June 29, 2012 – The U.S. Supreme Court Thursday left standing most of President Barack Obama's health care overhaul, including the most controversial provision requiring virtually all Americans to have health insurance or pay a tax. In a 5 to 4 decision written by Chief Justice John G. Roberts, the court ruled the insurance provision of the Patient Protection and Affordable Care Act is a legitimate use of the government’s power of taxation and not an unconstitutional mandate. The landmark legislation was signed into law more than two years ago.
University of Houston Law Center health law experts, Professor Patricia Gray, director of research in the Health Law & Policy Institute, Assistant Professor Jessica Lind Mantel, co-director of the Institute, and Professor Seth J. Chandler, weighed in to explain the ruling, its impact and the outlook for the Affordable Care Act.
Q.) Specifically, what did the court rule today?
The Affordable Care Act emerged largely unscathed with the court finding that the individual mandate is constitutional. The court also upheld the ACA’s expansion of the Medicaid program, but did so only because the court prohibited the federal government from taking all Medicaid funding away from states that decline to participate in the expansion.
Roberts was joined in the majority opinion by Ruth Bader Ginsburg, Stephen G. Breyer, Sonia Sotomayor and Elena Kagan. Although the majority upheld the individual mandate, they disagreed among themselves as to whether the Commerce Clause or the Necessary and Proper Clause would support the mandate, but agreed that the individual mandate is a tax on people who do not get health insurance, and thus is a valid exercise of Congress’ power under the Constitution’s Taxing Clause. The majority also ruled that, because Congress termed the payment to enforce the mandate a “shared responsibility payment” to the federal government -- in effect a choice by those who decided not to purchase health insurance -- the Anti-Injunction Act, which would have barred the Court from deciding the case at all, did not apply.
The court’s ruling on the Medicaid expansion is of particular interest in Texas because state officials have voiced concerns about the cost of this expansion, even though the ACA provides that the federal government will cover 90 to 100 percent of the cost. The ruling offers states the ability to decide whether to “opt in” or “opt out” of the Medicaid expansion free from fear that the federal government will take away all their Medicaid funding if they opt out. States that choose to accept the federal funds covering the cost of the expansion of their Medicaid program will need to comply with conditions set forth in the ACA, but states may elect not to participate in the expansion without forfeiting their current levels of Medicaid funding from the federal government. Seven justices agreed that the Constitution prohibits Congress from depriving a state of all of its current Medicaid funding if the state refuses to expand its Medicaid program.
Q.) What does this decision mean for people already insured?
People who already have health insurance can keep their coverage. However, the ACA sets forth a range of new consumer protections that apply to existing plans. For example, individuals no longer have a co-payment for certain preventive services, such as vaccinations and screening tests, although their premiums have likely increased to pay for this “free” care. Similarly, individuals no longer can be required to obtain prior authorization before going to the emergency room. Children under the age of 26 can continue to receive coverage under their parents’ health plan, whether in school or not. Similarly, the lifetime caps on coverage are gone, ensuring that people who need extensive medical care have full coverage. Beginning in 2014, plans also can no longer impose annual limits on coverage, and must cap an individual or family’s out-of-pocket costs at amounts specified in the statute. Plans currently are prohibited from excluding coverage of children’s pre-existing conditions, with this prohibition extending to adults beginning in 2014. Women in the individual health insurance market will no longer be charged more for their health insurance. Individuals who purchase their insurance in the individual market also will be able to claim a tax credit similar to that claimed by businesses, and beginning in 2014 may be eligible for subsidy assistance to help them pay for their insurance. The ACA also addresses “post-claims” underwriting practices by prohibiting insurers from rescinding coverage for those who get very sick if the insurer discovers that the individual’s application included an unintentional and immaterial mistake. Contributions to flexible savings accounts and similar private savings accounts will be limited and the amount of medical expenses needed before one can take a tax deduction will increase.
Q.) What does this decision mean for Texans who don’t have health insurance?
The landscape will be very different for individuals lacking health insurance come 2014, particularly for those who desire health insurance but can’t afford it. Beginning in 2014, people without health insurance will have the option of purchasing insurance through health insurance exchanges, basically Internet-based markets for insurance. Plans participating in these exchanges must provide comprehensive coverage and cannot exclude pre-existing conditions. They also must offer their plans to all seekers, that is, they cannot reject an individual simply because they are high-risk. Plans participating in the exchanges generally cannot charge high-risk individuals a higher premium than healthier individuals, but may adjust premiums only for age, location, and smoking status. People with household incomes between 100 percent and 400 percent of the federal poverty limit also will be eligible for subsidies that help them pay for their health insurance premiums and cost-sharing. The ACA provides that each state should establish a health insurance exchange, with federal funds available to assist states in doing so. However, Texas elected not to accept the federal funds, and has taken no steps toward establishing a state-sponsored health insurance exchange. Should Texas fail to do so by November of this year, the federal government will step in and establish a federally-run health insurance exchange for Texas residents.
Many of the uninsured in Texas could be covered under an expansion of the Medicaid program should Texas elect to do so. Although the federal government will pay for most of the costs associated with this Medicaid expansion, Texas has rejected available federal funds to expand unemployment insurance and to create a health insurance exchange. If Texas fails to adopt an expansion of Medicaid coverage, it may create a Catch-22 for people with incomes less than 100 percent of federal poverty level, because they may be ineligible for the subsidies available for people who seek insurance through the exchange. Thus the poorest of the uninsured will be even less able to secure insurance in the private market.
Individuals who elect to forego health insurance will pay a tax that will ultimately rise to as much as 2.5 percent of their income, enforced by withholding the penalty from any income tax refund due the individual. The ACA provides for several limited exemptions to this tax penalty, and people whose income is too low for them to file an income tax return will not be subject to an enforcement action.
Q.) Are employers required to offer health insurance coverage to their employees?
Beginning in 2014, employers with more than 50 employees who work full time (more than 30 hours a week), must offer health insurance coverage that meets certain minimum benefit requirements as well as other health insurance reform requirements. If an employer chooses not to comply, the Act requires a penalty of between $2,000 and $3,000 per employee, depending on various details. Employers with fewer than 50 employees are not required to offer coverage, but are eligible for certain financial assistance in the form of tax credits if they do offer coverage.
Q.) When does this law take effect?
Some provisions are already in effect—prohibiting insurance denial for children with pre-existing conditions, authorizing coverage for children up to age 26 on their parents’ insurance, removal of the lifetime caps on coverage—but most of the important and expensive provisions will be phased in starting in 2014.
To schedule an interview with Professor Gray, Chandler or Mantel, please contact: Carrie Criado, Executive Director of Communications and Marketing, cacriado@Central.UH.EDU, 713.743.2184; or John Kling, Communications Manager, email@example.com , 713.743.8298.