June 28, 2012 the Supreme Court upheld the Patient Protection and Affordable Health Care Act (colloquially known as ObamaCare.)
What does this mean?
- Individuals who are not exempt must either purchase health insurance or pay “shared responsibility” to the Federal Government using their IRS forms (aka the Individual Mandate); this begins in 2014.
- Medicaid (for pregnant women, children, needy families, and the elderly) will be expanded.
- Individuals with pre-existing conditions may not be barred from purchasing health insurance.
- How did this happen and why did the Supreme Court uphold it?
First, one must understand how the case came to SCOTUS (the Supreme Court of the United States). When twenty-six states and individuals brought the case to the Federal District Court, it eventually trickled up into the Court of Appeals who ruled that all of the Affordable Health Care Act could be kept except the individual mandate. SCOTUS affirmed and reversed this decision in part.
The Court had considered the constitutionality of the Individual Mandate first under the Anti-Injunction Act. This act states that you cannot argue in court about a tax until AFTER you pay it. If the Court had agreed that the Anti-Injunction Act applied to this case, it would have been thrown out and not heard because no one has been required to pay the “shared responsibility” yet. However, the Court agreed that the Anti-Injunction Act does not apply because this is technically not a tax, but rather a penalty. If you filled out your taxes last year, you would recall there is indeed a line to list your penalties on the forms.
The Interstate Commerce Clause (ICC) allows the Federal Government to regulate any commerce activity that crosses state lines; this critical clause has allowed the Federal Government to make many decisions regarding activities that take place in the United States. However, the key to this is that the Affordable Health Care Act is essentially creating commerce by creating a market in which persons are compelled to purchase health insurance. The Court immediately threw out the idea, therefore, that the ICC could be applied to this prophesied commerce activity.
Leaning on the Necessary and Proper Clause, SCOTUS also declared the Necessary and Proper Clause was inapplicable because the individual mandate is neither necessary or proper.
So what allows the government to compel us to purchase health insurance unless we are exempt?
SCOTUS declared the Individual Mandate constitutional under the Taxing Clause, which states taxation is one of Congress’s powers. They ignored the fact that the Individual Mandate is technically a penalty and not a tax by relying on jurisprudence that stated penalties are within the scope of taxation. SCOTUS made clear that not purchasing health insurance is not “illegal” or “unlawful” but rather will have the consequence of paying a penalty to the IRS. Because sickness and injury is unpredictable, SCOTUS argued that everyone is in this market and since everyone is participating, those eligible are subject to the penalty. The Court reassures us, however, that there will be no “broccoli mandate” because health insurance is a unique product and subject to different regulations. Although the Supreme Court Justices may be at odds with the “wisdom or fairness” of the penalty, their role is only to uphold constitutional actions in an unbiased manner.
Regarding Medicaid expansion, the Court was concerned that states could be penalized. Historically, when states balk at the expansion of a program, the federal government counter-threatens to take away other funding, coercing the states to comply. SCOTUS considers the proposed changes, which alter the program to “meet the needs of the entire nonelderly population with income below 133 percent of poverty level” and serve as “universal health insurance coverage,” to be more than just a simple modification to Medicaid which is within the powers of the government under the Spending Clause. Thus, if states choose not to comply with the expansion, their current Medicaid funding will not be taken away.
Thus, the judgment of the Court of Appeals for the Eleventh Circuit is affirmed in part and reversed in part.
The Individual Mandate
In 2014 , if you do not purchase health insurance and are not exempt from doing so, you must either pay a penalty which is 2.5% of your income or $695, whichever is greater. However, this penalty cannot exceed the average premium that health insurance companies charge.
The Effects
Insurers who are now forced to accept those with costly pre-existing conditions will raise premiums across the board in order to afford these new individuals. Congress attempted to prevent this by compelling individuals to purchase health insurance so that the pool of premium-payers would be larger and offset the cost of those with pre-existing conditions. Experts estimate 4 million people each year will pay a penalty to the IRS rather than purchase insurance.
What do you think the effects will be?