Supreme Court Issues Decision On The Affordable Care Act - Immediate Implications For Health Care Industry

In the United States Supreme Court's historic decision announced today, the Patient Protection and Affordable Care Act ("ACA") has emerged substantially intact as the blueprint for national health reform in the coming years. The Court upheld the "individual mandate," preserving the key counterweight to the ACA's requirement that insurers guarantee the issue of health care coverage. The Court also upheld the ACA's Medicaid expansion, but ruled that the Secretary of Health and Human Services may not exercise the power granted her in the ACA to deny Medicaid funding to States choosing not to participate in the expansion. All of the remaining benefits and requirements of the ACA were left whole by the Court. An analysis of the constitutional law implications of the decision will be provided in our companion Alert tomorrow.

For health care industry stakeholders, the Court's affirmation of the constitutionality of the major elements of the ACA finally provides clarity and direction on the fate of federal health care reform. Although efforts to repeal the ACA may continue, and some states may decide not to implement the now-voluntary Medicaid expansion, federal regulators and many state governments will now push ahead with ACA implementation. Health care providers, insurers and managed care plans, pharmaceutical and device manufacturers and employers will proceed in their efforts to prepare for the reforms and comply with the numerous requirements of the law.

Medicaid Expansion

The most significant change in the implementation of federal health care reform likely to ensue from the Court's ruling today is the scope of the Medicaid expansion. The Court's decision represents a victory for States which argued that the mandatory nature of the expansion was unduly coercive. The ACA tied States' current participation in Medicaid to their expansion of Medicaid coverage to State residents under 133% of the federal poverty level. States that opted not to participate in the Medicaid expansion would have lost federal Medicaid funding. The Court concluded that the federal government is entitled to offer funds to entice States to expand Medicaid coverage, but could not condition State participation in the basic Medicaid program on implementation of Medicaid expansion.

The Court's decision is certain to have a notable impact on levels of Medicaid coverage in the years ahead. With Medicaid expansion now essentially optional, and not mandated, some States...