SUPREME COURT FINDS OBAMACARE UNCONSTITUTIONAL

By:  Alan M. Levy

In what was probably the most eagerly-awaited Supreme Court decision since Bush v. Gore, a majority of Chief Justice John Roberts and the Court’s four liberals have held that the “individual mandate” in the Patient Protection and Affordable Care Act (often called “Obamacare”) is constitutional under Congress’s taxing authority.  National Federation of Independent Business, et al. v. Sebelius, et al., 567 U.S. ____, Case No. 11-393 (6/28/12). The law’s supporters have consistently argued that the mandate is necessary so that healthy people share in the costs of the risk pool, and people do not delay their enrollment until already sick because the law prohibits exclusion of preexisting conditions.

In reaching this result, Chief Justice Roberts said that the Anti-Injunction Act (which prevents restraint of a tax law until the tax is collected) does not apply because Congress labeled the mandate as a “penalty,” not a “tax”.  The Commerce Clause was also held inapplicable because this law compels individuals to become active in commerce by purchasing a product rather than regulates how commerce is conducted.

Because the Court is required, if at all possible, to interpret every Congressional action in a way that makes it constitutional, the Chief Justice then went on to rule that the mandate “may be reasonably characterized as a tax,” noting that it is “not so high that there is really no choice but to buy health insurance,” is collected by IRS, and is not a punishment, but an alternative.  This “tax on going without health insurance” was found permissible.

Finally, the Chief Justice and two of the liberals joined the dissenters in ruling that the expansion of Medicaid by each state is unconstitutional insofar as it takes away federal support for other parts of the state’s Medicaid program if the state declines such expansion.  That is, a state cannot be threatened with loss of support for part of its current Medicaid program because it declined to expand that program to include all adults with income of less than 133% of the federal poverty level.

The transition from “penalty” to “tax” in two different contexts will probably raise questions and incite criticism from the opponents of the law.  Further, this finding of constitutionality does not prevent a future Congressional action to modify or eliminate the statute.  However, some popular aspects of the law are already in place, (e.g., dependent care until age 26, elimination of caps on lifetime maximum benefits, phase out of pre-existing conditions) while the mandate itself is not due to take effect until 2014.  Further debate and possible amendment are inevitable.

Lindner & Marsack will continue to monitor the evolution of this statute and other decisions, and will report developments to you as they occur.  If you have any questions, please contact Alan Levy.

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