High Court to Rule on Health Reform Legality

November 15, 2011
Jill Wechsler

Jill Wechsler is ACT's Washington Editor

Applied Clinical Trials

Challenge to coverage mandate would undermine efforts to achieve universal coverage.

The US Supreme Court, as expected, will decide if key provisions of the Obama administration’s healthcare overhaul law violate the Constitution by exceeding the federal government’s power to regulate interstate commerce and to levy taxes. The key issue is whether Congress can require every American to purchase health insurance by 2014 or pay a penalty. State officials and other parties are challenging the constitutionality of the individual mandate provision in the Affordable Care Act (ACA), and differing legal rulings on the issue has brought it to the High Court for a final ruling.

The Justices indicated Nov. 14 that they will hear oral arguments in March, which would lead to a ruling on the case in June, just four months prior to the November presidential elections. Whether the Court regards the ACA as an illegal expansion of federal government power—as opponents claim—or a valid way to regulate commerce—will have a profound impact on the national political debate. The decision also is slated to shape the legacy of the Supreme Court under Chief Justice John Roberts.

Broader impact?
If the Supreme Court strikes down the individual mandate, it then has to decide if that also invalidates other portions–or all–of the ACA. The Justices agreed to consider the issue of “severability” whether the mandate is so closely linked to the rest of the reform law that all of it must be set aside. The Obama administration contends that most of the law should remain intact, but that the mandate would undermine requirements that insurers cover everyone, including individuals with pre-existing conditions.

A ruling that kills the mandate and other policies designed to broaden healthcare coverage could be disastrous for biopharmaceutical companies. Drug makers, as well as insurers and healthcare providers, supported the ACA as a way to expand coverage for some 30 million uninsured Americans so that they would have the means to access to healthcare services and treatments. In addition to penalizing individuals and employers for rejecting coverage, the reform law provides subsidies to help lower-income individuals purchase coverage and expands Medicaid programs to cover more of the uninsured. The promise of a much larger market for prescription drugs was considered a reasonable trade-off for pharmaceutical companies to pay millions in extra fees and to cover much of the cost of closing the Medicare “coverage gap.”

The Justices also will consider arguments from some states that the law’s expansion of Medicaid illegally coerces them to spend additional money. Medicaid supporters are particularly upset about this contention, pointing out that much of the cost of increased Medicaid coverage will be borne by the federal government.

The last topic on the docket is a more technical point:  whether an 1867 law prevents the government from challenging new taxes before they are collected. Although most parties maintain that this law does not apply to the ACA, one appeals court said that judicial review of the tax issue should wait until a fine is assessed, which would first occur in 2015. If the High Court agrees, all parties will be sorely disappointed, as that would delay a ruling on the larger constitutional issues for several years.

The Justices are allowing more than five hours to hear arguments on these issues, a remarkably long amount of time that reflects the national importance of the subject under debate.

The administration “is confident that the law will be upheld as constitutional,” predicted Health and Human Services secretary Kathleen Sebelius at a press briefing Nov. 14, 2011 to announce separate health reform initiatives. Many Supreme Court experts agree, based partly on comments from lower-court conservative jurists on the validity of the law.

Differing opinions
The case is before the Supreme Court because several federal Appeals Courts across the country have ruled differently on the mandate and other topics. Most recently, the DC Circuit Court of Appeals declared the mandate constitutional, as it fits the role of Congress under the Commerce Clause to “forge national solutions to national problems”–a term that includes the need to provide affordable, quality healthcare.

That followed a June decision by the Sixth Circuit Court of Appeals in Michigan also supporting the mandate. Here, a Bush-appointed conservative judge concurred  that “not every intrusive law is an unconstitutionally intrusive law.” Separately, the Fourth Circuit in Virginia dismissed two challenges to the health reform law, one on the basis that it was premature to rule because the mandate and related fees, or taxes, do not go into effect until 2014.  

However, the Eleventh Circuit Court in Atlanta declared in August that Congress exceeded its powers to regulate commerce in requiring individuals to buy health insurance. This case, brought by Florida and 25 other states plus the National Federation of Independent Business, provides the basis for the High Court deliberations. 

Political battle
Whatever the High Court decides, the issue will remain at the top of the political agenda through the coming year. In the recent November elections, Ohio voters adopted an amendment to their state constitution opposing the mandate for purchasing health insurance. The vote is largely symbolic, because an individual state cannot ignore a valid federal policy, and the Ohio action becomes moot if the Supreme Court rules against the mandate. But this action reflects widespread public opposition to the insurance purchase requirement and many other reform provisions.

Meanwhile, Republican White House hopefuls continue to rail against Obamacare in general, and the insurance mandate specifically. Every GOP presidential candidate has pledged to repeal PPACA and to enact less intrusive health reform policies. If the Court does not strike down all of PPACA, though, it will be difficult for Congress to kill the current reform program because of its many broadly supported provisions, and due to projections that it will reduce government healthcare spending.

Most experts consider wholesale repeal of the ACA unlikely. Even if the mandate and broader coverage requirements fall, provisions for establishing biosimilars and to support comparative effectiveness research are expected to remain. The program for establishing state-based exchanges to offer insurance also could survive, along with popular provisions designed to control insurance premiums increases.

One area of agreement by all parties is that speedy resolution of the constitutional issues by the High Court will provide a much-needed sense of predictability about health reform. A number of providers and hospital groups filed briefs asking the Justices to decide the mandate issue promptly in order to reduce uncertainty among healthcare providers about how to move forward with major changes in operations and policies.

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