The Affordable Care Act and The Supreme Court’s Landmark Decision

By Laura A. Petersen

Introduction

In March 2010, President Obama signed into law one of the most historic and controversial pieces of legislation this nation has ever seen. Since becoming law, the Patient Protection and Affordable Care Act (“ACA”) has generated numerous lawsuits and sparked national debate over the future of American healthcare. After the federal courts reached conflicting decisions regarding the ACA’s constitutionality, the Supreme Court decided to hear the case. The Court heard an unprecedented six hours of oral argument over three days, the most for any one case in over forty years. On June 29, 2012, by a vote of 5-4, the Court upheld a majority of the ACA as constitutional.

Ruling

Chief Justice John Roberts wrote the majority opinion in which the Court held the following: (1) the Anti-Injunction Act does not preclude litigation over the validity of the ACA’s individual mandate; (2) the government does not have the power to order individuals to purchase health insurance; however, it does have the power to impose a tax on those without health insurance; and (3) the government cannot withhold existing Medicaid funding from states that choose not to participate in the ACA’s expansion of Medicaid.

Anti-Injunction Act

The Anti-Injunction Act prohibits a party from challenging a federal tax policy before an individual has actually paid the tax. Under the ACA, the first “penalties” for not having health insurance will not be paid until 2014. In 2011, the Fourth Circuit held that the Anti-Injunction Act prohibited the plaintiffs from challenging the individual mandate until after they paid the penalty. The Supreme Court, however, unanimously held that the Anti-Injunction Act did not apply to this suit. The Court determined that even though payment would be assessed and collected in the same manner as taxes, Congress intentionally drafted the ACA using the language “penalty” instead of “tax.”

Individual Mandate

The heart of the ACA — and its most controversial provision — is the individual mandate. This provision requires individuals to obtain health insurance or pay the aforementioned penalty. The government advanced two primary theories supporting the individual mandate’s constitutionality.

The government argued that the individual mandate is a valid exercise of Congress’s constitutional power under the Commerce Clause. This clause gives Congress the power to regulate activities that affect interstate commerce. Given the costs borne on the insured because of the uninsured, the government argued that Congress could order individuals to purchase health insurance. The Supreme Court rejected this argument 5-4, holding that Congress cannot compel commerce in order to regulate it.

The government also argued that the mandate is a valid exercise of Congress’s constitutional power to “lay and collect taxes.” This argument asked the Court to interpret the mandate not as a legal command for individuals to purchase insurance, but rather as a tax on those that do not. The Supreme Court accepted this argument 5-4.

Ultimately, in affirming the constitutionality of the individual mandate, the Court held “our Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from the regulated activity. But from its creation, the Constitution has made no such promise with respect to taxes.”

Medicaid Coercion

The ACA dramatically increases states’ obligations under Medicaid. The ACA requires states to expand their Medicaid programs by 2014 to cover all individuals under the age of 65 with incomes below 133% of the federal poverty line. This expansion is expected to add anywhere from 16-18 million additional enrollees to state Medicaid programs. While the government is covering the cost of this increase until 2016, the States will pay 10% of the expansion by 2020. If a state opts out of the ACA’s Medicaid expansion, that state would lose all of its existing federal Medicaid funding.

The Supreme Court held that it was unconstitutional for the government to deny existing federal Medicaid funding from states that opt out. The Court determined that the ACA’s Medicaid provision violates Congress’s constitutional power under the Spending Clause. The Spending Clause allows Congress to monetarily incentivize a state to regulate a certain way but it does not allow Congress to commandeer a state legislature for federal purposes.

The Court held that the ACA’s provision allowing the government to deny all existing federal Medicaid funding was unconstitutionally coercive under the Spending Clause. Effectively, Congress was forcing states to either agree to the ACA and provide for Medicaid expansion or sacrifice their budgets and abandon their poor by opting out. Because the provision threatening Medicaid funding was severable from the rest of ACA, it was the only provision struck down by the Court.

Conclusion

The ACA represents unique and historic legislation with broad social, economic, and political ramifications. The Supreme Court’s landmark decision upholding a majority of the law will likely go down as one of the most influential decisions in American history. The decision serves to not only dictate the future of healthcare, but also to further delineate the bounds of federalism and the relationship between the government and its citizens. The Court’s opinion was limited solely to the ACA’s constitutionality, not its advisability. As the Court noted, “[u]nder the Constitution, that judgment is reserved to the people.”

This article was prepared with the assistance of Kyle R. Clapper, summer associate at Quinn, Johnston, Henderson, Pretorius & Cerulo and student at University of Illinois College of Law.

Originally published in the Summer 2012 edition of Quinn Quarterly.