Supreme Court to Hear State Appeals on Affordable Care Act

The U.S. Supreme Court announced Monday that it will decide whether President Barack Obama’s landmark legislation, the Patient Protection and Affordable Care Act, is constitutional. The decision comes after 28 states filed lawsuits regarding certain provisions of the law. The case, Florida et al v. United States Department of Health and Human Services, was filed in March 2010 by Florida and 25 additional states joined the suit.

In broad terms, this case challenges two major components of the Affordable Care Act: the expansion of Medicaid and the law’s provision requiring individuals to purchase insurance, known as the individual mandate. One of the more broad goals of the Affordable Care Act is to insure nearly everyone in the country, primarily by providing incentives for businesses to insure their employees and expanding entitlement programs to insure the unemployed, retirees and minors. The law also aims to deter people from not obtaining coverage by fining larger businesses that do not insure employees, as well as some individuals. This, proponents argue, will drive down the cost of health care for the federal government, states, businesses and individuals.

The legal challenge to Medicaid expansion is the first of its kind. Some states claim that expanding the program to insure everyone below 134 percent of the federal poverty line will bankrupt already fiscally strapped states, despite the fact that the federal government will pay for the vast majority of the expansion (see a state-by-state breakdown by the Kaiser Family Foundation here). However, the legality of the individual mandate has generated the most controversy.

The root of contention over the Affordable Care Act’s individual mandate is whether Congress has the authority to penalize an individual or business for not acting; that is, whether you can be fined by the federal government for not purchasing health insurance. The Obama administration argues that Congress has this power and it is rooted in the legislature’s ability to levy taxes and regulate interstate commerce. In other words, Congress has a broad constitutional authority to levy taxes for many purposes, as well as the power to regulate any interstate economic activity. So far, the courts have been divided on the issue. The U.S. District Court for the Northern District of Florida upheld the Medicaid provision of the bill, but not the individual mandate. Importantly, the district court also said that since the law was not written to allow courts to invalidate specific provisions (no “severability clause”), that the entire law was null and void.

With the Florida ruling, the court added another legal question, whether or not parts of the law could stand if some provisions were invalidated. The 11th Circuit Court of Appeals agreed that the individual mandate is unconstitutional, but argued that it can be severed from the Affordable Care Act, allowing the remainder of the law to stand. Ultimately though, it will be up to the Supreme Court.

Aside from the often esoteric arguments for or against the Affordable Care Act, the fact that the Supreme Court will hear this case, and render a decision before July, is great news for states. This is because a major component of the law, the organization of state-run health insurance exchanges, will at the very least require some organizational changes in statehouses around the country. This requires substantial planning, and with the law’s tight deadlines, time is of the essence.