The Affordable Care Act was immediately challenged in federal courts following its passage in March 2010. In a historic June 28, 2012, ruling, the U.S. Supreme Court upheld most of the act.
The Supreme Court's Decision
The court's June 28, 2012 ruling on the constitutionality of the Affordable Care Act (ACA) addressed four key questions:
Is the individual mandate to purchase healthcare insurance constitutional?
Yes - but not under Congress's commerce clause powers. Congress cannot compel individuals to enter the stream of commerce that Congress wishes to regulate.
Instead, a majority of the court held that the penalty (or "shared responsibility payment") assessed on individuals who decide not to purchase insurance is a legitimate exercise of Congress's constitutional taxing powers.
Given that the penalty is a tax, should the Anti-Injunction Act prevent challenges to the Affordable Care Act until the tax has been collected?
No. The Anti-Injunction Act, passed in 1867, says that a taxpayer who protests a tax must first pay the tax before challenging it in court. The act does not apply in this case, however, because Congress intentionally used the word "penalty" instead of "tax" to describe the ACA's shared responsibility payment. This signaled Congress's intent that the Anti-Injunction Act should not apply in this case.
Is the Affordable Care Act's expansion of Medicaid constitutional?
No. The federal government can use incentives to encourage states to take actions that otherwise would not be within the range of federal power. But the threat to withhold all of a state's Medicaid money for failure to expand Medicaid eligibility was "a gun to the head of the states" that tipped the Medicaid expansion from a federal effort to influence state action into a federal effort to coerce the states to take action.
Are provisions found unconstitutional severable?
Yes. Medicaid expansion was the only provision found unconstitutional. The court's decision on Medicaid expansion modified the Social Security Act, which contains a severability clause. Severability clauses are common features in federal laws. They say that if any provision of a law is found unconstitutional, it can be "severed" from the law, with other provisions remaining in force. Because the ACA did not have a severability clause, the court heard arguments on whether provisions that were being challenged could be severed, or if they were so central to the ACA that it could not stand without them.
Read the Court's decision.
Additional Resources
On-demand webinar: Listen to "Assessing the Impact of the ACA Supreme Court Decision," featuring HFMA President and CEO Joe Fifer and HFMA healthcare financial practices experts.
HFMA members' reactions: Get first-hand reaction to the decision from healthcare finance professionals.
Federal budgetary impacts: Read the Congressional Budget Office's analysis of the decision's impact on the federal budget.
Publication Date: Monday, August 06, 2012