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U.S. Supreme Court to Rule on the Constitutionality of the Affordable Care Act

By Jennifer Hitchon, JD, MHA, AOTA Regulatory Counsel (jhitchon@aota.org) 

The U.S. Supreme Court heard oral arguments from March 26 to 28, 2012, challenging the constitutionality of the Affordable Care Act (ACA; 2010; H.R.3590; Pub.L. 111-148), the health care reform law signed by President Obama in 2010. The ACA is meant, in part, to expand health care coverage options and extend coverage to tens of millions of previously uninsured Americans. The law is more than 2,000 pages long and includes numerous key elements, but the legal challenges brought by states have focused on one central element: the requirement that all nonexempt Americans obtain insurance coverage or face a financial penalty to be collected under tax law. That requirement (the “minimum coverage provision” or the “individual mandate”) is considered necessary to ensure another aspect of the ACA: that insurance companies make coverage available to all applicants without taking account of pre-existing conditions and without charging especially high fees to those with costly health care needs.

Legal Issues before the Court

The Court heard arguments pertaining to four legal issues: (1) the applicability of the Anti-Injunction Act, which could lead the Court to rule that a decision is premature since no penalties related to the individual mandate have yet been imposed; (2) the constitutionality of the individual mandate itself; (3) the severability of the individual mandate and whether the entire act must be invalidated if the mandate falls; and (4) whether the Medicaid expansion provisions are unlawfully coercive.

The Court appears deeply divided on the issues of the individual mandate and severability. The five conservative justices—Samuel Alito,  Antonin Scalia, Clarence Thomas, and Chief Justice John Roberts Jr.—appear aligned, as do the four liberal justices—Elena Kagan, Sonia  Sotomayor, Ruth Bader Ginsburg, and Stephen Breyer. The vote of moderate Justice Anthony Kennedy will likely be decisive.  

The options available to the justices are to deem a decision premature, uphold the law, or strike it down in whole or in part. A decision is expected in June 2012.

Anti-Injunction Act

On the first day of oral arguments, the justices considered whether they are barred from hearing the case at this early date. The Anti-Injunction Act states, loosely, that litigation intended to prevent the collection of a tax may proceed only after the assessment of the tax and not before. In the case of the ACA, the first penalties for failing to purchase health insurance coverage will not be applied until 2014 and will not be due until 2015.

Notably, lawyers for both the Obama administration (Solicitor General Donald B. Verilli Jr.) and the 26 state challengers to the law (Paul Clement) have the same legal interpretation of the Act and believe the Supreme Court can decide the case now. The justices hired an outside lawyer to make arguments on this issue, and are expected to move forward with a decision.

The Individual Mandate

On the second day of the hearings, parties debated the central question in the case: whether Congress can mandate that individuals purchase a product (health insurance) or pay a tax penalty.

The Obama administration attorney argued that Congress is authorized to enact such a mandate pursuant to its power to regulate commerce and its power to tax under Article I, Section 8, of the Constitution. Further, the administration lawyer argued that Congress has additional authority to act in this arena because health care is a pressing national problem that is economic in nature and asked the court to frame the legal question differently, as “May Congress decide, in fashioning a comprehensive response to a national crisis in the health care market, to regulate how people pay for the health care they will almost inevitably need?”

The challengers argued instead that the requirement to buy a product is unprecedented, unlawfully regulates inactivity rather than activity, and would allow Congress unlimited power to intrude on individual freedom.

Obama’s solicitor general faced the toughest questioning from justices. Justice Kennedy asked, “Can you create commerce in order to regulate it?” and Justice Scalia asked, “May failure to purchase something subject me to regulation?” Chief Justice Roberts wondered whether the government could compel the purchase of cell phones next and Justice Alito extended that line of thought to include forcing people to buy burial insurance.

Severability 

The next morning, day three of oral arguments, the justices dealt with the issue of severability: Is the individual mandate severable from the ACA? Or, if the mandate were deemed unconstitutional, must the ACA be invalidated in its entirety? This question is of particular importance because the mandate itself is widely regarded as imperiled.

Solicitor General Verilli suggested that if the mandate falls, the only provisions of the ACA that should fall with it are those prohibiting insurers from denying coverage to consumers based on pre-existing conditions and charging high premiums to consumers with costly medical conditions. Paul Clement argued the entire health reform law should fall with it and Justice Scalia agreed, remarking, “My approach would be to say that if you take the heart out of this statute, the statute’s gone.”

Medicaid Expansion 

The last arguments the justices heard on day three concerned Medicaid expansion—specifically, whether the law’s requirement that states expand Medicaid coverage and increase program spending or lose federal funding was unduly coercive. Although the ACA does provide for federal funding of state program expansions initially, the law includes a gradual reduction of the federal contribution over time.

The challengers argued that this creates an unfair burden and gives no real choice to the states, which currently depend on federal Medicaid dollars significantly. The solicitor general, bolstered by several justices, noted that there is little question as to the constitutionality of the expansion provisions, as states are free to withdraw from the Medicaid program at any time.

Implications  

The Supreme Court’s decision, expected early this summer, will significantly impact health care and possibly even the outcome of elections in November. Losing the individual mandate, either alone or with other aspects of the law, would be a significant setback to the Obama administration’s efforts to reform health care, but we know many foundational issues of the ACA are here to stay. The Medicare program will move ahead with efforts to incentivize quality reporting regardless of the Supreme Court’s decision, and many states will move forward with plans to establish and run state-based health insurance purchasing exchanges (including state-based individual mandates and bars to coverage denials based on pre-existing conditions).

AOTA is closely following legal developments related to the ACA and will be analyzing the Court’s decision in June.

Send your questions to jhitchon@aota.org. 


Resources:

Supreme Court docket orders and case filings

Anti-Injunction Act: Oral Arguments Audio (Monday, March 26),Briefs

Minimum Coverage Provision: Oral Arguments Audio (Tuesday, March 27), Briefs

Severability: Oral Arguments Audio (Wednesday, March 28), Briefs

Medicaid Expansion: Oral Arguments Audio (Wednesday, March 28),Briefs