Mcguirewoods Healthcare Reform Guide: Installment No. 25 - An Employee Benefits Perspective On The Supreme Court's Decision On The Healthcare Reform Law

"Scarcely any political question arises in the United States that is not resolved, sooner or later, into a judicial question." —Alexis de Tocqueville, Democracy in America (1835)

"The Federal Government does not have the power to order people to buy health insurance. Section 5000A would therefore be unconstitutional if read as a command. The Federal Government does have the power to impose a tax on those without health insurance. Section 5000A is therefore constitutional, because it can reasonably be read as a tax." —Chief Justice John Roberts, National Federation of Independent Business v. Sebelius (June 28, 2012).

This is the 25th in a series of WorkCite articles concerning the Patient Protection and Affordable Care Act and its companion statute, the Health Care and Education Reconciliation Act of 2010 (collectively, PPACA).

In lawsuits brought by 26 state attorneys general, two private citizens and the National Federation of Independent Business, the U.S. Supreme Court ruled yesterday, in a 5–4 decision written by Chief Justice Roberts, that the individual mandate of PPACA is within Congress's power under the Taxing Clause of the Constitution. National Federation of Independent Business v. Sebelius (June 28, 2012). Justices Breyer, Ginsburg, Kagan and Sotomayor joined in this part of the Court's ruling.

A majority of the Supreme Court (Roberts, Scalia, Alito, Thomas and Kennedy) concluded that Congress lacked authority to impose PPACA's individual mandate under the Commerce Clause. Nonetheless, Chief Justice Roberts joined with the four other justices to hold that PPACA's "penalty" on individuals who fail to purchase health insurance could be viewed as a "tax" authorized by the Constitution.

A majority of the Supreme Court also concluded that PPACA's expansion of Medicaid was constitutional so long as states are not denied existing federal funding if they fail to comply with the Medicaid expansion provisions under PPACA.

Individual Mandate Upheld as a Tax

Constitutional questions posed by PPACA arose even before the act was passed in March 2010. The first drafts of the legislation contained a tax on individuals who failed to purchase health insurance, based on Congress's broad authority under Article I, Section 8 of the Constitution to "lay and collect taxes." When sufficient votes could not be found for this tax, Congress instead enforced the individual mandate with a "penalty," relying upon its authority to "regulate Commerce among the...