The Supreme Court’s Decision on The Affordable Care Act

June 28, 2012

This morning, the Supreme Court has upheld the constitutionality of the Affordable Care Act. How it got there is an exercise that would challenge the procedural understandings of even the most intrepid law students. Here, we try to communicate what the Court held, how in simple terms it got there, and what the most obvious implications of the Decision are.

There are two major issues at play in this case. The first is what has been referred to as the “individual mandate,” the requirement that an individual must purchase health insurance or pay a penalty. The second was the “Medicaid expansion” provision which contained the requirement that, in order to receive certain Medicaid funds, states must comply with minimum coverage requirements or risk losing Medicaid funding altogether. The individual mandate survived the challenge. The Medicaid expansion was struck insofar as it allowed the federal government to strip Medicaid funds from states that chose not to participate, but permitted the remainder of the provision to stay in place for those states that wished to adopt them.

To best understand how the Court got to this ruling, we need to step back to a few basic principles. First, the challenge to the law was on constitutional grounds and courts, as a rule, are and should be reluctant to overturn validly enacted laws on constitutional grounds. Second, and building on this principle, courts will look to all the different ways a statute can be interpreted, and as long as there is some way that it can be held constitutional, it will be. Third, when striking a provision as unconstitutional, it is preferable to allow as much of the law to stand as is practical. With those thoughts, we turn to the most controversial aspect of the law, that which has been dubbed the “individual mandate.”

As the Chief Justice pointed out in his portion of the opinion, “the most straightforward reading of the mandate is that it commands individuals to purchase insurance.” Slip op. Roberts 31. This reading of the law is what provided one of the strongest arguments against the law’s constitutionality. The argument was that the federal government lacked the power to command people to make such a purchase. A second (actually third) line argument that the government floated, however, was that it was merely imposing a tax on people who chose not to purchase insurance. The lead opinion concluded that this was a reasonable interpretation. Slip op. Roberts 32. After an analysis of the Commerce Clause and taxing precedents, Chief Justice Roberts concluded:

The Federal Government does not have the power to order people to buy health insurance. Section 5000A (the mandate) 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 be reasonably read as a tax.

Slip op. Roberts 44-45.

The second important provision under challenge was the Medicaid expansion provision. That provision requires states to comport with new expanded Medicaid regulations as a condition of receiving certain Medicaid funds. The challenge to that provision was based on the notion that Congress was threatening to withhold Medicaid funding unless the states adopted the federal government’s new proposed rules and that taking that step exceeded the federal government’s authority to compel states to administer federal programs. The federal government countered that it was within its right to try to coerce states into adopting what it believes are sound and necessary policies. The Court basically agreed with the challenge.

Specifically, the Court ruled that the federal government cannot order the states to regulate a program according to its instructions alone. The provision allowing the federal government to withhold all Medicaid funding – which sometimes can equal up to ten percent of a state’s budget – went beyond reasonable coercion and was more akin to a “gun to the head.” Slip op. Roberts 51. Nonetheless, the Court salvaged much of the regulatory framework so that states could have a choice as to whether to adopt the Federal policies. It did not rule out the possibility that the Federal Government could adopt less “coercive” tactics to promote its agenda.

Today’s decision comes as surprise to many commentators who prognosticated that the law would be struck down. In some respects, the upholding of the law changes nothing – it was the law of the land yesterday and is the law of the land today. Important popular provisions, such as the requirement that health insurance policies cover children up to age 26, remain in force. Many of the infrastructure changes that insurers and health care providers have been working on will continue to develop. The status quo is preserved.

In reality, though, the battle and inherent uncertainty of the past few months will remain. Forces are mobilizing to overturn the law at the Congressional level and it is certain to loom large in the upcoming elections. If the law survives these challenges, then in 2014 we will see the implementation of the “mandate” and, presumably, the imposition of a tax on those who choose not to comply. If the law works as intended, more Americans will be insured and, in theory, the overall cost of providing services will drop. Rest assured, there will be many twists and turns as this grandest social experiment of our generation continues to play out.

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For more information about "The Supreme Court’s Decision on The Affordable Care Act," contact Guy J. DuBeau at gdubeau@axley.com or 608.283.6704.