Supreme Court Agrees to Hear Health Law Case

by Rebecca Farley on November 17, 2011

The Supreme Court announced this week that it will hear the legal challenges to the Affordable Care Act (ACA) in its upcoming session. The move follows several conflicting decisions at the District and Appellate court levels, some of which upheld the law and others which struck it down. The following is a summary of the legal issues that the Supreme Court has agreed to take up – and their implications for the future of the ACA.

1. Is the individual mandate constitutional? Perhaps the most widely-publicized objection among opponents of the ACA is the law’s requirement that all individuals either have a source of health insurance coverage or pay a tax penalty. Congress justified this provision of the law under its power to regulate interstate commerce, arguing that a person’s decision to not be insured has broad ripple effects throughout the economy. However, the plaintiffs in several of the ACA cases have argued that a decision not to purchase a product does not fall under the umbrella of “interstate commerce” and that Congress is overstepping its bounds by requiring people to purchase a private product. The Implication: If the Court strikes down the mandate, it will then have to decide whether the rest of the law can still stand (see below). However, if it upholds the mandate, that question may be rendered moot and the Court may move on to Issue 3.

2. If the mandate is struck down, can the rest of the law stand? The individual mandate is the lynchpin to the other insurance reforms included in the ACA. Without a requirement that individuals be insured, the law’s new regulations on insurance companies (including the requirement that no individual can be turned away from insurance for a pre-existing condition) would not be fiscally sustainable, since the entire premise of insurance is based on both healthy and sick people paying in to the same pool. Most laws include a “severability” clause which states that if one part of the law is struck down, the rest of it may still stand – but the ACA did not include such a clause. Thus, it is unclear whether the rest of the ACA could survive if the mandate was ruled unconstitutional. The Implication: If the Court rules that the mandate is unconstitutional and cannot be severed from the rest of the law, the entire ACA may be struck down. On the other hand, if the Court rules that the mandate is unconstitutional but can be severed, Congress will have to return to the drawing board and find a new way to make the ACA’s insurance reforms fiscally sustainable. Several proposals for ways to do this have been floated by policymakers and researchers, including the idea of having a yearly open enrollment period for purchasing insurance on the exchange, similar to what is currently done in Medicare Part D and most employer-sponsored plans. However, any Supreme Court decision that results in Congress having to take additional action sets the stage for a protracted political battle that would be heavily influenced by the outcome of the 2012 elections.

3. Is the Medicaid expansion an unconstitutional infringement on states’ powers? Twenty-six states have challenged the constitutionality of the Medicaid expansion, which provides states with new money for Medicaid under the conditions that they cover certain new populations and provide at least a minimum set of essential benefits. It is well-established in legal precedent that it is not an infringement of states’ powers for the federal government to offer them optional new funding with certain requirements attached to that funding. However, the states in this lawsuit have argued that the scope of the new law is so vast, and the Medicaid expansion is such a fundamental component of the law, that their participation would in effect force them to abdicate powers traditionally reserved for states (a situation known in this context as commandeering). The Implication: If the Court rules that the Medicaid expansion is in fact unconstitutional, it would severely undermine the law and could put the implementation of health reform in jeopardy. However, the anti-commandeering argument is widely considered to be the weakest one against the ACA since states’ participation in Medicaid is voluntary.

4. Do plaintiffs have legal standing to bring a lawsuit before the law goes into effect? The enforcement mechanism for the individual mandate – that is, the government’s tool for compelling individuals to purchase insurance – is a tax penalty levied on individuals who are not insured. Under a tax law known as the Anti-Injunction Act, plaintiffs cannot bring a lawsuit against a tax before they are actually subject to the tax. In other words, if the individual mandate is at heart a tax issue, it is possible that the plaintiffs in the ACA cases may not actually have legal standing to bring a lawsuit against the individual mandate until the point at which it actually goes into effect in 2014. Only one court has ruled against an ACA challenge on these grounds thus far. The Implication: If the Supreme Court rules that the Anti-Injunction Act holds in this instance, it may render any further consideration of issues 1 and 2 meaningless until 2014. Issue 3 is not a tax issue, so the Court could still rule on the Medicaid expansion.

The Court’s decision on these four issues could have wide-ranging implications both for the future of health reform in the United States and the constitutional limits on Congress’ power. The oral arguments before the Supreme Court are scheduled for March, meaning that a decision will not be handed down for some months yet to come. Meanwhile, states and the federal government will continue their preparations for ACA implementation.

 

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