Supreme Court

In upholding the individual mandate, Chief Justice Roberts explained that the federal government does not have the power to order people to buy insurance, but does have the power to impose a tax on those who choose to go without insurance.

Navigating health reform

Individual Mandate and Most of Health Reform Upheld

  • 6/28/2012

Individual Mandate and Most of Health Reform Upheld

The United States Supreme Court ruled on June 28 that the individual mandate that all Americans have minimum essential health insurance coverage or pay a penalty is constitutional and as such, the entire Patient Protection and Affordable Care Act (PPACA) remains the law of the land with the exception of the Medicaid expansion initiative.

The majority opinion (5-4 vote) was written by Chief Justice John Roberts, who was appointed by President George W. Bush, siding with the Democrat-appointed justices Kagan, Sotomayor, Breyer, and Bader Ginsburg.

In upholding the individual mandate, Chief Justice Roberts explained that the federal government does not have the power to order people to buy insurance, but does have the power to impose a tax on those who choose to go without coverage. He also clearly states that failure to purchase insurance under the law does not result in criminal penalties for the behavior.

"There still may be changes in some of the health care reform law," says Nancy Rehkamp, Director of Health Innovations at CliftonLarsonAllen, "but the Supreme Court decision simply means that many more of us must step up and define how our organizations are going to move forward."

Chief Justice Roberts wrote:

… the mandate is not a legal command to buy insurance. Rather, it makes going without insurance just another thing the Government taxes, like buying gasoline or earning income. And if the mandate is in effect just a tax hike on certain taxpayers who do not have health insurance, it may be within Congress’s constitutional power to tax.

On the Medicaid expansion issue, it appears the Supreme Court said the government does have the authority to expand Medicaid, but cannot penalize states by withholding all of their Medicaid funds if states choose not to expand their Medicaid program to individuals earning up to 133 percent of the Federal Poverty Level (FPL).

Key implications

Employer perspective: State health insurance exchanges will need to be established by January 2013. Beginning in 2014, employers with 50 or more full-time equivalent employees will need to offer full-time workers affordable insurance options or incur annual penalties of $2,000 – 3,000 per employee. Employers should begin assessing now how this aspect of the law may impact their bottom line. The Health Insurance Penalty calculator from CliftonLarsonAllen can provide this information.

Health care provider perspective: With the PPACA intact, payment reforms such as value-based paymentaccountable care organizations, and bundled payments will continue to move ahead as will other Medicare payment reform provisions that will be phased in over the next few years. Managed Medicaid, long-term care, and dual integration programs will move forward. Additional opportunities to participate in demonstrations, pilots, and grant programs to test new payment and care delivery models should continue through the Center for Medicare and Medicaid Innovation.

Medicaid expansion: The majority opinion on this issue states that Congress is not precluded from offering funds to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. However, Congress cannot penalize states that choose not to participate. Given this decision, it is possible that the 26 states who contested this issue may not add individuals to their Medicaid rolls, resulting in the continuation of an uninsured group, charity care, and a potential need for Disproportionate Share Hospital payments.

Individual perspective: Beginning January 1, 2014, individuals will be required to obtain "minimum essential" health care coverage or pay a penalty when they file their income taxes in 2015. Additionally, health insurers will not be able to deny people coverage if they have pre-existing conditions. Premium tax credits and cost-sharing subsidies will be made available to individuals earning between 100-400 percent FPL to help them purchase insurance and make co-payments and deductibles. Adult children can remain on their parent’s health plan up to age 26. These are only a sample of the PPACA initiatives that will impact individuals.

There are many nuances in the 193-page opinion and court transcript summarizing the justices' opinions. CliftonLarsonAllen health care professionals will be combing through these details and providing a more thorough analysis in the coming weeks.

Nicole Fallon, Health Care Manager Consultant or 612-376-4843