***For Immediate Release***
June 28, 2012
Brian Reardon: (202) 466-8700
Affordable Care Act Upheld by U. S. Supreme Court
WASHINGTON DC - The Supreme Court handed President Obama and the supporters of the Affordable Care Act a significant victory today by finding the issue at the center of the law’s structure -- the Individual Mandate -- was allowable under the Congress’ taxing powers in the Constitution. The entire decision can be found here. Below is a quick summary and initial thoughts.
Individual Mandate: Upheld
The Court has ruled the mandate is a proper use of Congress’ taxing power, but not a proper use of the Commerce Clause. The key quote from the majority opinion:
” Our precedent demonstrates that Congress had the power to impose the exaction in Section 5000A under the taxing power, and that Section 5000A need not be read to do more than impose a tax. This is sufficient to sustain it.”
Severability: Not Applicable
Since the Mandate survived, there’s no need to worry about how to divide the remaining provisions of the law. In their dissent, the minority argued that they would have struck down the whole law had they prevailed. Kennedy in his dissent, “"In our view, the entire Act before us is invalid in its entirety."
Expansion of the Medicaid Program: Limited but not Invalidated
This appears to be a win for hospitals and others with large numbers of uninsured patients. It leaves the expansion in place while the Federal Government provides the bulk of the additional funding, while opening the possibility that the expansion will be rolled back once the Federal commitment ends.
The Anti-Injunction Act: Does Not Apply
Given the Court has upheld the Mandate as a tax, there is some question why the Anti-Injunction Act doesn’t apply. The Anti-Injunction Act effectively precludes court challenges to new taxes until those taxes are actually due. Since the Mandate doesn’t apply until 2014, the Court must have some explanation as to why the Injunction Act doesn’t apply. Something to look for while reading the decision.
Summary: The court found the Mandate was allowable under the Congress’ taxing powers, which historically have been viewed broadly by the courts. The battle over this law and its implications now moves to the November elections and the states.
For the elections, the effect of the ruling is unclear. It’s certainly a victory for President Obama in terms of policy and his legacy, but its impact on his re-election prospects is less clear. We think it’s a net positive for the President overall, but the case can be made that having this issue front and center for the election might help Romney.
For states, the onus is now on them to create the state insurance exchanges at the core of the insurance reforms. Most of the states have not made significant progress on these exchanges -- indeed a number of them have voted down exchange efforts -- so it’s time for them to get busy. Otherwise, the Federal exchange will be the default choice for businesses and individuals seeking insurance under the exchange, undermining one of the central goals of the legislation.
For sectors, the winners in this decision appear to be hospitals, Medicaid HMOs, and drug distributors, neutral for medical device makers, and a negative for HMOs, drug and biotech companies.
About Venn Strategies, LLC
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