This morning, the U.S. Supreme Court upheld most of the president’s healthcare law, by treating the law as a tax. A majority of five justices voted to uphold the most-discussed parts of the law, while four justices dissented and would have struck down the entire law. The Court also interpreted in a narrow manner a part of the law that applies to Medicaid, which is the federal program that assists people living in poverty. The name of the case is National Federation of Independent Businesses v. Sebelius, Case No. 11-393. Some highlights for in-house counsel follow:
Requirement to obtain insurance upheld: In an opinion written by Chief Justice Roberts, the Court upheld the provision requiring each person in the United States to either obtain health insurance or make a payment to the government. This requirement, known as the “individual mandate,” served as a key point of debate between those who supported the law and those who opposed it. The Court treated it as a tax, and then upheld it under the broad power that the U.S. Constitution gives to Congress to tax. While Congress referred to the payment as a penalty, the Court said that labels don’t matter. It wrote that the “question of the constitutionality of action taken by Congress does not depend on recitals of the power which it undertakes to exercise.”
Almost everything else also upheld: Almost all of the law’s other provisions also still stand. These include many new rules that will affect in-house counsel — not all of which have yet gone into effect — such as:
- prohibition on discrimination against people with pre-existing medical conditions, for offering healthcare coverage and also for setting insurance premiums;
- prohibitions on limits to lifetime health insurance coverage;
- limits on when health insurers can end coverage;
- extension of parents’ insurance to children until they turn 26;
- creation of health-insurance “exchanges” for people who cannot otherwise obtain health insurance;
- requirement for employers with more than 200 full-time employees to automatically enroll their employees in a health insurance plan;
- requirement for employers to add healthcare costs to employees’ tax forms;
- restrictions on “health savings accounts” that allow employees to use pre-tax income to pay for health treatments;
- requirement to treat coverage for mental illnesses the same as other illnesses;
- new annual fees on certain popular prescription drugs;
- new annual fees on certain companies that sell health insurance policies; and
- increase in the threshold for deducting healthcare costs from personal income taxes.
The upcoming election may ultimately determine the fate of these provisions and others.
Limits on Medicaid expansion: The Supreme Court did narrowly construe a part of the law involving the federal Medicaid program. The law expands the reach of Medicaid, which covers people in poverty. The law originally said that if a state wants to opt out of the expansion, it would lose all of its Medicaid funding, even funding for parts of Medicaid that existed before the new law. The Supreme Court held that this part of the law goes too far, and would violate the spending power that the Constitution gives to Congress. According to the Court, if a state opts out of the new expansion, it can still keep federal funding for parts of Medicaid that existed beforehand. This section of the case may ultimately have an effect on government contractors. The majority for this section is different than for the rest of the case; here, seven of the justices voted to alter the law’s Medicaid provisions, with only Justices Ginsburg and Sotomayor dissenting.
Effect on other laws: While it does not affect the outcome of this case, five justices did vote that the healthcare law cannot rest on the power that the Constitution grants to Congress to regulate interstate commerce. On this point, Chief Justice Roberts agreed with the four dissenters. The Constitution’s Commerce Clause serves as the foundation for an extremely wide swath of federal laws. But it seems that the Chief Justice limited the potential of this issue to affect too many — or, possibly, any — other laws. He wrote that “[t]he power to regulate commerce presupposes the existence of commercial activity to be regulated.” And given that most laws regulating businesses clearly involve “commercial activity,” it seems unlikely that this issue will have much of an effect, unless the Court expands on the point in future cases.
The Supreme Court’s opinion is available at: