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Key Healthcare Reform Provision Unconstitutional

A federal trial court in Virginia ruled Monday that the "individual mandate" provision in the Patient Protection and Affordable Care Act ("PPACA") is unconstitutional. The court held that the provision, which requires all Americans to obtain health insurance with minimum essential coverage by 2014 or face a penalty tax, exceeds Congress's authority under the Commerce Clause of the U.S. Constitution. The ruling came in one of several court challenges to PPACA that have been filed since the law was signed on March 23, 2010. Two prior rulings have found the individual mandate constitutional, setting the stage for an eventual showdown in the U.S. Supreme Court.

The court's ruling has no immediate practical effect on employers. The court severed the individual mandate from the rest of PPACA, declining to hold that the law in its entirety is unconstitutional. The court also declined to enter injunctive relief pending appeal, which means that the law will continue to be enforced and implemented for the immediate future. Thus, employers should proceed with compliance and implementation plans, but keep a close watch on legislative developments as well as further developments in the court system.

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