This morning the U.S. Supreme Court settled the long-standing issue of the constitutionality of President Obama’s health care law, the Affordable Care Act (“ACA”). National Federation of Independent Businesses, et al v. Sebelius, Secretary of Health and Human Services, et al. 567 U.S. 7 (2012). In its landmark decision, the Supreme Court upheld the ACA as constitutional, however it narrowly construed whether or not the Federal Government can terminate Medicaid funds owed to states.
The Issues Decided in the Healthcare Case
1. The Anti-Injunction Act – Was it too Soon to Bring the Case?
The threshold issue for the Supreme Court was whether the Court could even hear the challenge to the health care law or whether the Anti-Injunction Act (“AIA“) barred the Court from ruling on the issue at this time. The AIA states that “‘no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person,’ 26 U. S. C. §7421(a), so that those subject to a tax must first pay it and then sue for a refund.” Id. at 11. The AIA requires that individuals actually incur a penalty before they can bring a lawsuit to challenge a tax. Id. at 12.
The Court held that the AIA did not apply here, because Congress did not intend the payment to be treated as a “tax” for purposes of the AIA. The ACA describes the required payment as a “penalty” and not a “tax.” While calling the payment a “penalty” cannot control whether the payment is a tax under the Constitution, it does determine whether it is a tax under the AIA.
2. The Individual Mandate – A Commercial Activity? A Tax? Or Unconstitutional?
The individual mandate requires each individual to maintain a minimum level of health insurance coverage. In the event that a person does not obtain minimum health insurance (barring situations where that individual is exempted from being required to obtain insurance), they will be required to pay a financial penalty, known as the “shared responsibility payment.” The shared responsibility payment gets phased in over time. In 2014, it will be $95 per person in the household or 1% of a percentage of the household’s income, whichever is greater. The Government argued that Congress had the power to implement the penalty under the Commerce Clause, the Necessary and Proper Clause, and the Taxing Power.
The opinion authored by Chief Justice Roberts upheld the individual mandate as a Constitutional exercise of Congress’s taxing power. Roberts held, “Our precedent demonstrates that Congress had the power to impose the exaction in §5000A under the taxing power, and that §5000A need not be read to do more than impose a tax. That is sufficient to sustain” the individual mandate. Roberts likened the payment to other taxes reasoning, “The ‘[s]hared responsibility payment,’ as the statute entitles it, is paid into the Treasury by ‘taxpayer[s]’ when they file their tax returns. 26 U. S. C. §5000A(b). It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. §5000A(e)(2). For taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status.”
Chief Justice Roberts does argue, however, that the mandate would not be upheld under the Commerce Clause. Chief Justice Roberts found, “The Federal Government does not have the power to order people to buy health insurance. Section 5000A 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 reasonably be read as a tax.”
The four justices joining Roberts in the majority—Ruth Bader Ginsburg, Sonia Sotomayor, Stephen Breyer and Elena Kagan—argued in the Opinion written by Justice Ginsberg that the individual mandate also could be upheld under the Commerce Clause.
3. The Expansion of Medicaid – Must States Expand Medicaid to Cover Those Earning Less than 133% of the Federal Poverty Level?
The ACA also proposed to expand Medicaid eligibility. The expansion would mandate States to provide coverage to all individuals under 65 with household incomes at or less than 133% of the Federal Poverty Level beginning in January 2014.
On the issue of Medicaid expansion, the Court held it would be unconstitutional to punish states who failed to comply with the Medicaid expansion by threatening to withhold the existing federal funding. The Federal Government cannot compel the States to enact or administer a federal regulatory program or from “commandeer[ing] a State’s legislative or administrative apparatus for federal purposes.” Printz v. United States, 521 U. S. 898, 933 (1997). However, under the Spending power, Congress does have the “authority to condition the receipt of [Federal] funds on the States’ complying with restrictions on the use of those funds, because that is the means by which Congress ensures that the funds are spent according to its view of the “general Welfare.’” National Federation of Independent Businesses v. Sebelius, at 50.
Thus, Chief Justice Roberts held “Nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.” Id. at 55.
Accordingly, States will be free to choose to accept or reject federal funding for the Medicaid Expansion, but if States do accept the funding then the government can require the States to implement the Medicaid Expansion.
Supreme Court finds Obamacare is constitutional.
