The U.S. Supreme Court has accepted review of the Affordable Care Act -- what opponents call "Obamacare" -- America's new health care reform law. It's no surprise the Court accepted review. The lower courts split on its constitutionality, and the Supreme Court must weigh in to resolve the split. Before opponents start cheering -- or proponents start fearing -- that the Act will be entirely stricken, a close analysis of the issues the Supreme Court actually accepted for review is warranted.
The Supreme Court declined certain constitutional attacks, and accepted review of only four issues. The key issue concerns the "individual mandate" as to which the Court allotted twice the usual amount of time for oral argument. The Court will reach this issue only if the Anti-Injunction Act does not bar review. The Anti-Injunction Act is a jurisdictional law that precludes judicial review of taxes, or fees similar to a tax, before they are collected. Any penalty fees generated from the "individual mandate" would not be collected before 2014 tax returns are filed, so if the Anti-injunction Act applies, judicial review of the Act would be postponed until 2015.
The Court will also review the Act's expansion of Medicaid to 133 percent of the federal poverty level. Numerous states attack this expansion as "coercive" since they are primary overseers of Medicaid with federal financial support. It is noteworthy that no lower court to date has agreed with the States' attack on this issue. Finally, the Court will review whether the Act is "severable." If it is "inseverable," then it must be stricken in its entirety if any portion of it falls. The Court allowed 1.5 times the usual argument length for this issue. Altogether, 5.5 hours have been set aside to hear the issues involving the health reform Act.
Tellingly, the Court rejected any challenge to what has been coined the "employer mandate" that requires large employers to obtain minimum health coverage for employees or pay a tax penalty. Specifically, the Court refused the States' challenge to this mandate requiring them to provide minimum health coverage for State employees. That the Court refused to hear any attack on the employer mandate foreshadows the Act's "individual mandate" could survive challenge as well, but even if not, that only a small portion of the Act is really at risk.
The health reform Act has ten separate parts, called "Titles," and the vast majority of its provisions within those Titles, are not subject to any legal challenge. Only two provisions out of these ten Titles are before the Court. In light of the Court's narrow review, it seems safe to say that some form of health care reform is "here to stay." Those waiting for a ruling telling them whether the law is really here or not before taking steps to get ready for what it requires may want to reconsider.
The Supreme Court selected for review only Title I's "individual mandate" and Title II's Medicaid expansion. No other provision will be heard, and that means eight Titles are not at risk unless the entire Act is found "inseverable." Even though the Court agreed to consider "severability," the Court's refusal to entertain the employer mandate suggests the Court already views the Act as severable. Only four Justices are needed to accept review of any issue, but not even four were interested in the employer mandate. That means fewer than four have any concern at all with the constitutionality of the employer mandate and the Court is perfectly willing to review the Act on an issue-by-issue basis, suggesting further that it may be poised to view the Act as severable.
Courts are reluctant to interpret statutes as "inseverable," especially when their scope is as comprehensive as this one. The Act's ten Titles address numerous subjects and topics. Title I expands private health insurance coverage abolishing discriminatory exclusions like preexisting conditions, but also establishes insurance "exchanges," among other provisions. Only a portion of Title I concerns the "individual mandate." The Obama administration takes the position nothing in Title I except its expanded health coverage is so tied to the "individual mandate" that the entire Act must be stricken; indeed, the balance of the entire Act stands easily without the mandate. Likewise, Title II deals with much more than Medicaid expansion; Title II improves, simplifies and coordinates both Medicaid and the Children's Health Insurance Program (CHIP), and importantly, enhances the quality of health services provided in these programs. Striking the entire Act based on an alleged "coercive" expansion in Medicaid would frustrate other unrelated improvements to such programs.
Given the Supreme Court will review only two issues out of ten Titles, it seems highly unlikely the Court will strike the entire Act as "inseverable." More likely, if any constitutional infirmity is found at all, the Court will follow the administration's lead and excise only those portions directly tied to what is unconstitutional. To date, the lone circuit court of appeals to strike down the "individual mandate" expressly rejected any attempt to strike the entire Act, and for good reason. Titles III and IV have nothing to do with the "individual mandate" or Medicaid expansion, but were intended to enhance the quality and efficiency of America's health care delivery system, to prevent disease and promote public health. Titles V and VI provide incentives and other support to America's health care workforce, and require greater integrity and transparency in public health programs. Titles VII and VIII improve access to innovative medical therapies and to long term care. Titles IX and X contain revenue provisions and other amendments to strengthen the Act. Nothing in these other provisions or Titles need be stricken just because the "individual mandate" or Medicaid expansion could fall. A court exercising judicial restraint will find it difficult to interpret the Act's intent behind these divergent provisions to require they all be stricken based solely on infirmity with the "individual mandate" or Medicaid expansion.
For this reason, employers and health care providers would be well advised not to put on "hold" any plans for coming into compliance with other provisions of the health care reform law. Hesitation may mean missed opportunities. The Act employs free-market tools to accomplish many of its reforms. Indeed, the Hon. Laurence Silberman, a conservative Judge appointed by Pres. Ronald Reagan, observed in his recent D.C. Circuit Court of Appeals' decision upholding the Act: "The theory of the individual mandate... is that private entities will do better than government in providing certain social insurance... Privatized social services combined with mandatory-purchase requirements... partially privatize the social safety net... and move, at least to some degree, away from the tax-and-government-benefit model that is common now." This Judge expressly recognized one of the market-oriented concepts found in the Act. There are numerous others that affect businesses and health care providers. Waiting to see if the Supreme Court strikes the entire Act could sacrifice strategic positioning in an evolving marketplace as business competitors and other care providers start movement to comply with the Act.
While the Supreme Court will soon decide whether the "individual mandate" and Medicaid expansion are constitutional, the Court's decision will not likely reverse the many reforms scheduled to occur over the next two years. Large employers should start considering how best to provide employees with affordable minimum health coverage which they must have in place by 2014 or pay tax penalties. Small businesses may want to start considering how health insurance shopping in the soon-to-be-established "insurance exchanges" affects their employee benefit plans. Medical providers such as hospitals and physicians must start considering the strategic impact that change from a "fee-for-service" to a "fee-for-value" payment system means for their organization and collaborations with other health care providers. Regardless how the Supreme Court rules on the two provisions of the Affordable Care Act now before it, prudence dictates that businesses and providers start considering health care reform as "here"!