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Employee Benefits Law Report Reporting on recent trends and developments affecting employee benefits

Health Care Reform Survives Supreme Court Scrutiny – But Not Entirely Intact

Posted in Health and Welfare Plans, Health Care Reform

Health care reform just got a clean bill of health from the United States Supreme Court. The Court today ruled on the constitutionality of the Patient Protection and Affordable Care Act (“PPACA”), and generally upheld the legislation in a 5-4 decision written by Chief Justice John G. Roberts. Roberts was joined in his opinion by the four justices who had been appointed to the Court by Democratic presidents. In an expected development, certain individual justices wrote and/or joined concurring and dissenting opinions as well. The Court upheld the individual mandate to purchase health coverage, concluding that the mandate is permissible under Congress’s taxing authority. However, the Court rejected the argument that the individual mandate was a valid exercise of the power of Congress under the Commerce Clause of the Constitution. It will be interesting to see whether this restrictive ruling on the Commerce Clause might come back to haunt the Congress and future presidents in areas unrelated to health care reform without regard to which political party is in power.

By way of a quick refresher, the Court considered four questions during oral arguments held earlier this year. The main issue was whether Congress had the power under the Constitution to impose the individual mandate to purchase health coverage. A second issue addressed whether other parts of PPACA had to be struck down if that mandate was invalidated. The third issue before the Court considered whether PPACA’s expansion of Medicaid imposed undue coercion of the states (as discussed below, the Court surprised most observers with their decision on this issue). The fourth and final issue asked whether the above questions were ripe for adjudication at this time since the mandate is not yet in effect (this fourth issue was rejected by the Court in its opinion today).

Because the mandate is constitutional, the Court was not required to decide whether other parts of PPACA have to be struck. Subject to the possibility of congressional repeal (or amendment), the entire statute survives this courtroom brawl essentially as is.

The decision is not a complete win for the Obama administration. In a bit of a surprise, the Court upheld the expansion of Medicaid coverage contained in PPACA but concluded (not without dissent) that it was impermissible for the federal government to withdraw existing Medicaid funding from states that opt out of this expansion. No lower court decision had taken this position. The practical implications of this portion of the Court’s opinion on the expansion of Medicare are as yet unclear (at least to this author).

The Court’s decision today will have a profound impact on employers, the states and health care providers. Employers, many of which have been frozen in place while awaiting this decision, will have to move forward with plans to implement the provisions of PPACA that become effective in the near term (such as the uniform explanation of coverage) and in subsequent years (when plan design and coverage issues will have to be analyzed). Federal agencies charged with implementing PPACA already have issued regulatory guidance on certain provisions of the law, but much more guidance (including the refinement of previously issued interim guidance) is needed and anticipated. We will keep our clients and contacts aware of developments as they occur. There is much homework to do.

Today’s decision clearly does not mark the end of the battle in this country over health care reform. Congressional Republicans as well as Mitt Romney, the presumptive GOP nominee for president, have stated loudly and frequently that their goal is to repeal PPACA in its entirety. Supporters of PPACA generally concede that refinements to the law will be needed. Health care reform remains a main issue of contention in the fall’s presidential elections. Today’s decision is certain to have an impact on the debate.

We will review the Court’s opinion in detail (which, while lengthy, at least is not as long as the law itself), and will follow up with a more comprehensive analysis of its impact. In the interim, please contact us with any questions or comments you may have. Stay tuned.