proskauer benefits brief podcast

In this episode of the Proskauer Benefits Brief, partner Robert Projansky and associate Katrina McCann discuss the recent district court case, Texas et al. v. The United States of America, which declared the Affordable Care Act (ACA) unconstitutional. On December 14, 2018, a district court judge in the Northern District of Texas deemed the entirety of the Affordable Care Act invalid because he found the individual mandate to be unconstitutional. From what would happen to the employer mandate to emergency care coverage, tune in as we discuss what these changes could mean for employers and plan sponsors if the court’s decision is ultimately upheld.

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Katrina McCann: Hello and welcome to the Proskauer Benefits Brief legal insights on Employee Benefits and Executive Compensation. I’m Katrina McCann, and on today’s episode I’m joined by Rob Projansky, and we’re here to talk about the recent District Court case that declared the Affordable Care Act invalid. So, on December 14th, a Federal Judge in Texas deemed the entirety of the Affordable Care Act invalid because he found the individual mandate to be unconstitutional. The case is Texas et al. v. The United States of America. So Rob, this is not the first time that the Affordable Care Act has been in the Courts? Correct?

Rob Projansky: No, Katrina, actually it’s not. In the most significant case on this topic the Supreme Court upheld the individual mandate in National Federation of Independent Businesses v. Sibelius some years ago. There were really two arguments in that case about whether Congress actually had the ability to impose an individual mandate. The first related to the Commerce Cause. Was the power to regulate interstate Commerce? Did that give the authority to Congress to impose an individual mandate? And the majority in that case said, “No it didn’t”, because forcing someone buy insurance is not regulating commerce. However, the majority ultimately upheld the individual mandate because what they said was that it fell within congressional power to tax. Said differently, the Federal Government can’t force someone to buy insurance but can impose a tax if a person doesn’t buy insurance.

Katrina McCann: So, why this was already decided by the Supreme Court, do we have another lower court decision on the constitutionality of the individual mandate at this point?

Rob Projansky: Yeah, so, the reason is that the Tax Cuts and Jobs Act intervened. So, the Tax Cuts and Jobs Act was a 2017 law that dropped the tax for violating individual mandate to zero. Why would they drop it to zero rather then to just get rid of individual mandate? A reasonable question. The answer is that, it had to be done thru the reconciliation process, which really just a congressional process where all you can do is change something with a tax impact. So, what happen was, they had no choice but to eliminate the tax. They couldn’t simply just eliminate the mandate. What that means is the individual mandate remains in the law but there no tax for violating it.

Katrina McCann: So, why does it matter that the individual mandate is still there?

Rob Projansky: Great question. So, according to two individuals in the twenty states that sued the Federal Government in our case, it matters because it impacts whether the individual mandate can be upheld based on the power tax. If the tax was zero and the mandate to, still in the law, the argument was that it couldn’t be supported by the taxing power, there is no tax. So it must be unconstitutional. The defendants, which were lead by a coalition of sixteen states that intervened in the case, said that the purpose of the Tax Cuts and Job Act was really to eliminate the individual mandate; but because of the legislative process that I mentioned, they could only do so by dropping the tax to zero. But in effect, the individual mandate didn’t exist according to the defendants. So the judge actually ended up agreeing with the plaintiffs, and saying that, without a tax impact, the mandate is there but is unconstitutional because it simply can’t be supported by the taxing power. Not only that, the judge stated that the individual mandate is such a critical component of the ACA that it can’t be severed from it, and the whole statute is therefore invalid.

Katrina McCann: What’s next after that?

Rob Projansky: The Court didn’t issue a final order yet or an injunction, so the White House has stated the ACA remains in effect for now pending appeal. The judge in the case was asked to clarify that this is the case, so we are waiting to hear from the judge as to what’s next. What we do know is that there will almost certainly be an appeal to the Fifth Circuit and now we wait.

Katrina McCann: And that’s why we’re suggesting that Employers basically stay the course for the time being.

Rob Projansky: That’s right. So what we’re saying to employers is that, as far as we know right now, the ACA remains the law of the land. That could change in the future. But for now we are just going to stay the course.

Katrina McCann: Rob, the media is focused on what this means to the Affordable Care Act as a whole and what this means to individuals? But let’s talk about what this means to employers if the Court’s decision is ultimately upheld.

Rob Projansky: And even the changes for employers would be pretty sweeping. So the first and most notable is that the employer mandate would go away. That’s a tax that applies if the employer doesn’t offer coverage to 95 percent of its full timers or coverage isn’t affordable or minimal value and certain other things happen. That’s going to go away, which means that there will be some additional denying flexibility for employers like there was before the ACA. The second thing, and pretty significant is that the substantive requirements for coverage that the ACA brought are also going to go away. So if you think back to pre-ACA rules, you can look at coverage for dependents, right now, under the ACA dependents have to be offered coverage under age 26. Before ACA, many plans covered someone up to age 19, or if the child was in school, or on a medical leave from school up to the age of 23 or something like that. Plans can now revert if they wanted to, to that type of arrangement. Out-of-pocket maximums would go away; annual life-time dollar limits, which were very common place prior to the ACA, would now be permitted again. Other things, maybe not as big an impact, for example, emergency care would no longer need to be covered at the network cost sharing level. Often in the past it was covered at that level by employer plans, but not always. Other changes include, for example, preventive care would no longer need to be covered at a zero-dollar co-pay. The claims and appeals enhancements would go away. So things like the external appeals requirements now go back to the pre ACA regime where insured plans have to do it if the state law requires it. But other than that it there wouldn’t be a requirement for external review. Also, and this one is getting a lot of press, pre-existing conditions exclusions would be permitted. That’s an interesting one because even those who oppose the ACA seem to be focused on finding a solution to the problem; and if you look at what politicians have said since this decision came out the other day, your, well, hearing a lot of people say, we’re going to find another solution and then we’ll protect people with pre-existing conditions. So it will be interesting to see if this decision is upheld, what happens next with respect to pre-existing conditions. The other thing is taxes will go away. There were some tax increases and those will change. For example, the much maligned Cadillac tax, which nobody really likes yet it stays there because it’s a revenue prevision, but that will go away. Other taxes like the Medicare surcharge tax for high earners, the medical device tax and health insurance tax, those will all disappear as well.

Katrina McCann: So, what I’m hearing is, stay tuned there’s a lot more to come on this.

Rob Projansky: Yep, all eyes are going to be on this appeal for a while and, if the decision stands, as I said, it will be interesting to see what, if anything, Congress does to replace all of this; and if it doesn’t, what the States will do?

Katrina McCann: Thanks Rob, and thank you for joining us on the Proskauer Benefits Brief. Stay tuned for more legal insights on Employee Benefits and Executive Compensation and be sure to follow us on iTunes.

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Photo of Robert Projansky Robert Projansky

Robert M. Projansky is a partner in the Employee Benefits & Executive Compensation Group and is currently a member of the Firm’s Executive Committee.

Rob has a broad practice advising both multiemployer and single employer clients on all issues related to the legal…

Robert M. Projansky is a partner in the Employee Benefits & Executive Compensation Group and is currently a member of the Firm’s Executive Committee.

Rob has a broad practice advising both multiemployer and single employer clients on all issues related to the legal compliance and tax-qualification of ERISA-covered pension and welfare plans. Rob’s clients include the largest and highest-profile U.S. media and entertainment industry clients, as well as a broad range of Fortune 500 companies.

In the multiemployer context, he serves as counsel to the boards of trustees of a number of large and small funds and frequently assists clients in addressing issues related to the funding of defined benefit pension plans, including zone status, benefit suspensions, special financial assistance and withdrawal liability. He also advises these clients on healthcare compliance, cybersecurity and government investigations. In addition, his practice includes advising corporate clients on their responsibilities related to multiemployer plans, with particular expertise on the impact of multiemployer and collectively bargained plans in corporate transactions.

Rob has extensive experience advising corporate clients regarding general compliance issues and fiduciary compliance matters, including plan asset and prohibited transaction issues. He also has addressed a myriad of issues related to complex plan investments, including negotiation of separately managed and collective investment vehicles for both traditional and alternative investments such as hedge funds, private equity funds and fund-of-funds vehicles.

Rob is described in Chambers USA as “incredibly smart and creative, and a really effective, zealous advocate” who “adroitly communicates complicated ERISA matters to clients in understandable language and well-timed levity.”  He is a widely sought after speaker on topics related to employee benefits, fiduciary, cybersecurity and government investigations and speaks each year at the annual conference and various other conferences sponsored by the International Foundation of Employee Benefit Plans, the largest educational organization in the employee benefits industry. Rob currently serves as one of the nine Advisory Directors on the Board of Directors of the International Foundation.

Photo of Katrina McCann Katrina McCann

Katrina E. McCann is a senior counsel in the Tax Department and a member of the Employee Benefits & Executive Compensation Group.

Katrina advises a diverse group of clients on a broad spectrum of employee benefits matters, including:

  • counseling clients with respect to

Katrina E. McCann is a senior counsel in the Tax Department and a member of the Employee Benefits & Executive Compensation Group.

Katrina advises a diverse group of clients on a broad spectrum of employee benefits matters, including:

  • counseling clients with respect to the design, drafting, implementation and ongoing qualification of their qualified plans in both the single and multi-employer context, including profit sharing, money purchase, 401(k), ESOP, and defined benefit plans;
  • providing counsel on the establishment, administration and continued legal compliance of health & welfare plans and programs;
  • advising tax-exempt organizations regarding their 403(b) plans and 457 arrangements;
  • creating and advising on non-qualified plans, including deferred compensation and supplemental employee retirement plans;
  • providing technical and practical advice on compliance with ERISA, the Internal Revenue Code, the Affordable Care Act, COBRA, HIPAA, and other laws affecting employee benefit plans, as well as issues concerning plan administration, qualification requirements, correction of plan document failures, fiduciary issues and prohibited transaction issues;
  • routinely working with clients and their service providers, advising on the RFP process, reviewing provider arrangements and collaborating to develop effective and compliant disclosures, government reporting forms and participant communications;
  • analyzing the employee benefits and executive compensation issues in connection with corporate transactions, advising on withdrawal liability matters and structuring benefit plans following a transaction and providing counsel with respect to all aspects of benefit plan mergers; and
  • advising both employers and senior executives in connection with various executive compensation matters, including the negotiation and drafting of equity plans and awards, employment agreements, severance agreements and other compensation arrangements.

Katrina is a member and former co-chair of Proskauer Women’s Alliance Steering Committee and serves on the Firm’s Reproductive Rights Steering Committee. She is also a Board member of Playwrights Horizons, an off-Broadway theater dedicated to the development of contemporary American playwrights and the production of innovative new work, and a Board member of the Axe-Houghton Foundation.

Prior to joining Proskauer, Katrina served as Special Assistant to the Mayor’s Office of Pension and Investments and was Special Assistant Corporation Counsel, Pensions Division, New York City Law Department. While in law school, Katrina was the Robert M. LaFollette/Keenan Peck Legal Fellow, serving in the offices of Senator Herb Kohl & the United States Senate Committee on the Judiciary.