Texas Judge Rules Affordable Care Act Unconstitutional

Posted January 29th, 2019

United States District Court Judge Reed O’Connor of the Northern District of Texas ruled in favor of an argument by a group of states attorneys general that the Patient Protection and Affordable Care Act (“ACA”) was unconstitutional.  This decision was reached in part based on the 2017 reduction of the individual mandate penalty to zero.  Judge O’Connor’s ruling is the most recent development in years of challenges to the ACA since its enactment.  Notably, this decision did not grant injunctive relief that would immediately roll back the ACA’s provisions, including coverage for preexisting conditions, Medicaid expansion, and continuation of coverage for children on parents’ coverage until age 26.  The ACA remains the law of the land as this case winds its way through the appeals process.

Therefore, the immediate impact of this decision on employers is limited.  Employers who are classified as Applicable Large Employers (“ALEs”) under the ACA must still file Forms 1094/1095 with the IRS and distribute 1095s to employees for 2018, and employers should anticipate having to file and distribute these forms in 2019 as well.  The employer shared responsibility payment remains in effect; therefore, ALEs must continue to offer affordable minimum essential coverage.

The ACA has resisted challenges in the courts and in Congress, and it is far too early to determine whether this most recent challenge will succeed.  Until the United States Supreme Court affirms Judge O’Connor’s decision, finds the ACA unconstitutional on other grounds, or Congress repeals the law in its entirety, employers must continue to comply with the ACA.