Client Alert: The Affordable Care Act is Back Before the Supreme Court – What's This Fight All About?

Adopted back in 2010, then immediately challenged in courts across the country, the Patient Protection and Affordable Care Act, is back in the news due to a new case being heard by the U.S. Supreme Court. After all these years, what is the current challenge all about – and what is it likely to mean for you?

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Fundamentally, the Affordable Care Act (ACA) was intended to make health insurance more affordable and available to all citizens by, among other things, requiring that insurers make coverage available to everyone, even if they had pre-existing conditions, and by setting rates on a community-wide basis, rather than rates that reflected the individualized risk that a given insured, with those pre-existing conditions, might warrant. At the time, it was understood that, in such an insurance world, “healthy” individuals could be expected to delay buying insurance (and contributing money into the insurance pool) until they actually anticipated needing it. Insurers objected, arguing that this was like being forced to sell auto insurance to drivers after they had crashed their cars. As part of the grand compromise that was done at the time, in order to assuage this issue, it was decided to compel all individuals to buy health insurance, or face a penalty – thus, anticipating that the insurance pool would be full and that “healthy” individuals would be contributing towards the expenses of the sick.

The court challenge to the program which reached the Supreme Court asked the question, “On what Constitutional basis can Congress purport to pass a law that says everyone must buy insurance, or else?” It was urged that Congress had express authority to “regulate commerce” under the Constitution – but a majority of the Court eventually concluded that this meant regulating commerce that was already underway – not forcing an individual to engage in commerce in the first place! A majority of the Court focused on the notion that the requirement to buy insurance was enforced by way of a “penalty” – which the Court recharacterized as being a “tax” – and that Congress clearly had very broad authority in the Constitution for enacting taxes. Hence, the ACA was found to be authorized by the Constitution, because the individual mandate was a taxation program. [Curiously, the Court, in the same decision, needed to conclude that the law was not a tax, for procedural purposes, or due to a technicality, the case could not have proceeded at all.]

Fast forward to 2017 with a new Administration; by December 2017, while attempts to repeal the ACA failed, a law was passed that said that the penalty/tax for not buying health insurance was reset to zero. Court challenges followed, culminating in the case which the Supreme Court has now agreed to consider; and the Administration makes this argument:

The Court previously said that a law could be passed to compel someone to buy insurance as part of an overall plan that was enforced by way of a “tax,” because Congress clearly has Constitutional authority to enact taxes; but, if the amount of the “tax” is changed from, say $695 per person, to $0, it is, by definition, no longer a tax; and, if it is no longer a tax, then the justification which the Court came up with for saving the ACA back in 2012 evaporates.

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Why does this matter to you?

The lower court judge who first heard the case agreed that, once the penalty was reset to zero, it could not be deemed a tax, and the prior teaching of the Supreme Court compelled the conclusion that the individual mandate was no longer enforceable. But, recall that the individual mandate was inserted as part of an overall scheme/plan that supported the requirements against pre-existing conditions and rates focused on individuals – the trial court held that these never would have been enacted without the individual mandate, so if one piece is invalid, they all become unenforceable.

On appeal, the court of appeals agreed that a $0 penalty did not amount to a tax, and, thus, could not justify the Constitutionality of the individual mandate, but it left open for another day the issue of what other parts of the ACA would continue to stand or fall as a result.

In the brief filed with the Supreme Court on Thursday, the Administration urges that, at the very least, the ACA’s requirements for guaranteed issuance to all who apply and for a community-based rating system must be found unenforceable, as being integral parts of the individual mandate. But, beyond that, the Administration argues that, if those provisions of the ACA cannot be enforced, none of the rest of the provisions can either. Specifically, the insurance exchanges, the mandatory employer coverage, limits on coverage, and coverage for dependents are all, the Administration contends, integral parts of the same plan/scheme – without an enforceable individual enrollment mandate, all the assumptions made about being able to operate a national insurance system cost-effectively fail as well.

In short, if the Court accepts all the Administration’s positions, all of the ACA could still be deemed unenforceable, including the employer mandate. 

As a practical matter, it seems difficult to imagine that the Court, having already found the Statute lawful would now turn the program upside down after ten years. One way through the “logic” of the Government’s position could be to hold that, since Congress changed the penalty but left the entire balance of the program undisturbed, that reflected some more recent intention that the program would remain enforceable (perhaps regardless of the original intent). Since arguments have not yet been scheduled by the Court, it will likely be another year before we have the final answer.