BREAKING NEWS- U.S. SUPREME COURT UPHOLDS HEALTH CARE REFORM

Posted by Marla Roshkoff - 28 June, 2012

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The decision employers and individuals alike have been waiting for regarding the constitutionality of the Affordable Care Act was handed down by the United States Supreme Court this morning. The historical Opinion spanned 193 pages (with concurrences and dissents) and found the Affordable Care Act constitutional in part and unconstitutional in part. Specifically, the 5-4 decision, authored by Chief Justice Roberts, held that the Individual Mandate to purchase health coverage is an appropriate exercise of Congress' power to tax, but the Medicaid Expansion provisions of the Act are overreaching.

Background

Congress enacted the Patient Protection and Affordable Care Act (the "Act") in 2010 to increase the number of Americans covered by health insurance and decrease the cost of health care for those individuals. The provisions of the Act were captured in over 900 pages of text. On the day President Obama signed the Act into law, Florida, along with 12 other states, filed a complaint in the Federal District Court for the Northern District of Florida challenging the constitutionality of the Act. Thirteen more states subsequently joined the complaint, along with several individuals and the National Federation of Independent Businesses. The main challenge to the Act was that the individual mandate provisions of the Act exceeded the powers granted to Congress.

After determining that the Court did, indeed, have the authority to opine on the case, the Court addressed the merits of the arguments.

Individual Mandate

The most hotly debated provision of the Affordable Care Act was the Individual Mandate. The individual mandate requires most Americans to maintain “minimum essential” health insurance coverage. Beginning in 2014, individuals who do not comply with the mandate by maintaining health insurance must make a "shared responsibility payment" to the federal government. The payment, which is labeled a "penalty" under the Act, is calculated as a percentage of household income, subject to a minimum based on a dollar amount and a maximum based on the average annual premium the person would have to pay for qualifying health insurance. For example, in 2016, the penalty will be 2.5% of an individual's household income, but no less than $695 and no more than the average yearly premium for insurance that covers 60% of the cost of 10 specified services. The penalty is paid to the Internal Revenue Service with the individual's income taxes.

In the case, the government argued that the individual mandate should be upheld based on two powers granted to the government under the Constitution - the Regulation of Commerce and the Ability to Tax. The Court found that the individual mandate was not part of Congress' ability to regulate commerce, but was a proper exercise of its taxing power.

The Constitution authorizes Congress to "regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." The Court used earlier case precedent to read the Commerce clause as allowing regulation of the channels of interstate commerce. By requiring that individuals purchase health insurance, the government argued that it was shifting the cost of insurance among those who purchase and those who do not purchase insurance, thereby forcing more healthy individuals into the insurance risk pool to influence costs. The government argued that the individual mandate was within Congress's power because the failure to purchase insurance has a "substantial and deleterious" effect on interstate commerce, creating negative cost-shifting. The Court disagreed and found that Congress in the past had never relied on the Commerce Clause to compel individuals not engaged in commerce to purchase an unwanted product. The Court found that the Constitution grants Congress the power to regulate commerce, which pre-supposes the existence of a commercial activity to be regulated. It does not provide justification for forcing individuals to engage in purchasing.

After determining that the Commerce Clause did not support the individual mandate, the Court analyzed the mandate under Congress' power to lay and collect taxes. The government argued that the mandate does not order individuals to buy insurance, but rather imposes a tax on those who do not buy the product. The Court considered if imposing a tax on those that do NOT have a product, rather than those who do have a product was reasonable.

The Court found that taxing an individual without insurance was reasonable. The Court agreed that the mandate was not a legal command to buy insurance, rather it made going without insurance just another item the government taxes, like buying gasoline or earning income. The only consequence to an individual of not maintaining insurance was making an additional payment to the IRS when taxes are paid. Therefore, the payment for not having health coverage could be reasonably characterized as a tax, not a penalty, and the Constitution permits Congress to impose taxes.

Medicaid Expansion

The second provision of the Act challenged in the case was Medicaid Expansion. Medicaid was enacted in 1965 and offers federal funding to states to assist pregnant women, children, needy families, the blind, the elderly and the disabled in obtaining medical care. States have control over their own Medicaid programs. In order to receive federal funding for Medicaid, states must comply with certain federally-authorized criteria in determining who receives care, what services are provided, and at what cost.

The Act expands the scope of the Medicaid program and increases the number of individuals states must cover. For example, the Act requires state programs to provide coverage to adults with incomes up to 133 percent of the federal poverty level, when some states have significantly lower income criteria for their Medicaid programs. The Act provides that if a state does not comply with its new coverage requirements, it may lose not only just the federal funding for those requirements, but all of its federal Medicaid funds.

The states argued that the Medicaid expansion provisions exceeded Congress's authority under the Spending Clause. Their position was that Congress was coercing the states to adopt changes Congress wanted by threatening to withhold all Medicaid grants, thereby violating the basic principle that the federal government may not compel the states to enact or administer a federal regulatory program.

The Court held that while Congress could offer funds under the Act to expand the availability of health care and could require states accepting such funds to comply with the conditions of their use, Congress could not penalize states that chose not to participate in a new program by taking away their existing Medicaid funding.

Summary

The Court's decision today addresses the constitutionality of certain provisions of the Act, and the Act is upheld, even with the restrictions on Medicaid expansion. The court does not opine on the benefits or detriments of the Act itself, which, it believes, must be determined by the American people. As to the individual mandate, Chief Justice Roberts writes, "Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness." Based on today's decision, health care reform will be moving full-steam ahead. Unless, of course, health care continues to be an political issue in the upcoming elections.

Topics: Health Care Reform (ACA)


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