Many aspects of the Supreme Court’s decision to uphold the Affordable Care Act (ACA) continue to garner both praise and criticism. Especially notable is the coverage and commentary about the Chief Justice’s position in the case, which was contrary to partisan ruling predictions. The cornerstone of the challenge to the ACA was the “individual mandate”— the requirement that nearly all Americans purchase health insurance by 2014 or pay a penalty. When defending the constitutionality of the individual mandate, the administration’s main argument was that Congress could require individuals to purchase health insurance using its power under the Commerce Clause of the Constitution. According to the administration, the broad power under the Commerce Clause was applicable in this instance because the failure to buy health insurance shifts the cost of healthcare from the uninsured to healthcare providers, insurance companies, and those who do purchase health insurance. The ACA opponents argued that the Commerce Clause was intended to regulate economic activity, whereas the decision not to purchase health insurance constituted inactivity and therefore should not fall under Congress’ Commerce Clause powers.  

While five Justices—Chief Justice Roberts and Justices Ginsburg, Breyer, Sotomayor, and Kagan—agreed that the mandate was constitutional, they did so based upon different reasoning than that proffered by the administration. The Chief Justice rejected the administration’s Commerce Clause argument, and instead agreed with one of its alternative arguments: the mandate imposes a tax, not a penalty per se, on people who do not buy health insurance, and Congress has the authority to impose taxes based on its constitutional taxing powers. Although the Chief Justice acknowledged that the mandate and accompanying tax are mainly intended to get people to buy health insurance, rather than raise money like a traditional tax, he insisted that it was still a tax rather than a penalty.

The Court’s decision also struck down the penalty on states that do not comply with the increased requirements for Medicaid coverage. The Court said that the Medicaid provision was not the “relatively mild encouragement” expected from Congress; instead, it was more like a “gun to the head.” While Congress may still attach some strings to the distribution of Medicaid funds, it cannot take away all the funding for states that do not comply with the new eligibility requirements set forth in the ACA.

WHAT THE AFFORDABLE CARE ACT MEANS TO EMPLOYERS

Given this holding, the ACA will, within the next two years, offer health insurance coverage to millions of Americans who currently do not have coverage. Moreover, the current and future rules barring limitations as to preexisting conditions remain applicable. Beginning September 24, 2012, employees will have to be provided with a summary of benefits and coverage and, for some employers, the cost of health care coverage must be reported on an employee’s W-2. Beginning in 2013, there will be additional taxes paid by highly compensated employees and those with significant investment earnings to support this law. In addition, a number of other changes required by the ACA go into effect as of 2014, including the imposition of annual tax penalties on certain employers that do not offer health insurance to their full-time workers and on individuals who do not secure health insurance.  

It is certainly likely that the imposition of the ACA will continue to be debated, including relevant interpretive rules promulgated by various government agencies impacting doctor-owned hospitals, health insurance exchanges, Medicare panels and employers providing free birth control.  

While legislation to repeal the ACA will likely again be introduced in Congress, whether the ACA remains in effect will depend upon the next Congress and the presidential election in November. In the meantime, the ACA will continue to be a significant concern for employers, medical providers and insurance carriers.