Retail Groups Criticize Supreme Court Ruling

A broad swath of retailers and apparel brands facing a potentially costly employer health care mandate were disappointed by the landmark decision.

WASHINGTON — A broad swath of retailers and apparel brands facing a potentially costly employer health care mandate were disappointed by the Supreme Court’s landmark ruling on Thursday that upheld the constitutionality of President Obama’s signature health care reform law.

This story first appeared in the June 29, 2012 issue of WWD.  Subscribe Today.

Chief Justice John Roberts sided with the court’s four liberal justices — Elena Kagan, Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor — in a 5-to-4 decision that upholds the Patient Protection and Affordable Care Act, passed by Congress in 2010, which requires all Americans to have health insurance or face a fine and all employers to provide workers coverage or face a penalty.

At stake in the case the High Court considered was the constitutionality of the individual mandate, considered a centerpiece of the 2010 legislation, and in turn the validity of the entire health care reform package.

Roberts argued in the majority opinion that the individual mandate is constitutional under the federal government’s authority to assess taxes, essentially equating the penalty individuals face if they fail to obtain health insurance with a tax.

“Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness,” Roberts said in the majority opinion.

Justices Antonin Scalia, Clarence Thomas, Anthony Kennedy and Samuel Alito dissented.

The decision handed Obama a key election-year victory.

“Earlier today, the Supreme Court upheld the constitutionality of the Affordable Care Act…,’ Obama said in a televised statement from the White House following the decision. “In doing so, they’ve reaffirmed a fundamental principle that here in America — in the wealthiest nation on Earth — no illness or accident should lead to any family’s financial ruin.”

Obama said the law will make health insurance more affordable for the more than 250 million Americans who already have it and provide private health insurance plans for the first time for 30 million people currently uninsured.

House leaders kept up the pressure on Obama and the legislation, vowing to hold a vote on a full repeal of the health care law the week of July 9, according to House Majority Leader Eric Cantor (R., Va.).

“Although the Court upheld the law’s constitutionality, many problems remain: it penalizes employers too much; it doesn’t do enough to reduce the cost of health care, and it is unreasonably complicated and difficult to implement and administer,” said Matthew Shay, president and chief executive officer at the National Retail Federation “This law will have a dramatic, negative impact on every employer and employee in the United States and further constrain job creation and economic growth.”

Shay said NRF plans to “redouble” its efforts to work with Congress to repeal the law in addition to trying to “smooth” the implementation through the regulatory process for companies.

Sandy Kennedy, president of the Retail Industry Leaders Association, said the organization’s focus will now turn to the employer mandate and “the effect that impending changes to employer-sponsored coverage will have on nearly 170 million Americans who receive health care through their employer.

“President Obama repeatedly assured Americans that if they liked their health insurance, they could keep it. However, today, with just 17 months until the law takes effect, and no meaningful implementation guidelines available for employers, those assurances are in doubt,” Kennedy said. “While retailers are committed to continuing to provide health coverage to their employees, overregulation jeopardizes their ability to do so.”

Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association, said the bulk of his members are small to medium-sized companies, some of which will be impacted by higher health care costs.

“My guess is that many companies have already factored health care costs into their cost structures, but the smaller companies that don’t currently offer it will be most impacted by the Supreme Court ruling and the law.”

Burke said companies that participate in government procurement programs will also feel the squeeze because they are locked into contracts that cannot be changed to reflect higher health care costs.

By 2014, under the Affordable Care Act, employers will be required to provide their workers coverage, a provision which was opposed by the NRF and RILA.

Under the employer mandate, retailers with more than 50 full-time employees who don’t offer insurance to their full-time workers will face a $2,000 penalty per full-time employee after the first 30 such workers.

If a company offers “unaffordable” insurance to workers, defined as a plan costing an employee more than 9.5 percent of the individual’s family income, then the employer will be slapped with a $3,000 fine for each such employee. If the cost exceeds 8 percent of the individual employee’s family income, that individual may opt out of the employer’s plan, taking the employer contribution with him.