Now that the U.S. Supreme Court has resolved the constitutionality of the Patient Protection and Affordable Health Care Act (aka ObamaCare), question arise as to what potential legal challenges may lay ahead. First, let’s sort out the major components of the Court’s opinion:
Upheld the highly controversial “individual mandate” part of the law, which requires most Americans to obtain “minimum essential” health insurance coverage by 2014 or face a penalty; and
Upheld the law’s Medicaid expansion but held that the federal government could not penalize states that refuse to go along with the expansion requirements by withdrawing existing Medicaid funds.
The individual mandate was by far the most hotly disputed provision in the law, and despite the odds and popular media’s predictions that it would be struck down, the Court, led by Chief Justice John Roberts in a 5-4 vote, upheld the provision as within Congress’s power under the Taxing Clause to the Constitution.
Interesting for a number of reasons, not the least of which that this was the Obama Administration’s third, back-up argument in support of the law. The first was that the law could be enacted under the Commerce Clause, and the second was that it was authorized under the “Necessary and Proper” Clause.
Roberts wrote in his opinion that Congress did not call the penalty a “tax,” but the label does not determine whether the payment can be viewed as an exercise of Congress’ taxing power. Roberts cited several factors supporting the view that the payment is a tax, including the fact that the Internal Revenue Service will collect it. He also said that, for most Americans, the amount due will be far less than the price of insurance.
Congress’ use of the taxing clause to encourage buying something is not new, Roberts wrote. Tax incentives already promote, for example, home purchases and professional educations, he said.
“The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax,” 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.”
So, as the dust settles, what can businesses expect? The law has a number of key dates that companies need to know. By January 1, 2014, insurers will be prohibited from discriminating against or charging higher rates for any individuals based on pre-existing medical conditions. That is sure to be an area where potential litigation may arise. In addition, by this date, the law will impose a $2,000 per employee tax penalty on employers with more than 50 employees who do not offer health insurance to their full-time workers.
Much remains to be sorted out and understood, but businesses and individuals should carefully review the law with their legal counsel and monitor these and other key compliance dates.