Supreme Court Upholds PPACA

By Bruce Howell, Schwabe Williamson & Wyatt, PC, Portland, OR

AuthorOver the course of the first two years of President Obama’s term in office, healthcare reform was high on his agenda. Thus, in December of 2009, the United States Senate passed healthcare legislation and sent it to the United States House of Representatives consideration.  The House of Representatives debated over the course of the first three months of the new year and, in March of 2010, the legislation was passed and sent to President Obama for his signature.

The signing into law of the Patient Protection and Affordable Care Act of 2010 (“PPACA” or the “Act”) brought an instantaneous response from attorneys general of several states and other groups questioning the constitutionality of certain provisions of the Act.  Suits were filed in Florida, Michigan, Ohio, Virginia, and the District of Columbia seeking to overturn the Act on, inter alia, the grounds that the provisions which mandated the purchase of health insurance by individuals (the “Individual Mandate”) violated provisions of the United States Constitution, specifically the Commerce Clause.

On March 26, 27 and 28, 2012, the United States Supreme heard arguments on the several cases that had arisen from the various actions filed. 

In a 5-4 decision of June 28, 2012, the Supreme Court addressed four issues as follows:

1.  The Tax Anti-Injunction Issue

The Supreme Court, in its opinion delivered by Chief Justice Roberts, concluded that, for the purposes of the Tax Anti-Injunction Act, such Act did not apply to PPACA because the requirement to pay for not having health insurance under the Individual Mandate was a “penalty” rather than a “tax.”  It is important to note that this distinction focused on the Anti-Injunction Act language and not upon the taxing power in the Constitution. 

2.  The Individual Mandate Issue

The Court held that the individual mandate violated the provisions of the Commerce Clause and the Necessary and Proper clause in that Congress has the power to “regulate” an existing business or activity, but not to create a new business or activity.  Thus, the Individual Mandate was held unconstitutional under the foregoing clauses. 

However, the Court upheld the individual mandate under the taxing authority given to Congress under the Constitution.  The taxing authority is applied even though the Individual Mandate was cast as involving a “penalty” and the Congress clearly had stated that the penalty was not a tax. Justice Roberts, while stating for purposes of the Anti Injunction Act that the requirement to pay for not having insurance was a “penalty” and not a “tax”, decided that what Congress had really meant by this legislation was to create a taxing scheme under the Individual Mandate and, thus, the choice of terms under constitutional analysis did not preclude the majority from deciding that Congress had the power to raise taxes and pass this legislation.

3.  The Severability Issue

Since the mandate was upheld the issue on whether it could be severed from the rest of the PPACA was declared moot.

4.  The Medicaid Issue

The requirement of states to participate in Medicaid expansion programs or to have their Medicaid funds withheld was declared to be unconstitutional and an overreaching by the Federal Government.  However, the states may voluntarily participate in this funding. 

The impact of this decision, both legally and politically, will resound for years to come. A full analysis of the Supreme Court’s decision will be forthcoming in the ABA’s eSource in July and The Health Lawyer in August.

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