The Vita Blog December 2018

Who: This applies to all employers offering company-sponsored health insurance.

Action: There is no immediate employer action required.

Overview

On December 14, a U.S. District Court in Texas issued a declaratory order that the individual mandate of the Patient Protection and Affordable Care Act (ACA) is unconstitutional and declared that the rest of the ACA is unconstitutional. The individual mandate of the ACA requires most people to have a certain level of health insurance coverage or pay a penalty.

Background

Earlier this year, twenty states filed a lawsuit asking the Court to strike down the ACA entirely after Congress passed the Tax Cuts and Jobs Act in December 2017 that reduced the individual mandate penalty to $0, starting in 2019.

The plaintiffs argued that, without the penalty, the individual mandate is unconstitutional, and argument that leveraged the Supreme Court’s prior ruling that the individual mandate was found to be constitutional on the basis of Congressional authority to tax. However, since there is no longer a tax, the constitutionality of the individual mandate cannot then rest on Congress’ authority to tax. In addition, they argued that the individual mandate is not severable from the rest of the ACA so if the individual mandate is unconstitutional, then the rest of the ACA is unconstitutional.

The U.S. Department of Justice (DOJ) argued that the individual mandate is unconstitutional without the penalty. They also argued that because the guaranteed issue and community rating provisions are inseverable from the individual mandate, the guaranteed issue and community rating provisions are also unconstitutional.

Court Ruling

The Court found that the individual mandate is unconstitutional without the penalty and that the individual mandate is inseverable from the rest of the ACA. Therefore, it declared that the individual mandate and the entire ACA – including its guaranteed issue and community rating provisions – are unconstitutional.

However, it didn't grant the plaintiffs' request for a nationwide injunction to prohibit the ACA's continued implementation and enforcement. 

On December 16, the Court issued an order that requires the parties to meet and discuss the case by December 21, and to jointly submit a proposed schedule for resolving the plaintiffs' remaining claims. The parties' proposed schedule for resolving these remaining claims is due to the Court by January 4, 2019.

Ruling's Impact

At this time, the case's status does not impact employers' group health plans. We will keep you informed with any updates in regards to the final decision in this case.

Who: San Francisco based employers (small employers under 20, or under 50 if a non-profit, are exempt from this requirement)

Action: Review and adjust the minimum HCSO expenditure requirements for 2019 in accordance with the HSCO.

Background

The City and County of San Francisco Health Care Security Ordinance (HCSO) became effective January 1, 2008. 

The HCSO requires San Francisco based employers to spend a certain dollar amount on health care on behalf of all employees. Employers can choose to offer health, dental and/or vision insurance, make payments to the City Option or make contributions that reimburse employees for out-of-pocket health care costs.

Required Health Care Expenditure Amounts

The minimum expenditure requirements for 2019 have been released. Please note that there are different expenditure rates for medium and large employers:

Small employers under 20, or under 50 if a non-profit, are exempt from this requirement.

Please note that the annual salary exemption has also increased for 2019. An employee classified as a manager, supervisor or confidential employee and who earns more than $100,796 per year is exempt (increased from the 2018 annual maximum of $97,693).

2019 State Disability Adjustments

The California Employment Development Department (EDD) has announced that the 2019 employee contribution rate for State Disability Insurance (SDI) will remain at 1%. The taxable wage base from which the contributions will be taken will increase from $114,967 to $118,371 and the maximum cost to an employee will be $1,183.71.

2019 IRS Inflation Adjustments

On November 15, 2018, the IRS released Revenue Procedure 2018-57 which details 2019 annual inflation adjustments for more than 50 tax provisions. As expected, the IRS increased the pre-tax allowance for a few accounts but held firm on others. See below for the revised maximums effective January 1, 2019.