On June 28, 2012, the Supreme Court narrowly voted to uphold the majority of the Affordable Care Act (“the Act”). In the end, the basis for the decision was the federal government’s authority to tax. Under the Act, certain individuals that do not elect health insurance coverage must pay a financial penalty. This is commonly referred to as the Individual Mandate component of the Act. Five of the justices agreed that, while President Obama has taken great care to stay clear of the word “tax” in his healthcare reform efforts, such a financial penalty may reasonably be characterized as a tax. While the “tax” versus “penalty” debate makes for good TV, it remains to be seen how relevant it is to the overall healthcare reform debate. Surely from now until the Presidential election in November, the Democrats’ position will be “not a tax” and the Republicans’ position almost certainly will be “a tax.”
Employers and healthcare vendors have been working to comply with various provisions of the Act since 2010, and the Court’s ruling means that all of the expense and effort associated with this compliance was not a waste. It also means that employers must continue to work towards meeting the Act’s near term requirements. The new Summary of Benefits is due later this fall and employers must prepare for reporting the value of healthcare coverage on the 2012 w-2s that will be issued in January of 2013. While the reported value will not be taxable in 2012, many critics believe that this is the first salvo in the effort to tax health insurance benefits.
The ultimate fate of the Affordable Care Act likely lies in the results of the upcoming Presidential election. Employers should continue to work with their health insurance provider in an effort to meet the Act’s current requirements while balancing its uncertain future.
For further information, please contact your Aronson tax professional or Mark Flanagan of Aronson’s Employee Benefit Services Group at 301.231.6257.