As if the ACA debate couldn’t get more complex – the U.S. Department of Justice (DOJ) has declined to defend an ACA challenge filed by Texas and several other Republican states, seeking to invalidate the pre-existing coverage mandate – and therefore the entire law.
The suit alleges that since the individual mandate was reduced to zero, this would invalidate the entirety of the law because the mandate, which was determined to be a tax, is the vehicle to fund the healthcare coverage subsidies. The DOJ declined to defend the lawsuit because they claim they agree with most of it. Instead, 17 Democratic-led states are picking up the defense of this suit, which will likely take months to settle.
And, the battle continues at the state level with Vermont and New Jersey passing statutes which enforce the individual penalty to residents of those states that lack ACA-compliant coverage.
New Jersey’s law takes effect January 1, 2019 and like the ACA, imposes a fixed per-person charge or a tax of 2.5% of household income, whichever is higher. New Jersey, through a Section 1332 waiver, would seek to create a reinsurance fund to pay for catastrophic claims in an effort to stabilize premiums. In 2015, the ACA individual mandate tax collected from New Jerseyans amounted to $93 million.
Vermont also created a state mandate which becomes January 1, 2020 with details to be established during the 2019 legislative session and other states are evaluating following this lead.
Clearly these state initiatives will give rise to new compliance and reporting requirements effective for employers operating there. What a mess.