The U.S. Supreme Court has a full load of weighty cases to consider this term. Here are the ones that could affect the insurance industry.
By many measures, the U.S. Supreme Court has a full load of weighty cases to consider this term. And depending on whether five justices approve, it may add another Affordable Care Act (ACA) case to its docket after petitions to expedite the ACA case to the Supreme Court were brought by 20 Democrat attorneys general and the U.S. House of Representatives.
In December 2019, the U.S. Court of Appeals for the Fifth Circuit in New Orleans declared the ACA’s individual mandate unconstitutional and remanded the matter back down to a district court to determine whether that provision can be removed from the rest of the healthcare law or the entire law must be declared unconstitutional in a 2-1 ruling.
Twenty Republican state attorneys general and governors initially challenged the constitutionality of the individual mandate after Congress enacted the Tax Cuts and Jobs Act of 2017, which “zeroed out” the individual mandate penalty beginning in 2019.
The appeals court found the individual mandate is now unconstitutional because it can no longer be read as a tax, which the Supreme Court had previously allowed as the only constitutional provision allowing the mandate.
The Supreme Court ordered those who challenged the law, to include the Trump Administration, to file their response by 4 p.m. ET on Friday, Jan. 10. It is unclear as to how the court will decide on the petition, but the court does not generally accept cases that come to it before lower-court rulings are complete.
The Supreme Court also will decide on the constitutionality of the Consumer Financial Protection Bureau (CFPB). Created in 2011 by the Dodd-Frank Act, the CFPB operates with an unusual level of independence for a government agency. The case boils down to the statutory restrictions on the ability of the President to remove the director.
If the justices agree that the restrictions on removal violate the separation of powers doctrine—the idea that the Constitution divides the different functions of government among the executive, judicial and legislative branches—the entire agency could be declared unconstitutional. If the court finds it is not severable from the rest of Dodd-Frank, all its decisions over the past nine years may become invalid. The case is scheduled for March 3.
Of particular interest to insurance producers and agency owners, on Dec.12, 2019, the Supreme Court declined to hear Jammal et al. v. American Family Insurance Company, et al., a case involving a federal class action that challenges the independent contractor classification of American Family agency owners.
The case started in 2013, filed by four former American Family agents in an Ohio U.S. District Court. The Ohio court later certified the case as a class action, adding approximately 7,000 current and former agency owners as plaintiffs and precluding them from withdrawing from the case.
In 2017, the district court ruled that members of the class should have been classified as employees. However, the judge allowed an immediate appeal of that decision, acknowledging past court decisions had been nearly unanimous in ruling that insurance agents are independent contractors.
In January 2019, the U.S. Court of Appeals for the Sixth Circuit determined that American Family agency owners are independent contractors, overturning the district court ruling which will now stand. The circuit court found that the independent contractor status was supported by the agreement between American Family and its agents. American Family agents are paid by commission. They also hire and pay their staff, set their work hours, and file taxes as independent contractors.
Heather Eilers-Bowser is Big “I” counsel, federal government affairs.