Supreme Court Upholds Individual Mandate

In a 5-4 decision, the Supreme Court upheld the constitutionality of the key individual mandate provision of the Patient Protection and Affordable Care Act. This provision requires most Americans to maintain “minimum essential” health insurance coverage. The court’s ruling released today contains 196 pages of opinions and will require lengthy analysis, but by upholding the individual mandate, the health care reform laws remain largely intact.

Under the PPACA, beginning in 2014, individuals that do not maintain “minimum essential” coverage will be required to pay a penalty for non-compliance. Individuals will be required to show compliance with the mandate annually when they file their federal income tax returns. The non-compliance penalty will be paid to the IRS along with an individual’s taxes. This tax payment alignment is the aspect of the bill, which according to the majority opinion of the Supreme Court grants Congress the ability to impose an individual mandate.

In his written opinion, Chief Justice Roberts agreed with the challengers of the bill that the individual mandate is unconstitutional under the Commerce Clause of the Constitution. However, because “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality,” Hooper v. California, 155U.S. 648,657, he felt that the mandate could be interpreted as imposing a tax. Since Congress has the power to tax, the individual mandate “may be upheld as within Congress’s power under the Taxing Clause.”

Chief Justice Roberts was critical of the expansion of Medicaid and that provision was declared unconstitutional. The Medicaid provision of the PPACA required States to comply with an expansion of Medicaid eligibility or risk losing all of their Medicaid funding. This demand was deemed “economic dragooning that leaves the States with no real option but to acquiesce in the Medicaid expansion.” Despite this piece of the legislation being unconstitutional, the Court ruled that it can be remedied without affecting the other provisions of the Act.

This Medicaid expansion was viewed by opponents of the bill as an attempt to move closer to a single-payer system. Under the PPACA, Medicaid would provide health care assistance to the entire population with income below 133% of the poverty level. This expansion could trigger previously ineligible individuals to drop their employer sponsored plans for lower-cost coverage through Medicaid. It could also lead to significant increases in Medicaid costs for States and some argued that it would provide increased incentive for employers to drop their sponsored health plans. It is unclear as to how eliminating this increase in Medicaid eligibility will impact the PPACA’s goal of providing health insurance accessibility to the currently uninsured.

The long-term implications of this ruling are yet to be determined, however, both political parties will likely use these results as a platform to support their individual positions. What this means for business is that employers must continue to proceed with the assumption that the widespread Health Care Reform changes set for 2014 will be implemented. We will continue to provide updates as new information is disseminated and assist our clients in implementing the necessary changes required under the Patient Protection and Affordable Care Act.


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