Supreme Court Upholds Constitutionality Of Centerpiece Of Health Care Reform

In the case known as National Federation of Independent Business v. Sebelius, the Supreme Court upheld the constitutionality of the centerpiece of the Patient Protection and Affordable Care Act of 2010 – the so-called “individual mandate,” which requires individuals to purchase a health insurance policy providing a minimum level of coverage or to pay a penalty tax.

The Court’s decision is a complicated one involving two different constitutional provisions and a shifting alignment of the Court’s nine justices. The core question was whether Congress had the authority to enact the “individual mandate.” For Congress to have the authority to enact a statute, it must act under one of the Constitution’s various clauses giving Congress power.

The proponents of the individual mandate pointed to two Constitutional grants of authority to Congress – the authority to regulate interstate commerce, and the authority to levy taxes. The Interstate Commerce Clause, found in Article I, Section 8 of the Constitution, authorizes Congress to “regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” The Taxation Clause, also found in Article I, Section 8, gives Congress the authority to “lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States.”

A third clause in Article I, Section 8 of the Constitution hovers in the background in all cases involving the authority of Congress. That clause, known as the “necessary and proper” clause, authorizes Congress to “make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers.” The Supreme Court has long read this provision to give Congress great latitude in exercising its powers.

Against that backdrop, five of the Court’s nine justices agreed that Congress did have the authority under the Taxation Clause to impose the individual mandate. Writing for a five-judge majority, Chief Justice Roberts wrote that “it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance. Such legislation is within Congress’s power to tax.”

Justice Roberts, a Republican appointee and normally one of the Court’s most conservative judges, was joined in his opinion on the Taxation Clause by the Court’s four Democratic appointees – Justices Ruth Bader Ginsburg, Stephen Breyer, Sonia Sotomayor and Elena Kagan. The other four Republican appointees – Justices Clarence Thomas, Antonin Scalia, Anthony Kennedy, and Samuel Alito – dissented from Justice Roberts’ conclusion about the Taxation Clause. In an opinion written by Justice Scalia, the four justices criticized the individual mandate as “a massive state-administered federal welfare program.”

Normally, this is where the Supreme Court’s decision would end. Because the Court found that Congress did have the authority to enact the individual mandate, it would not go on to address the now-academic question of whether Congress also had the power to enact the individual mandate under the Interstate Commerce Clause.

However, Justice Roberts felt it appropriate to also write that he did not believe the Interstate Commerce Clause authorized the individual mandate. In his judgment, “the individual mandate cannot be upheld as an exercise of Congress’s power under the Commerce Clause. That Clause authorizes Congress to regulate interstate commerce, not to order individuals to engage in it.” The four other Republican appointees joined in this conclusion, and the four Democratic appointees disagreed with it. In a concurring opinion written by Justice Ginsburg, the four Democratic appointees offered that “beyond dispute, Congress had a rational basis for concluding that the uninsured, as a class, substantially affect interstate commerce. Those without insurance consume billions of dollars of health-care products and services each year. Not only do those without insurance consume a large amount of health care each year; critically, their inability to pay for a significant portion of that consumption drives up market prices, foists costs on other consumers, and reduces market efficiency and stability.”

In a separate portion of his opinion, Justice Roberts sided with the four Republican appointees to find illegal the portion of the health care reform law that would have expanded Medicaid coverage so that it includes low-income adults up to 133 percent of the poverty line. Under the law, the federal government would have covered the initial costs of the expansion, but eventually states that did not provide the benefits would have lost their existing Medicaid funding. Justice Roberts found this requirement the equivalent of “coercion.”

Where does this all leave us? Because five justices found the individual mandate to be within Congress’ taxing authority, it was upheld and will go into effect in 2014. The so-called “Cadillac Tax,” which subjects insurance plans costing more than $27,500 a year to a 40% excise tax, will almost surely go into effect in 2018 unless it is amended by Congress.

What is likely to be the impact of the Court’s decision on public safety bargaining? Almost all experts agree that the individual mandate will reduce health insurance costs for those who are presently covered. Currently, uninsured individuals have a right to receive catastrophic health care, with the costs of that care borne by the entire health care system. That has translated to higher premiums for insured individuals.

With the individual mandate, millions of formerly uninsured individuals will now be required to purchase health insurance or pay a penalty. That means that the rates for presently-insured individuals should go down, or at least not increase as fast. There are almost as many estimates of the impact on rates as there are health care experts, but a decline of 2.5 to 5.0% seems to be the most common prediction.