How California vs. Texas Could Impact Benefits Brokers

The U.S. Supreme Court heard oral arguments in California vs. Texas on November 20. We will not know how they rule until spring 2021. Regardless of the outcome though, the decision will impact benefits brokers and how they sell health insurance. As such, it wouldn’t hurt brokers to stay abreast of any information that might indicate how the court will rule.

Some of the questioning from the court’s more conservative justices have led to speculation that the Affordable Care Act (ACA) will be left intact. And yet, President Trump has managed to get three conservative judges appointed to the court during his first term. They could override Justice Roberts and his tendency to side with the court’s liberal faction on issues related to the ACA.

What the Case Is About

California vs. Texas is a case that arose directly from a provision in the 2017 tax bill that reduced the penalty associated with the ACA’s individual mandate to zero. Plaintiffs contend that having no penalty for not buying insurance makes the individual mandate moot. And if it is moot, plaintiffs contend that the entire law is as well. They are asking the Supreme Court to strike it down.

Defendants claim that the individual mandate can be severed from the ACA without affecting the rest of the legislation. They have appealed to the court to leave both the ACA and its individual mandate intact.

Regardless of how the case turns out, Dallas-based BenefitMall recommends that brokers be a source of information for their clients. Brokers are going to have to be ready with answers and explanations when we learn the court’s ruling in the spring of 2021.

If the ACA Is Struck Down

It is very possible that the court could side with plaintiffs and rule the entire ACA unconstitutional. Based on Justice Roberts’ opinion – the very opinion that saved the ACA so many years ago – the legislation’s individual mandate amounts to a tax, giving Congress the authority to implement the entire package. But without the individual mandate there is no tax. Roberts’ own logic seems to dictate that the ACA cannot stand.

If this is the case, benefits brokers will be faced with an entirely new health insurance paradigm for 2022. They will be looking at new packages from nearly every carrier they represent, packages likely to reflect insurance policies that existed prior to the ACA. This may mean more options for employers and their employees; it may mean fewer options as well.

If the ACA Is Upheld

If the court upholds the constitutionality of the ACA, there are two possible options: they could keep the entire law intact or sever the individual mandate but keep the rest of the law. The choice they make will be critical to the health insurance industry.

Keeping the entire law would almost certainly mean renewed attempts to restore the individual mandate’s penalty. That may not happen within the next two years if the GOP retains control of the Senate. But it could very well happen in 2023 or thereafter.

If the court chooses to sever the individual mandate, very little will change for insurance brokers. Everything will continue on as is, with employers is still being required by the ACA to offer qualifying insurance plans as outlined in the legislation. Insurance carriers will likely keep offering the same plans with their expected annual modifications.

Regardless of the outcome of California vs. Texas, benefits brokers will be looking at changes as they prepare for 2021’s open enrollment. A ruling in favor of the plaintiffs will probably mean more changes to contend with.