The U.S. Supreme Court issued its much anticipated opinion on constitutionality of the March 2010 federal health care reform law, the Patient Protection and Affordable Care Act. Key provisions were the individual mandate for health insurance and the Medicaid expansion.
The mandate requires all U.S. citizens maintain “minimum essential” health insurance coverage or make a “shared responsibility payment” to the IRS. That payment – described as a penalty – is calculated as a percentage of household income. Individuals below certain income thresholds are exempt, and the IRS cannot use its typical enforcement tools to require payment.
The Medicaid expansion would require coverage of all individuals under age 65 with incomes below 133 percent of the federal poverty level and an “essential health benefits” package. The federal government would cover 100 percent of costs for the expansion through 2016, and then 90 percent. States choosing not to implement the expansion would lose all existing Medicaid funds.
A lawsuit, filed by 26 states, including Indiana, challenged the legality of the individual mandate and Medicaid expansion, set for Jan. 1, 2014.
The Supreme Court decision was, as expected, a 5-4 vote. Unexpectedly, Chief Justice Roberts sided with the liberal justices to be their fifth vote. His fellow four conservative justices issued an unsigned dissenting opinion; two other Justices wrote additional opinions.
The government argued the individual mandate was within Congress’s power to regulate commerce because the failure to purchase insurance “has a substantial and deleterious effect on interstate commerce” by shifting uncompensated care costs to family health insurance premiums, over $1,000 per year. The court noted, “Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority.”
The oldest reference in the opinion, a 1789 letter from Benjamin Franklin, proved to be most telling: “…in this world nothing can be said to be certain, except death and taxes.” Under constitutional jurisprudence, if a statute has two possible meanings, one of which violates the Constitution – as the Court determined ordering people to buy insurance did – then the courts must adopt the meaning that does not violate the Constitution.
The government’s alternate argument, then, was the law simply imposed a tax on persons who did not buy health insurance, under Congress’s power to “lay and collect taxes.” Although the law called it a penalty, the court concluded it was functionally a tax in “substance and application.”
The payment is far less than the price of insurance. It doesn’t just apply to persons who knowingly break the law, and it is collected like a normal tax. Further, penalties generally punish an unlawful act or omission.
“Here, it is not illegal to not have health insurance. What is illegal is not paying the shared responsibility payment for not having health insurance,” explained Julie Reed, ISMA general counsel. The court assures us that “Congress’s ability to use its taxing power to influence conduct is not without limits.”
The court agreed that threatening to remove all Medicaid funding from states that did not expand Medicaid was not “relatively mild encouragement.” It was “a gun to the head.”
The threatened loss of over 10 percent of a state’s overall budget crossed the proverbial line and left the states with no real choice but to implement the expansion, at significant cost and resources. “Now, states can choose whether to expand Medicaid but cannot lose all Medicaid funding if they decline,” said Reed.
The court closed its opinion by assuring it does “not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people.”
What’s next for Indiana
Provisions of the ACA already in effect will remain in effect. Similarly, future provisions will move toward implementation, but states have discretion on whether and how to expand insurance coverage to more citizens.
“Specifically, they can choose whether to expand access to needy individuals through Medicaid or another program, and whether to form their own health insurance exchanges. The ISMA is involved in ongoing discussions about an exchange for Indiana,” Reed said.