussions for corporations, as they weigh whether to rejigger their employee benefit plans for the next two years in response.

Many businesses expected the individual coverage mandate to be struck down, unraveling the entire law. But the ruling means companies must comply with the PPACA unless Congress takes action to repeal the law. It also means that businesses with more than 50 employees that forgo providing health insurance to full-time employees would suffer a “no coverage” penalty. That provision could cause some companies to consider either dropping health coverage altogether or hiring more part-time employees or contractors. At the same time, the PPACA also subsidizes insurance exchanges in individual states through which employees could buy insurance on their own.

While the Supreme Court’s decision creates some certainty for businesses that didn’t know if they would ever have to comply, the initial reaction of CFOs is unfavorable. Some of them think significant uncertainty remains, as Congress surely will continue its battle over the law. Finance chiefs also are worried that the law opens the door for even more burdensome federal regulation, a climate they say is preventing businesses from investing in expansion. They also say that the complexity of the law will make it hard to calculate the cost of hiring additional employees as they enter into the budgeting process for 2013.

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