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Tag Archive | "Individual Mandate"

U.S. Supreme Court – Day Two of Oral Arguments on the Affordable Care Act

Today’s Supreme Court oral arguments centered on the Patient Protection and Affordable Care Act’s (ACA) “individual mandate” (also known as the “minimal coverage provision”), the requirement, beginning in 2014, for all Americans to either obtain health insurance or pay a penalty.  The question is whether Congress can use its authority under the Commerce Clause of the Constitution to regulate interstate commerce in order to enact such a requirement.

Solicitor General Donald B. Verrilli began by describing a U.S. health care system in which 40 million people are uninsured and the costs of their uncompensated care drive up health insurance costs for those who are insured.  He explained that Congress used its authority under the Commerce Clause to enact two key reforms to the insurance market, “guaranteed issue” and “community rating” (a position that none of the parties disputes), but that these reforms could not exist without Congress also creating a minimal coverage provision, thereby assuring that individuals would have insurance in advance of any actual need for health care services.  He argued that there is no temporal limit to the Commerce Clause, that everyone subject to the regulation is or will eventually be in the health care market and they are just being regulated in advance.

Chief Justice Roberts and Justices Scalia and Breyer at once began to question whether Congress could create commerce where previously none existed in order to regulate it. General Verrilli responded that, rather than creating commerce, Congress actually was regulating existing economic activity – people’s participation in the health care market, where health insurance is a means of paying for health care. Justice Scalia insisted that the provision regulates health insurance, not health care.  Chief Justice Roberts expressed his concerns that if the Court accepted the principle that everyone was in the insurance market, he didn’t see why Congress’ power would be limited to only the method of payment

Justice Kennedy stated that this issue goes beyond what the Court’s cases have allowed and, because of that, the government has a heavy burden to show that the individual mandate is authorized under the Constitution.  He posed the question whether Congress could have chosen alternative means, for example, using its taxing authority to create a national health service. General Verrilli responded that Congress had chosen a tool that was reasonably adapted to the problem it confronted.  Justice Scalia and General Verrilli then engaged in a lengthy exchange in which Justice Scalia noted that while the provision might have been reasonable, it was not proper because the federal government’s powers are not unlimited.

While Justices Kagan, Ginsburg and Sotomayor repeatedly noted that requiring individuals to purchase insurance made sense because it diversifies the risk and eventually everyone will need health care, Justice Alito pointed out that healthy young adults would be forced to purchase health insurance that would result in them subsidizing services that would be received by everyone else. Justice Scalia said that young adults would purchase health insurance when they think they have a risk of incurring high medical costs, just as others do. Chief Justice Roberts noted that the minimum coverage provisions would require people to purchase insurance for services that they might never need, like pediatric or maternity services.

General Verrilli was asked to explain how the penalty for failure to obtain insurance was a “tax” and stated that because it is to be administered by the Internal Revenue Service, it is characterized as a tax.  When Justice Ginsburg pointed out that the previous day General Verrilli had argued that the penalty was not a tax, he replied that Congress clearly used its taxing authority to create the penalty provision. Justice Ginsburg held firm to her previously stated position that because the penalty would not generate revenue, but rather was designed to affect the purchase of health insurance, it is not a tax.

Paul D. Clement, the appellate attorney arguing for the respondents, stated that while the Commerce Clause gives Congress the power to regulate commerce, it does not give Congress the greater power to compel people to enter into commerce, to actually create commerce.  He explained that it is consistent with 220 years of the Court’s jurisprudence that regulating the point of sale (the purchase of health care services) is regulating commerce, but that Congress cannot force individuals to enter into commerce in the first place by requiring them to purchase health insurance.  He noted that Congress could have chosen an alternative mechanism, for example, tax credits for those who purchased insurance.  He also argued that the penalty is not a tax because it was neither labeled a tax in the ACA nor was it structured as a tax.

Michael A. Carvin, the appellate attorney arguing on behalf of an additional set of respondents, stated that Congress does not have the authority to promote commerce, only to regulate it once it exists.  In response to Justice Ginsburg’s comment that the only  way to assure that people could afford health care once they became sick was to have health insurance prior to the onset of an illness, he noted that the Commerce Clause does not give Congress the power “to regulate things that are statistically connected to things that negatively affect commerce.”  He also commented that Congress not only had compelled people to enter the insurance market, it also had prohibited anyone over age thirty from purchasing only catastrophic health insurance because the “subsidies” they provided were needed by others in the insurance pool.

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Appellate Court Rules on Individual Mandate

On August 12, the U.S. Court of Appeals for the 11th Circuit Court ruled the individual mandate included in the Affordable Care Act unconstitutional.  In the decision, the judges explained that “the individual mandate contained in the act exceeds Congress’s enumerated commerce power.”

The federal appellate court, however, overturned several key rulings made by Judge Roger Vinson in the Northern District of Florida in the case brought by 26 States, the National Federation of Independent Business, and two individuals.  Specifically, the 11th Circuit Court judges found that the health care reform law could stand on its own without the individual mandate.  In addition, the court found that the Medicaid expansion is not unconstitutional.

The case heard before the 11th Circuit Court is the first to be decided in appellate court and found unconstitutional.  Earlier this summer, an appellate court in Cincinnati found the law to be constitutional.  Challenges brought separately by the State of Virginia and Liberty University are still pending in appellate court.  The Supreme Court is expected to consider a challenge to the Affordable Care Act, but we do not expect the Court to issue a ruling prior to the 2012 election.

In March, the Government Accountability Office (GAO) released a report examining alternatives to the individual mandate.  GAO found that mechanisms employed in Medicare Part B or Part D could be alternatives.  In Medicare Part B, the longer a senior waits to enroll, the higher the beneficiary’s monthly premium.  The report indicated that Congress could amend ACA so that uninsured individuals would pay a higher premium if they delayed purchasing insurance coverage.  GAO also noted that the government could limit the open enrollment period in the health insurance Exchanges to once every few years and require individuals who do not enroll in plans offered by the Exchanges to pay higher co-payments or deductibles.

Sen. Ben Nelson (D-NE) and Sen. Claire McCaskill (D-MO) are considering introducing legislation that would provide an alternative to the individual mandate.  Rep. Peter DeFazio (D-OR) introduced the “Personal Responsibility in Health Care Insurance Act” (H.R. 767), which would require individuals who do not want to purchase health insurance to sign an “affidavit of personal responsibility” and would prohibit them from using the bankruptcy court to reduce their health-related debt.

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