Waiting for the U.S. Supreme Court Decision: An Overview of Potential PPACA Outcomes
Last month, the United States’ highest court heard oral arguments on what has become the most controversial piece of legislation in recent history, the Patient Protection and Affordable Care Act (PPACA). Many of us wait eagerly for a final decision, which is expected to be published in June. Some key background information is listed below to help put things in perspective.
The Justices
The U.S. Supreme Court consists of one Chief Justice and eight additional Justices, appointed by various presidents, who are tasked with interpreting the Constitution and other legal issues. The Justices enjoy life tenure, a tactic purposefully employed by the founding fathers to ensure the Court could maintain impartiality against their counterparts in the legislative and executive branches, and further serve as a meaningful checkpoint in the democratic system. Stephen B. Presser, a professor at Northwestern University School of Law, explains, “Since 1788, in the famous defense of the Constitution set forth by Alexander Hamilton in the Federalist Papers, it has been understood that it is the task of the Supreme Court to rein in majoritarian legislatures when they go beyond what the Constitution permits.”
The Oral Arguments
The Justices heard oral arguments for three consecutive days last month on four key legal issues stemming from PPACA. BenefitMall summarized the proceedings for each legal issue under consideration by the U.S. Supreme Court in several blogs:
The Supreme Court has consolidated a number of lower court cases to address these four legal issues. To read many of the lower court decisions that BenefitMall covered, click here.
Judicial Outcomes
As we anticipate the final decision, it is important to understand some of the possible outcomes of the case. The Justices could rule to:
- Delay hearing the legal issues associated with case for several years due to the Tax Issue.
- Invalidate the Individual Mandate.
- Invalidate all or part of the Medicaid Expansion requirements.
- Uphold PPACA as is.
- Declare the entire Act unconstitutional due to the lack of a Severability Clause if any of the key provisions such as the Individual Mandate are overturned.
In addition to these over-lapping alternatives, the Court might use some judicial creativity to mix and match various legal interpretations and outcomes.
Will the Tax Issue Delay the Decision?
The federal government, as represented by the Obama administration and the U.S. Solicitor General, takes issue with whether the 26 states, which are one of the named parties in the case led by Florida’s attorney general, have the ability to bring the case before the U.S. Supreme Court at this point in time. At issue is whether or not the Anti-Injunction Act effectively renders the case moot, or premature, until the new tax (aka the individual mandate fine) goes into full effect several years from now.
Commentators speculate the line of questioning from the Justices suggests the Court will likely find the case is ready to be heard now, and that the 26 states are not procedurally barred from issuing a legal decision. Part of this opinion is reinforced by the Obama administration’s attempt to try to position the fine as a penalty when someone does not purchase health insurance, rather than a tax. Several Justices criticized the federal government for wanting to categorize the penalty as both a tax and a fine. Most legal experts believe this ambiguity has opened up the case to be heard now by the U.S. Supreme Court and not two years from now when the alleged tax goes into effect.
Will the Individual Mandate be Overturned?
One portion of the Act, the Individual Mandate, has been the most heavily debated provision. The Court is grappling with the constitutional powers of the federal government to require individuals to purchase health insurance or pay a fine to the IRS. The 26 states challenging this provision argue that requiring individuals to purchase health insurance exceeds the congressional authority granted under the Commerce Clause, and that it opens the door to allow Congress to require individuals to buy other goods such as broccoli. The Obama Administration counters that the mandate is a valid use of congressional power to regulate interstate commerce and to implement a tax or penalty to help pay for health insurance.
Since the U.S. Supreme Court is made up of nine Justices, a majority of five or more Justices will decide the case. Most experts believe that the Court’s more four liberal Justices – Breyer, Ginsburg, Kagan and Sotomayor – will support the individual mandate along with the other provisions in PPACA. Correspondingly, Justices Alito, Scalia, and Thomas, known for their more conservative outlooks, will vote to strike down at least the individual mandate and might even overturn the entire Act.
So the decision may come down to how Chief Justice John Roberts and Justice Anthony Kennedy, who has been characterized as the swing voter in this case. During the oral arguments on the individual mandate, Roberts’ and Kennedy’s questions appeared to raise significant concerns about the Obama administration’s interpretation of the Commerce Clause giving the federal government too much power. Later in that same session, however, their questions were more balanced and tempered as they challenged the states’ position as well. Predicting how they will vote based on the oral arguments is too speculative at this time. However, many conservatives are hoping Justices Roberts and Kennedy will rule against the individual mandate.
If the Justices do strike down the individual mandate but leave other PPACA provisions in place, this outcome could greatly limit the coverage goals underpinning the Act and cause significant problems in the health insurance markets. For example, MIT economist Jonathan Gruber said, “Without a mandate the law is a lot less effective. The market will not collapse, but it will be a ton more expensive and cover many fewer people.”
However, some of the justices appear to be contemplating this option. “The more conservative approach,” Justice Ginsburg said, “would be salvage rather than throwing out everything.” Justice Kennedy may also favor this approach, noting that striking only the mandate “can be argued at least to be a more extreme exercise of judicial power than to strike the whole.”
On a related note, the Supreme Court could not only strike the Individual Mandate, but other sections that are dependent on the Individual Mandate provision. Among those sections that also might be eliminated are some of the insurance reforms including the elimination of pre-existing exclusions clauses for group and nongroup policies.
Will the Medicaid Expansion Be Upheld?
The Justices also heard oral arguments on the Act’s Medicaid Expansion provision and whether it unduly coerces state governments. The Supreme Court has previously held that Congress can place conditions on state receipt of funds, but the condition cannot be “so coercive as to pass the point at which the pressure turns into compulsion.” The 26 states challenging PPACA argued that the Medicaid Expansion exceeds congressional authority because the law drastically increases the number of poor individuals who will then be eligible for Medicaid and will force states to overtime fund a significant portion of these costs, which most cannot afford to do right now.
Many legal experts believe it is less likely the U.S. Supreme Court will strike down most or all of the Medicaid Expansion provisions. PPACA actually supports a number of different programs for the under-served, so it is unlikely the Court will wipe out all of the programs in its ruling unless it overturns the entire Act. However, it is possible the Justices could provide some limitations to what the federal government can require the states to do to support the Medicaid Expansion.
Will the Court Uphold PPACA as Is?
One possibility is that the Justices may decide to uphold the entire Affordable Care Act. If this is the case, the Justices would have authorized the individual mandate as being a legitimate delegated power to the federal government via the Commerce Clause or through some other legal mechanism. This will address some of the exposure points referenced above about disrupting the insurance market, but several new issues must be addressed if PPACA stays intact. For example, the state-based exchange network could disrupt the existing insurance market if not configured correctly (e.g., having employers dump existing group coverage). Also, with the expansion of coverage, many more mandates will need to be funded by both the federal and state governments.
Will the Court Overturn PPACA Completely?
If the Court does find that one or more of PPACA’s key provisions unconstitutional or otherwise illegal, the Justices could accept the 26 states’ argument that the missing Severability Clause is a fatal flaw and strike the entire Act. Under this scenario, most of the work done the past two years would be scratched and Congress would have to develop a new or modified proposal to pursue PPACA’s stated public policy goals.
The Political Dimensions
Media outlets, legal experts, health care policy insiders and other stakeholders have been discussing the legal merits of this case as well as the surrounding politics. This political dimension was highlighted last week through President Obama’s ex parte comments concerning how the Supreme Court should rule. PPACA supporters for the most part backed his comments, while many thought they were a breach of protocol due to the division between the executive and judicial branches of government.
The President noted, “I am confident that the Supreme Court will not take what would be an unprecedented, extraordinary step of overturning a law that was passed by a strong majority of a democratically elected Congress.”
The notion that the Court’s potential decision to overturn PPACA would be “unprecedented” and “extraordinary” is less grounded in legal fact. Since the 1803 case of Marbury v. Madison, the Supreme Court has been authorized to overturn Congressional laws that either violate the Constitution or otherwise have fundamental legal problems. In fact, the U.S. Supreme Court has overturned 159 acts of Congress since its inception.
Although the Court’s decision is not expected for another few months, the oral arguments may have already had an impact on the public’s perception. The Pew Research Center, in conjunction with The Washington Post, unveiled the results of a new poll showing that 23 percent of respondents now have a less favorable opinion of the Affordable Care Act after hearing the Supreme Court arguments. This negative perception by the public may be seen in a recent request made by Judge Jerry Smith, a Reagan appointee to a federal court in Texas. Judge Smith demanded a letter from the Department of Justice after hearing Obama’s remarks that the Supreme Court would be engaging in judicial activism if they strike the Affordable Care Act. Judge Smith explained, “I want to be sure that you’re telling us that the attorney general and the Department of Justice do recognize the authority of the federal courts through unelected judges to strike acts of Congress or portions thereof in appropriate cases.”
Stay tuned as all of us wait to hear the Supreme Court’s decision in a few months. When the ruling is published, BenefitMall will offer timely analysis of what that decision means for Brokers, consumers and other key stakeholders.
We have covered many PPACA-related issues since its inception, and will continue to follow these issues for you. Please visit www.HealthcareExchange.com for those and other blog posts, polls, surveys and numerous resources or www.benefitmall.com to view past Legislative Alerts.
The views expressed in this post do not necessarily reflect the official policy, position, or opinions of BenefitMall. This update is provided for informational purposes. Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.