NFIB Deja Vu: What do you mean Obamacare doesn’t have an “employer mandate”?

December 16th, 2013

One of the biggest shocks to most from the Chief Justice’s opinion in NFIB v. Sebelius was that the Affordable Care Act did not mandate that people buy insurance, rather that there was a tax on going uninsured. While he only got to this conclusion by rewriting the statute, it was in fact the argument presented by the Solicitor General before the Supreme Court, supported by precedent. As I discuss in Unprecedented, the SG truly believed that this was the most natural way of reading the statute. CJ Roberts did not agree, but accepted the position through his “saving construction.”

So, I had to do a doubletake when I read Marty Lederman’s post on Balkinization, “Hobby Lobby Part III—There is no “Employer Mandate.” I have this odd feeling of deja vu, in part because Marty and I had similar discussions about the fact that the Affordable Care Act has no individual mandate.

Even so, the plaintiffs’ argument about an irresolvable clash between civic and religious obligations runs into a serious obstacle at the outset—namely, that federal law does not impose such a legal duty:  the so-called “contraception mandate” is a misnomer. …
As far as I know, every single court that has considered a challenge to the HHS Rule has failed to address this argument, because virtually every court has assumed, incorrectly, that the plaintiff employers are under a legal obligation, enforced by “fines” or “penalties,” to offer their employees access to a health insurance plan.  Once it is understood that there is no such obligation, the RFRA claims ought to be seen in a very different light.

Lederman proceeds to explain why the “employer mandate” is a misnomer.

OK, one might then ask, but if an employee health insurance plan must include contraception coverage, doesn’t the HHS Rule thereby de facto obligate all large employers to make such contraception coverage available to their employees, since such large employers are required by law to offer, and to partially subsidize, an employee plan?  Isn’t that what the Affordable Care Act “employer mandate” is all about?
No.  Contrary to common wisdom, federal law does not impose a legal duty on large employers to offer their employees access to a health insurance plan, or to subsidize such a plan.  There is no such “employer mandate.”
What the ACA does, instead, is to impose a tax on large employers (just as with Social Security), ensuring that they share in the national burden of the new public entitlement—but with an option allowing such employers to avoid the tax if they offer a health insurance plan to their employees.

In other words, there is no mandate. There’s just a tax, payable to the IRS, on not providing this “new public entitlement.”

The key statutory provision in this regard is 26 U.S.C. § 4980H(a), which bears the appropriate title “Shared responsibility for employers.”  It amends the Internal Revenue Code to provide that a large employer (one that employed an average of at least fifty full-time employees during the preceding year) must make an “assessable payment” to the IRS if it chooses not to offer its full-time employees participation in an employer-sponsored health insurance plan.  (The assessment only kicks in in months where at least one full-time employee of the company receives a government-provided premium tax credit or cost-sharing reduction for enrollment in a health plan on the exchange.  I assume this will be true in virtually every month for these employers.)
The statute itself expressly refers to this payment as a “tax,” see id. § 4980H(c)(7), 2 U.S.C. §18081(f)(2)(A), as well as an “assessable payment.”  The amount of the tax is $2000 per year for 30 fewer than the total number of the employer’s full-time employees.  (Part-time employees are not counted in this calculation.)


And all of the lower courts have held, incorrectly Marty writes, that there is a mandate.

This is simply mistaken.  There is no underlying “employer mandate” that requires large employers to offer an employee health insurance plan.  There is only § 4980H itself.  And as the Court of Appeals for the Fourth Circuit recently explained in the Liberty University case, § 4980H “does not punish unlawful conduct”—instead, it “leaves large employers with a choicefor complying with the law—provide adequate, affordable health coverage to employees or pay a tax.”  733 F.3d at 98.  (The court further explained that the amount of the exaction “is proportionate” to the need to ensure universal coverage, “rather than punitive.”  Id.)

John Roberts, you listening? Because Marty writes that the “employer mandate” (which he says is not a mandate) is like the “individual mandate” (which is not mandate).

Sound familiar?  It should.  Courts of appeals offered virtually the same exact mistaken reading of the ACA in the so-called “individual mandate” cases—until the Solicitor General and then the Supreme Court corrected them in the landmark Health-Care Cases (a/k/a NFIB v. Sebelius). You may recall that § 5000A of the Act—the provision at issue in the Health Care Cases—actually provides that an individual “shall” maintain a minimum level of health coverage, and that a “penalty” shall be imposed on any person who “fails to meet th[at] requirement.”  Even in light of this language of obligation, the Court held that the “shared responsibility payment” of §5000A “merely imposes a tax citizens may lawfully choose to pay in lieu of buying health insurance,” 132 S. Ct. at 2597.

In fact, Marty continues, it is easier to hold the “employer mandate” to be not a mandate than the “individual mandate.”

So, too, § 4980H merely imposes a tax that employers may lawfully choose to pay “in lieu of” offering their employees access to a health insurance plan.  And, most importantly, here, too, “[n]either the Act nor any other law attaches negative legal consequences to not [providing employee] health insurance, beyond requiring a payment to the IRS,” so that if an employer “chooses to pay rather than [provide] health insurance, they have fully complied with the law.” Id. at 2597.  Indeed, in this respect, construing § 4980H to offer a choice among lawful options is a considerably easier task than it was for § 5000A, for there are no comparable terms of apparent compulsion (such as “shall provide insurance”) in § 4980H—the requirement of an “assessable payment” to the IRS, denominated a “tax” rather than a “penalty,” is all there is.

Do not take Marty’s post lightly (I suspect this argument will find its way into a brief before the Court). This argument gave the Chief Justice a way to uphold the law while still explaining that there are limits on the taxing and commerce powers. Here too, the Court could dodge the tough religious liberty issue by saying there is no mandate, but merely a tax, which would be much easier to square under existing precedents (such as US v. Lee). Stay tuned. Everything that is old is new again.

Putting this argument aside, in dozens of interviews and countless hours of research, I was not able to find a single shred of evidence that anyone thought this was how the Affordable Care Act’s individual mandate operated when it was drafted. One person with knowledge of the litigation strategy insisted this was how insiders understood the law to work, but he could not point me to anything in support of this position.

I haven’t asked similar questions about the employer mandate, but I suspect I would find similar results.