While constitutional scholars and media pundits explore the political fallout of the Supreme Court's decision on the Patient Protection Affordable Care Act, attorneys are girding for a more practical concern: the health care law's potential to spawn a flood of legal suits against employers.
They are expecting employees to take companies to court not only for violations of the massive and complex law, but also for technical issues—such as documentation of benefits, change notices and the interpretation of arcane provisions—that workers may claim are preventing them from getting benefits they deserve.
No fewer than four federal agencies (the IRS, the Department of Labor, the Department of Health and Human Services and even the Department of Housing and Urban Development) are writing hundreds of pages of regulations that will apply as health care reform is implemented over the next six years.
"Whenever legislation creates new obligations for employers and rights for employees, inevitably there are disputes about exactly what the legislation means, how far the rights extend and whether employers' individual decisions fit the expectations of employees and the plaintiff lawyers that represent them," said Stewart Manela, head of the labor, employment and OSHA groups at law firm Arent Fox. ACA "is sure to be tested."
Potential land mines
A labyrinth of regulations layered atop existing laws—such as anti-discrimination statutes and ERISA, which governs employee benefits—the ACA is filled with moving parts and potential land mines for companies that aren't paying attention, said benefits lawyers. Not only are there new reporting, record-keeping and benefits requirements, violations of which can trigger fines, but the ACA doesn't preclude lawsuits if employees believe they've been mistreated or denied benefits they think an employer should offer. And it provides new whistle-blower protections for employees who voice their complaints to regulators.
"The statute has an extremely complex regulatory framework that adds layers on to what we already have," said Peter Marathas, a partner in Proskauer's employee benefits, executive compensation and ERISA litigation group. "It leads to an increased burden and increased potential liabilities."
Proskauer, for one, established an internal health care reform task force within days of the March 2010 passage of the law. The team of two dozen attorneys has met regularly for the past two years. In the weeks leading up to the Supreme Court decision, they conferred daily.
Whether such suits will be successful remains to be seen, said lawyers and consultants, and the risks are manageable if companies adopt policies to avoid problems and potential violations. But it won't be easy. "Like other rights and entitlements," Manela explained, "decisions and plans will be scrutinized when individual circumstances arise that were not perfectly forecast."
One potential hangup, for example, is the provision that specifies whether a company's existing health plan may be grandfathered and therefore permitted to offer more limited benefits than the law demands of new plans.
Among other things, grandfathered plans don't have to provide free preventive care or coverage for clinical trials.
Even "if an employer believes it has a grandfathered plan, employees could challenge whether it (meets grandfathering requirements) and should have adopted preventive care services, such as birth control," said Proskauer's Marathas. "They could sue on a class-action basis for failure to provide benefits."
Definitions of full-time vs. part-time workers could also be fraught with pitfalls, especially for retailers and other companies that employ temporary, seasonal or contract workers.
Some large companies with more than 50 workers will have to pay a penalty if they don't provide health care, but whether a business meets the definition of a large company depends on the number of its full-time-equivalent workers, a calculation that includes part-timers' total hours. Companies that try to manage the size of their workforce to avoid the play-or-pay mandate could see claims from employees.
Even seemingly risk-free offerings, such as wellness programs, could trip up a company if, for example, a "walk at work" program doesn't take account of employees with disabilities who are unable to participate.
"There must be an alternative for people who can't meet the standard," said Joseph Torella, president of the employee benefits division of insurance brokerage Hub International Northeast. "When you look at wellness, you have Department of Labor issues and EEOC issues." Torella noted that Hub has added more compliance experts to its staff, including two attorneys.
Small businesses are likely to be more at risk because they don't have armies of administrators to keep track of changes and requirements. But even large businesses that self-insure won't be immune because they can't offload responsibility for plan design and other decisions to insurance carriers.
Whether actions by employees will succeed and how federal agencies will deal with lapses remain to be seen. The Department of Labor is already conducting audits of plans that have requested to be grandfathered.
"The audit approach is not punitive, but that will shift pretty quickly once we get down the road," said Marathas, adding that he has been working for four months on one dispute with the Labor Department.
What's for sure is that audits, lawsuits and other measures that companies themselves employ to bring their policies into compliance won't be cheap.
"I think that we've created some jobs for lawyers and accountants," said Rosina Rubin, CFO of Attitude New York, a limousine company based in Manhattan that offers health insurance to its 60 employees.
Like many executives, Rubin is still trying to get answers to questions about the ACA, including how the limits on health savings accounts apply and whether and when her company will be able to buy insurance on the state exchange being planned.
She doesn't think she has to worry right now about things like new documentation requirements, but then added: "You know what? I'm really not sure. I have to talk to my employment lawyer."