U.S. Supreme Court justices were sharply divided March 28 on whether the entire health care reform law must be struck down if the high court rules that the individual mandate is unconstitutional.
At issue in the third and final day of oral arguments on the Patient Protection and Affordable Care Act was whether the individual mandate, which requires most U.S. residents to enroll in a qualified plan or pay a financial penalty, is so intertwined with the broader law that the entire law would fall if the court rules the mandate is unconstitutional.
If the court were to find the mandate is unconstitutional, Justice Antonin Scalia said, "My approach would say if you take the heart of the statute out, the statute's gone."
On the other hand, Justice Sonia Sotomayor said if the mandate were struck down, Congress could make needed changes to the broader law.
"If we strike down one provision, we are not taking away that power from Congress. Congress could look at it without the mandatory coverage provision and say, 'This model doesn't work. Let's start from the beginning,' " she said.
"Unless Congress tells us directly it's not severable, we shouldn't sever. We should let them fix their problems," Sotomayor said.
But Scalia questioned whether Congress could achieve such changes, asking, "There is such a thing as legislative inertia, isn't there?"
Justice Ruth Bader Ginsburg disagreed. "The more conservative approach would be salvage rather than throwing out everything."
However, Chief Justice John Roberts warned of consequences to health insurers if the court struck down the mandate but allowed the rest of the health care reform law to stand.
Would insurers say, "Without the mandate, the whole thing falls apart and we're going to bear a greater cost, and so the rest of the law should be struck down? And that's a whole other line of litigation," Roberts said.
If the broader law were to fall with the individual mandate, employers would face some tough decisions, the biggest being whether or not to roll back health care benefit plan design changes mandated by the law.
For example, employers last year were required to amend their plans to offer coverage to employees' adult children up to age 26, regardless of their student status.
Other changes employers already have had to put in place include eliminating plan lifetime dollar limits, bumping up annual limits and eliminating flexible spending accounts' reimbursement of over-the-counter drugs that are not prescribed.
In addition, many employers have planned a revamp of prescription drug plan coverage offered to Medicare-eligible retirees when health care reform law provisions—effective in 2013—cut back on rich tax breaks Congress provided to employers under an earlier law. If the broader law were to be struck down, employers might have second thoughts on implementing the changes to their prescription drug plans.
But the extent to which employers would cut back benefit upgrades mandated by the law is far from clear. Experts note that some of those benefit improvements—especially the extension of coverage to employees' adult children—have been popular among their workforces.
"It will be difficult for many employers to take away some of the enhancements the law has required them to make the past couple of years," said Rich Stover, a principal with Buck Consultants L.L.C. in Secaucus, New Jersey.
Employers also might be reluctant to act quickly and roll back the benefits they only recently improved due to the possibility that lawmakers could reinstate some of the most popular benefit mandates.
"You can expect major pressure on the Congress to somehow reinstate the popular provisions of the law," said Royal Oakes, a partner with insurance law firm Barger & Wolen L.L.P. in Los Angeles.
For now, a prudent course of action for employers is to examine benefit plan wording.
"Employers should carefully review plan documents and employee communication material to ensure they have the ability to selectively pare back ACA requirements if the entire act falls," said Andy Anderson, a partner with Morgan Lewis & Bockius L.L.P. in Chicago.