June 28, 2012 - This morning the Supreme Court
released its decision regarding the Obama administration's
healthcare reform legislation. The Court has decided that the
individual mandate of the Affordable Care Act, or the ACA, is
constitutional. The Court also addressed the law's Medicaid
expansion, and limited Congress's ability to withhold federal
funding from participating states. The rest of the ACA remains
intact and is the law of the land.
The Individual Mandate Survives
Chief Justice Roberts, writing for the majority, declined to
strike down the ACA's most controversial provision–
the requirement that most Americans buy health insurance by 2014 or
pay a penalty. The individual mandate garnered much attention in
the months leading up to the decision. Today, the Court held that
the measure is proper pursuant to Congress's power to tax, but
not under its ability to regulate interstate commerce.
Over the past few months, analysts focused on the Court's
interpretation of the scope of Congress's constitutional
commerce power. The Chief Justice determined that the mandate went
too far by regulating inactivity, i.e. the commerce clause permits
regulation of activity, but Congress cannot require it. He joined
four other justices in the conclusion that the mandate must survive
the Court's scrutiny as a constitutional exercise of the
federal government's taxing authority.
Under the ACA, health plans and insurers cannot deny coverage
based on preexisting conditions or charge different rates based on
a person's health status. If the Court had deemed the
individual mandate unconstitutional, it might have also struck down
these measures to forestall potential premium increases and
systemic instability. In that scenario, uncertainty –
pending further federal and state legislative action –
would have loomed over the industry.
Politically popular provisions, including parents' right to
cover children until they turn twenty-six, were also saved by the
Court's decision. Over the past few weeks, some of the
nation's insurers announced their intent to voluntarily
preserve some of the ACA's more widely-supported measures.
After today's decision, they must do so.
The Medicaid Expansion is Not Mandatory
The Court also addressed the Medicaid expansion that would have
added roughly 17 million people to its rolls. Under the ACA,
Congress was empowered to penalize those states not participating
in the expansion by withholding each nonparticipating state's
total Medicaid funding. Chief Justice Roberts determined that such
a broad denial, characterized as so coercive as to be a "gun
to the head," was not permissible.
In practice, this means that the Medicaid expansion is available
to any state that is willing to join. Participating states must
then meet the expansion's requirements, or face withholding of
the enhanced federal funds associated with the expansion. States
that currently participate in Medicaid but do not wish to join the
expansion are free to decline it. They may continue as before
without losing federal money. States not participating in the
Medicaid expansion are ineligible only for the increased funding
that is available to states that opt-in to the expansion.
This advisory was prepared by Maria Buckley, a member of
the Business Department and the Life Sciences practice group at
Nutter McClennen & Fish LLP. She was assisted on the drafting
of this advisory by Nutter summer associate Andrew
This update is for information purposes only and should not be
construed as legal advice on any specific facts or circumstances.
Under the rules of the Supreme Judicial Court of Massachusetts,
this material may be considered as advertising.
This update is for information purposes only and should not
be construed as legal advice on any specific facts or
circumstances. Under the rules of the Supreme Judicial Court of
Massachusetts, this material may be considered as
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