In the most closely watched and controversial case since the Bush v. Gore ruling that brought to an end the Florida recount in 2000, the Supreme Court upheld – by a margin of 5-4 – the individual mandate provision of the Affordable Care Act (ACA) that requires all Americans to purchase health insurance – or pay a fine.
There was initial confusion about the ruling because the court announced that it found the mandate unconstitutional under the Interstate Commerce Clause.
However, the ruling went on to clarify that the court considered the penalty for not purchasing health coverage a tax imposed by Congress. Under this interpretation, the court upheld the individual mandate and, in effect, much of the ACA.
“In the end, the Affordable Health Care Act survives largely unscathed,” noted Justice Ruth Bader Ginsburg.1
Summary of the Court’s Decision
The Individual Mandate
Central to the Obama administration’s case was the assertion that Congress could require everyone to buy health insurance using its power under the Commerce Clause of the constitution. The administration argued that failure to acquire insurance would ultimately shift the costs of health care for the uninsured to health care providers, insurance companies, and consumers of health insurance.
Five justices (Chief Justice Roberts and Justices Kennedy, Scalia, Thomas, and Alito) rejected this claim, arguing that the Commerce Clause assumes there is an activity to regulate. The decision to forgo health insurance coverage represents inactivity and so cannot be regulated.
However, a different group of five justices (Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, and Kagan) agreed that the penalty imposed by the mandate on those who chose not to buy health insurance coverage (in essence, the mandate’s enforcement mechanism) constituted a tax and that Congress is empowered by the constitution to impose taxes.
Under this interpretation, individuals are at liberty to forgo health insurance coverage, but Congress is constitutionally entitled to impose taxes.
According to Chief Justice Roberts, “The federal government does not have the power to order people to buy health insurance. Section 5000A would therefore be unconstitutional if read as a command. The federal government does have the power to impose a tax on those without health insurance. Section 5000A is therefore constitutional because it can reasonably be read as a tax.”2
ACA Severability
Because the court found the issue of the individual mandate constitutional, it did not have to consider the question of severability – whether all or any additional parts of the law had to be struck down if the mandate was rejected.
Medicaid Expansion
The court did strike one key provision of the ACA – the requirement that states expand their Medicaid programs to provide coverage for the uninsured. The law, as passed by Congress, would require states to significantly broaden Medicaid eligibility requirements to provide coverage for millions of Americans who are currently uninsured.
Although the federal government would initially pay for this expansion, the federal burden would drop to 90% beginning in 2020, with states required to fund the remainder. States that failed to comply with the costly Medicaid expansion would risk losing all federal Medicaid support.
It was this threat to existing Medicaid funding that the court found unconstitutional – judging that although the federal government can make funds available to states to allow Medicaid expansion to cover the uninsured, it can’t require states to accept this funding.
Threatening to withhold all federal Medicaid funding, the court ruled, would in effect require states to participate in the expansion. Therefore, states that choose not to participate must be allowed to do so, without any threat to existing Medicaid funding.
Anti-Injunction Act
Finally, the court ruled that the Anti-Injunction Act – a statute that requires a tax to be levied before it can be challenged in court – did not apply in this instance.
Confusingly, the court ruled that although the penalty imposed on individuals who do not purchase health coverage is not technically a tax, Congress is entitled to impose the penalty under its broad authority to collect taxes.
President Obama’s Reaction
Unsurprisingly, the reaction from the White House was one of jubilation. In comments made just after the Supreme Court delivered its verdict, the president reiterated many of his now well-worn themes on the law – highlighting the provisions that prohibit denial of coverage for preexisting conditions and those that allow young adults younger than 26 to stay on their parents’ health care plans, as well as the promise to cover 30 million currently uninsured Americans.3
Governor Romney’s Response
In contrast, Governor Mitt Romney, speaking on Capitol Hill, expressed his disappointment in the court’s decision and vowed, if elected, to repeal and replace the ACA. The presumptive Republican nominee made it clear to opponents of the ACA that the November elections represent the next round in the fight over health care reform, with this call to arms: “This is a time of choice for the American people. Our mission is clear: If we want to get rid of Obamacare, we’re going to have to replace President Obama.”4
What Is Next for the ACA?
The controversy over health care reform, which so bitterly divided the nation, is unlikely to die out after the Supreme Court ruling.
With the individual mandate ruled constitutional through Congress’ power to levy taxes, focus will shift to the November elections. If Republicans win control of the Senate and White House and retain the House of Representatives, their first priority will be to fulfill their pledge to repeal and replace Obamacare.
At the state level, the court’s decision that states cannot be required (or coerced) to participate in Medicaid expansion could have an implications for the ACA’s efforts to cover millions of American who are currently without insurance. However, with the federal government’s willingness to pay 90% of the cost of expansion, this proposal might be too tempting for even the governors who are opposed to the law to turn down – the federal share of Medicaid spending is currently 67%.5
A CNN/ORC poll conducted immediately after the ruling found public opinion was largely unaffected by the court’s decision, with 51% of Americans favoring a full repeal of the law and 47% wishing to keep all provisions in place.6
Both parties claim political advantage on the issue, and although the court upheld the law on constitutional grounds, the debate about whether it represents sound policy will continue.
Click here to read the Supreme Court’s ruling in full.
1Washington Post article: Supreme Court Upholds Obama’s Health-Care Law. Available at http://www.washingtonpost.com/politics/supreme-court-to-rule-thursday-on-health-care-law/2012/06/28/gJQAarRm8V_print.html. Accessed July 3, 2012.
2National Federation of Independent Business v. Sebelius, Nos. 11-393, 11-398, and 11-400, 2012 BL 160004 (U.S. June 28, 2012). Available at http://www2.bloomberglaw.com/public/document/Natl_Federation_of_Independent_Business_v_Sebelius_No_11393_US_Ju. Accessed July 3, 2012.
3White House press release – Remarks by the President on Supreme Court Ruling on the Affordable Care Act. Available at http://www.whitehouse.gov/the-press-office/2012/06/28/remarks-president-supreme-court-ruling-affordable-care-act. Accessed July 3, 2012.
4Washington Post article: Romney’s Response to Supreme Court Decision Thursday Upholding Obama Health Care Overhaul. Available at http://www.washingtonpost.com/national/romneys-response-to-supreme-court-decision-thursday-upholding-obama-health-care-overhaul/2012/06/28/gJQA1wIK9V_story.html. Accessed July 3, 2012.
5Kaiser Family Foundation, State Health Factsheet: Federal and State Share of Medicaid Spending, FY2010. Available at http://www.statehealthfacts.org/comparemaptable.jsp?typ=2&ind=636&cat=4&sub=47. Accessed July 3, 2012.
6CNN/ORC International Poll, June 28 – July 1, 2012. Available at http://www.realclearpolitics.com/docs/2012/CNN_healthcare_0702.pdf. Accessed July 3, 2012.