American Health Line

U.S. Supreme Court Upholds Federal Health Reform Law, Decides Individual Mandate Can Stand as a Tax

Topics: Health Care Reform, Insurance, Individual Mandate, Legal Issues, Medicaid

June 28, 2012

The U.S. Supreme Court on Thursday, in a 5-4 ruling, upheld the federal health reform law's individual mandate, reaffirming the law's requirement that most U.S. residents must purchase health insurance, the Washington Post reports (Barnes/Aizenman, Washington Post, 6/28).

Chief Justice John Roberts authored the majority opinion, which garnered the support of the high court's four liberal justices (Haberkorn, Politico, 6/28).

Roberts noted that the "[health reform law]'s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax" and is therefore constitutional. He wrote, "Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness" (Stempel/Vicini, Reuters, 6/28). "Simply put, Congress may tax and spend. ... The federal government may enact a tax on an activity that it cannot authorize, forbid or otherwise control," Roberts wrote (Politico, 6/28).

The majority also affirmed the constitutionality of the Medicaid expansion provision in the law, which would require states to extend coverage to adults with incomes up to 133% of the federal poverty level beginning in 2014. However, the justices struck down the provision that would have allowed the federal government to withhold existing Medicaid funding if the states failed to comply with the expansion (Washington Post, 6/28). "The states are given no choice in this case. They must either accept a basic change in the nature of Medicaid or risk losing all Medicaid funding," Roberts noted (Savage, Los Angeles Times, 6/28).

He added, "The court today limits the financial pressure the secretary may apply to induce states to accept the terms of the Medicaid expansion," stating that "[a]s a practical matter, that means states may now choose to reject the expansion; that is the whole point. But that does not mean all or even any will" (Politico, 6/28).

Kennedy Joins in Dissenting Opinion Against Overhaul

In the dissent, Justices Anthony Kennedy, Antonin Scalia, Clarence Thomas and Samuel Alito said the entire health reform law should have been struck down.

The law "exceeds federal power both in mandating the purchase of health insurance and in denying nonconsenting states all Medicaid funding," Kennedy wrote in the dissent (Sherman, AP/San Francisco Chronicle, 6/28).

Kennedy continued, "These parts of the Act are central to its design and operation, and all the Act's other provisions would not have been enacted without them. In our view it must follow that the entire statute is inoperative" (SCOTUSblog, 6/28).

How Health Reform Ended Up Before the U.S. Supreme Court

The Affordable Care Act made its way up to the Supreme Court after several lawsuits were filed against the health reform law after it was enacted in March 2010. The Supreme Court last fall agreed to take up the multistate lawsuit, as it is widely known. The suit was filed by former Florida Attorney General Bill McCollum (R) and gained the support of mostly Republican governors and attorneys general from 25 other states, along with the National Federation of Independent Business and two individuals.

The lawsuit argued that the overhaul's individual coverage mandate exceeds Congress' power to regulate interstate commerce, and the provision of the law requiring states to expand Medicaid coverage to adults with incomes up to 133% of the federal poverty level is unconstitutional and "coercive."

A three-judge panel for the 11th U.S. Circuit Court of Appeals in Atlanta in August 2011 ruled that the individual mandate is unconstitutional. The 11th Circuit court was the first federal appellate court to rule against any part of the law. The judges, in a 2-1 ruling, struck down the individual mandate but left the Medicaid expansion and other portions of the law intact.

-- compiled by Santosh Rao, associate editor