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Healthcare Reform (aka “Obamacare”) Goes to the Supreme Court – Summary of March 26th -28th

April 02, 2012  |   Posted by :   |   Health Insurance   |   13 Comments»

by Michael Grace

Health Reform Goes to the Supreme Court

By Blue Shield of CA


The U.S. Supreme Court heard three days of highly anticipated oral arguments pertaining to the Affordable Care Act (March 26 – 28, 2012).

What is at issue?

Challenging the ACA are 26 states that filed suits in the lower courts, as well as the National Federation of Independent Businesses (NFIB) and four individual plaintiffs. During the oral arguments, four issues were heard:
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1)Whether the Supreme Court should decide the case before the mandate takes effect in 2014
2)The constitutionality of the Individual Mandate (which requires individuals to purchase insurance, with a penalty assessed for non-compliance)
3)The “severability” of the Individual Mandate from the rest of the law
4)The constitutionality of the expansion of the Medicaid program

Summary of Oral Arguments in the Supreme Court*

March 26, 2012
Monday’s session focused on whether the Court would rule on this case in 2012. Arguments focused on a 19th century law called the Anti-Injunction Act (AIA) which bars a court from hearing a challenge to a tax until it is assessed. Since the Individual Mandate provision is enforced with a penalty, the question before the Court was whether the penalty should be considered a tax. If the Supreme Court finds that the AIA applies, it would not be able to hear the case and rule on the constitutionality of the Individual Mandate until at least 2015, when the penalty is collected along with the 2014 income taxes.

Several Justices raised points in favor of deciding that the AIA is not a bar to deciding the rest of the case this term. A ruling is expected by June.

http://www.supremecourt.gov/oral_arguments/argument_transcripts/11-398-Monday.pdf Download (PDF, 16KB) the transcript of Mondays proceedings.

March 27, 2012
On Tuesday, the Supreme Court heard arguments on the constitutionality of the Individual Mandate – what many consider to be the heart of the issue.

Solicitor General Donald Verrilli presented arguments defending the ACA and the Individual Mandate for the following reasons:

1)The Individual Mandate is authorized by Congress’s Commerce Clause, the Necessary and Proper Clause and the Taxing power.
2)The Individual Mandate is necessary to support the healthcare market reforms passed by Congress.
3)Congress has the power to impose an insurance requirement or other penalties at the time healthcare services are consumed (i.e., at the emergency room). Requiring the purchase of insurance before it is needed through the mandate is just a matter of Congress regulating the timing of the requirement.
4)The penalty associated with the Individual Mandate is found in the Internal Revenue Code, and meets the legal tests of a constitutional exercise of the taxing power as identified in case law.

Paul Clement, a former Solicitor General who represents the 26 states, and Michael Carvin, representing the NFIB and individual plaintiffs, argued that the Individual Mandate exceeds the limits of Congressional power for the following reasons:

1)If the mandate is permissible under the Commerce Clause, there is no limit on the Federal Government’s power to compel Americans to purchase a variety of products, including burial insurance, gym memberships, etc.

2)Congress should not be allowed to compel the purchase of a product to better regulate that product.

Justices Ginsburg, Kagen, Sotomayor and Breyer provided no indication by their questions that they disputed Congress’ regulatory authority to enforce the Individual Mandate.

Justice Kennedy and Chief Justice Roberts questioned the arguments of both sides, and seemed concerned about ensuring that ruling in favor of the mandate would not dramatically increase the power of the Federal government.

Justice Scalia asked pointed questions of Solicitor General Verrilli on the limiting principles for federal power, but did not ask the plaintiffs’ attorneys questions that would indicate he would support the mandate.

http://www.supremecourt.gov/oral_arguments/argument_transcripts/11-398-Tuesday.pdf Download (PDF, 16KB) the transcript of Tuesday’s proceedings.

March 28, 2012 (Morning)
Wednesday morning’s oral arguments at the Supreme Court focused on a discussion of the Individual Mandate’s “severability” – whether, if the mandate is determined to be unconstitutional, other parts of the law, such as the individual insurance market reforms and the employer responsibility provisions, must also be invalidated.

The attorneys for the plaintiffs asserted that if the Individual Mandate is unconstitutional, the entire law should be nullified. The Government asserted that if the Individual Mandate is to be struck down, only certain healthcare insurance market reforms (such as the “guarantee issue” requirements and prohibitions on preexisting conditions) should be voided while the rest of the law should be left to stand.

Most of the justices expressed a reluctance to scour the entire 2,700-page bill to determine which provisions should be severed and which provisions should remain if the Individual Mandate were removed. However, it seemed that the Justices agreed that the mandate was closely tied to the community rating and guaranteed issue provisions. This raised the possibility that the entire healthcare law could fall if the mandate was found to be unconstitutional, which was an unexpected possibility at the beginning of the case.

March 28, 2012 (Afternoon)
The Supreme Court concluded its three days of oral arguments Wednesday afternoon by hearing arguments on the issue of the Medicaid expansion, under which Medicaid eligibility would be granted to all residents earning less than 133 percent of the federal poverty level.

The attorney for the 26 states, Mr. Clement, argued that the states have no choice but to accept the Medicaid expansion because they can’t afford to have their entire participation in the Medicaid program put at risk, and that the federal funding provided for this expansion coerces compliance by the states.

Solicitor General Verrilli argued that under the existing case law, the funding merely encourages compliance and is not unconstitutionally coercive. Mr. Verrilli was asked by several Justices what would be the limits of the Secretary of Health and Human Services discretion and whether the Secretary had or would exercise this power.

Both sides faced extensive inquiry on the fundamental question of whether such heavy reliance on federal funding is implicitly coercive. The justices were surprisingly receptive to the plaintiff’s argument that the law’s Medicaid provisions unconstitutionally coerce states to expand the program, while no lower court had found this to be true.

http://www.supremecourt.gov/oral_arguments/argument_transcripts/11-393.pdf Download (PDF, 16KB) the transcript of Wednesday’s proceedings.

What’s next?
The Supreme Court is expected to issue its decision on these important issues at the end of June. We will keep you informed on new developments.