Legal Challenges to the Patient Protection and Affordable Care Act How Will the Outcome of the Supreme Court Case Affect the Internal Revenue Service?

The Drivers of Health Care Reform? Reform Insurance Laws –Standards for a Minimum Level of Coverage Actuarial Value and “Essential Health Benefits” Coverage - Priority #1 –Expand Medicaid –Provide premium subsidies to low- to middle- income people purchasing insurance through the Exchange

What Else Got Into the Law? Individual Mandate – The requirement to obtain health insurance coverage or face a penalty/tax. Employer Mandate – If an employer fails to offer health insurance coverage or the employer offers coverage that does not meet the minimum standards, the employer pays a penalty tax. New Taxes – Congress enacted a number of new taxes ranging from the high-cost plan tax and the “fee” (excise tax) on health insurance companies to an additional Medicare payroll tax and a limitation on the itemized deduction for medical expenses.

Legal Challenges to the Law On March 26, 27, and 28, the Supreme Court heard oral arguments relating to legal challenges to portions of the new health care reform law. The Court scheduled time to hear 4 arguments: –Standing – Can the challengers sue? –Individual Mandate – Is the individual mandate constitutional? –Severability – If the individual mandate is unconstitutional, does the rest of law stay or go? –Medicaid Expansion – Is it Federal coercion?

The Uncertainty Vegas odds? –Individual mandate held constitutional –ONLY individual mandate and guarantee issue fall –Entire law falls Odds are, the law will stay in place in one way, shape, or form…maybe?

Option #1 - Constitutional Impact On the Service? –Business as usual. The Service will continue to move forward on implementing the new health care reform law. –In this case, the IRS will take on new roles as an agency. Administering an advance-refundable tax credit on a large scale. –Enforce new taxes. Receive and review information required on account of new reporting obligations.

Option #2 – No Individual Mandate Impact On the Service? –Uncertainty. Can the Service continue to implement the new health care reform law ? –Fewer low- to middle-income will be purchasing health insurance. Eases the burden of administering the advance- refundable tax credit. –No enforcement of the individual mandate. But still required to enforce taxes already in effect, and taxes that come on-line in 2014.

Option #3 – Unconstitutional Impact On the Service? –Holding pattern. At least the Service can cease all activities associated with implementing and enforcing the law, but will the Service simply wait until another round of health care reform is enacted? –Take an active role in future health care reform exercises. Help Congress help you!

Questions? Christopher E. Condeluci