Supreme Court Upholds The Affordable Care Act's Individual Mandate: What It Means For Employers And Plan Sponsors

The Supreme Court of the United States (the "Court") ruled today, in a 5-to-4 landmark decision,1 that the individual mandate under the Patient Protection and Affordable Care Act ("the Act") is constitutional, although it also held that certain Medicaid expansion provisions are unconstitutional. The Act's coverage mandates remain in effect and the implementation and administration of its various mandates will need to continue. Although the Act was upheld today, we expect that the legal challenges to healthcare reform are far from over.

Background and Procedural History

A variety of plaintiffs, including 26 states, challenged the constitutionality of the Act. The challengers argued that Congress exceeded its authority when it established the individual mandate, and that the Medicaid expansion provisions exceeded Congress' Spending Clause powers. With respect to the individual mandate, the plaintiffs argued that the Constitution does not grant Congress the power to require private citizens to buy a private product from a private enterprise. The Obama administration responded that Congress had the authority to establish this mandate under the power to regulate commerce (the "Commerce Clause") and the power to "lay and collect taxes" (the "Tax and Spend Clause"), each of which is set forth in Article I of the U.S. Constitution. As to Medicaid expansion, the challengers asserted that the Act unconstitutionally coerced states to expand Medicaid by threatening to withhold all federal Medicaid grants for non-compliance. The administration countered that the Medicaid expansion provisions were mere modifications of the existing program that offered financial inducements to comply with the new law. The lower courts generally divided along four lines: (i) the individual mandate and the entire Act was constitutional; (ii) the individual mandate was unconstitutional but severable from the rest of the Act; (iii) both the individual mandate and the entire law was unconstitutional; and (iv) the issue was not ripe for review because of the Anti-Injunction Act, which prohibits taxpayers from preemptively seeking to stop the government from assessing any tax before it is imposed.

The Supreme Court's Ruling

As noted, in a much anticipated decision, the Court upheld the Act as a constitutionally valid exercise of congressional power. There were four separate opinions on the various issues, with Chief Justice Roberts writing for the Court.

The Court upheld the...