Healthcare Reform Update: Recent Litigation and Legislation

On January 31, 2011, in a federal district court in Florida, U.S. District Judge Roger Vinson declared the Healthcare Reform Act unconstitutional. Approximately twenty-six states had joined in the lawsuit. In response, the Florida Insurance Commissioner indicated that Florida would immediately stop implementing certain provisions of the Healthcare Reform Act but did not specifically indicate which provisions.

On December 13, 2010, a federal district court in Virginia held that Section 1501 of the Healthcare Reform Act “exceeds the boundaries of congressional power.” Section 1501 of the Healthcare Reform Act requires uninsured Americans to obtain health insurance coverage or be subject to certain penalties, beginning in 2014. The Virginia court held such mandate unconstitutional. The Justice Department has since filed a notice with the court that it would be appealing such ruling. The Virginia Attorney General is expected to request the United States Supreme Court to consider the constitutionality of the Healthcare Reform Act. Such declaration is rare in that it would bypass appellate review of the decision, but the Virginia Attorney General has indicated that in light of the conflicting lower court opinions, such review is necessary. It is also expected that the Florida decision will be appealed to the United States Supreme Court after review by the Court of Appeals.

While the District Courts have been busy, so has Congress. On January 19, 2011, the House of Representatives voted to pass the Repealing the Job Killing Health Care Law Act (the “Repeal Act”). If passed by the Senate and signed by the President, the Repeal Act would retroactively repeal the Healthcare Reform Act as well as Title I and Subtitle B of Title II of the Health Care and Education Reconciliation Act of 2010. With a Democratic-controlled Senate, most expect that the Repeal Act will not be passed. Further, President Obama has promised to veto the Bill if presented before him.

What Does This Mean for Employers?

Not much...for now. The parts of the Healthcare Reform Act that became effective in 2010 and 2011 are still effective. Failure to comply with these requirements may lead to penalties. Some of these requirements include but are not limited to: (i) grandfathered plans making the appropriate disclosures; (ii) non-grandfathered plans continuing to offer coverage for adult children and eliminating cost-sharing for preventive health services; and (iii) both non-grandfather plans and grandfathered plans continuing to eliminate any lifetime annual limits and decrease annual limits on essential health care and eliminating waiting periods in excess of 90 days. These requirements were effective for plan years beginning on or after September 23, 2010.

We will continue to update you on the progression of both the litigation and legislation but for now we strongly recommend that all employers continue to comply with the currently applicable provisions of the Healthcare Reform Act.

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