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Affordable Care Act - What the Supreme Court Decision Means to You

July 3, 2012

On June 28, 2012, the U.S. Supreme Court released its long anticipated and much discussed decision to the challenge to the Patient Protection and Affordable Care Act (also referred to as the “Affordable Care Act”). The opinion reflects the many divisions within the Supreme Court, but ultimately resulted in the Affordable Care Act being upheld by the Court. Chief Justice Roberts wrote the opinion of the Court, joined by Justices Ginsburg, Breyer, Sotomayor and Kagan. The opinion reached three important conclusions with respect to the statute.

First, the Court found that the Anti-Injunction Act, barring litigation challenging new federal taxes until such time as those tax are imposed on the public, does not bar the Court from hearing and deciding the appeal. Second, the Court found that the “individual mandate,” the requirement that all individuals purchase health insurance or pay a penalty, survives constitutional challenge as a valid exercise of Congress’s taxing authority. Finally, three justices, Chief Justice Roberts, Breyer and Kagan, found that the Affordable Care Act’s expansion of Medicaid to include a greater percentage of people living in poverty was permissible, but the federal government may not withhold all federal Medicaid funding to states which choose not to participate in the expansion. Justices Ginsburg and Sotomayor only concurred in the judgment of the Court on this issue, but disagreed with the majority’s reasoning. Justice Ginsburg filed a separate dissent and concurrence, in which Justice Sotomayor joined.  

Of course, there was a long, vigorous dissent authored by Justice Scalia in which he was joined by Justices Alito, Kennedy and Thomas. Additionally, Justice Thomas also wrote a quick, two-page dissent emphasizing his disagreement with the government’s position in this case regarding the regulation of “inactivity” under the Commerce Clause.

Here is a quick, initial analysis, based on the arguments that were raised with the Court during the March 2012 arguments.

  • The Court considered whether the challenge to the Act is premature because the “penalty” for not purchasing coverage has not yet been imposed. This challenge was brought under the Anti-Injunction Act, which generally provides that an individual cannot challenge a tax until he or she has to pay it.
What the Court decided: The Court concluded that, based on the language of the Act, Congress did not intend for the payment by those who do not comply with the individual mandate to be treated as a tax for purposes of the Anti-Injunction Act. BUT, the Court upheld the individual mandate as constitutional under Congress’s taxing power (see more below).
  • The Court also considered whether the individual mandate was constitutional.
What the Court decided: The Court, in the majority opinion, rejected the argument that Congress has the power to impose the individual mandate on the public through the Commerce Clause of the U.S. Constitution, which grants Congress the authority “to regulate Commerce . . . among the several states.”  However, the Court upheld the constitutionality of the individual mandate under Congress’s authority to “lay and collect taxes.” In her opinion, Justice Ginsburg, joined by Justice Sotomayor, rejected the position that Congress did not have the authority to impose the individual mandate under the Commerce Clause; she did agree that Congress also had the power to impose the mandate under the “tax and spend” clause of the Constitution.
  • The Court also heard arguments regarding the “severability” of the Affordable Care Act – that is, if the Court strikes down the individual mandate, can it sever the individual mandate and certain related provisions from the rest of the Affordable Care Act, or must it throw out the Act in its entirety?
What the Court decided: Because a majority upheld the individual mandate, it was not necessary for the Court to resolve the severability question.
  • The last argument the Court considered at oral argument was whether it was impermissibly coercive for Congress to condition payment of all Medicaid monies to a State on the State’s expansion of the Medicaid program (at federal expense) to increase the number of covered individuals.
What the Court decided: The Court found that Medicaid expansion was constitutional, but that Congress does not have the authority to bar all Medicaid funding to any state that refuses to agree to the expansion. Ultimately, the Court found that (1) Congress acted constitutionally in offering states additional Medicaid funds to expand coverage to millions of new individuals; (2) states may agree or refuse to accept such new funds; (3) if states accept such funds, they must abide by the federal rules for expanding Medicaid coverage; and (4) if states refuse to participate in the expansion, they may only lose Medicaid funds devoted to the expansion, not all Medicaid funds for their currently existing Medicaid programs.

Regardless of the details of the Supreme Court’s decision, the bottom line is that the ACA remains the law and it is critical to push ahead quickly in order to meet the compliance deadlines in the statute. The next deadline is coming up fast: the Summary of Benefits and Coverage, the purpose of which is to help consumers compare health insurance coverage options before they enroll and to understand their coverage once enrolled. The SBCs must be ready as of the first day of the first annual enrollment period that begins on or after September 23, 2012. For participants or beneficiaries who enroll in the plan other than during an open enrollment period (for example, newly eligible employees or special enrollees), the effective date is the first day of the first plan year that begins on or after September 23, 2012.

Also important is to start long-term strategic planning to be ready for the seismic changes flowing from the ACA. These changes include not only technical changes (plan and benefit changes, the availability of coverage through exchanges and treatment of full-time and part-time employees), but also the altered economics of health care in every aspect of collective bargaining. We’re ready to help you meet these challenges. Please call us...

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