- About Us
- Our Services
Yesterday, the U.S. Supreme Court announced its opinion in the National Federation of Independent Business v. Sebelius which tested the constitutionality of two key provisions included in the Patient Protection and Affordable Care Act (PPACA):
- The individual mandate to purchase health insurance
- The expansion of Medicaid to all individuals earning less than 133% of the federal poverty level
The Court upheld the individual mandate, but held that the federal government cannot withhold Medicaid funding from states that do not comply with Medicaid expansion. By issuing an opinion that did not strike down the law in its entirety, the Court removed any uncertainty surrounding whether provisions included in the law, but unrelated to the health insurance exchanges and Medicaid expansion, would continue to be implemented (for example, Medicare’s Accountable Care Organizations, its durable medical equipment competitive bidding expansion and filling the prescription drug “doughnut hole”).
Individual Mandate Upheld
The “individual mandate” requires most individuals to maintain “minimum essential” health benefits coverage. Individuals who do not comply with the mandate must make a “shared responsibility payment.” Although the Court found that the Anti-Injunction Act did not bar the suit because Congress did not intend the mandate to be a tax, the Court decided that the penalty imposed for failing to maintain minimal health insurance coverage is a tax for purposes of the Constitution.
Writing for the majority, Chief Justice Roberts stated that the “Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”
States Win Right to Opt-Out of Medicaid Expansion
The biggest surprise of the case was that states won the right to opt-out of PPACA’s Medicaid expansion. The current Medicaid program offers federal funding to states to assist pregnant women, children, needy families, the blind, the elderly and the disabled in obtaining medical care. PPACA expands the scope of the Medicaid program by requiring state programs to provide Medicaid coverage for all individuals earning less than 133 percent of the federal poverty level. Currently, many states cover adults with children only if their income is considerably lower and do not cover childless adults at all. Under PPACA, if states did not expand their Medicaid programs, they would lose existing Medicaid funding. The Court held the expansion violates the Constitution by threatening states with the loss of their existing Medicaid funding if they decline to comply with expansion. Therefore, states may now choose to reject the Medicaid expansion without losing federal funding for existing Medicaid programs.
In issuing its decision, the Court removed a great deal of uncertainty surrounding whether implementation of the health reform law would continue to move forward.
It is now clear the federal government can require individuals to purchase health insurance on the private market or be subject to a tax penalty.
At the same time, it created new uncertainties by invalidating the application of provisions that threatened states with the loss of Medicaid funding if they did not expand their Medicaid programs.
Allowing states to opt-out of the Medicaid expansion raises several interesting questions, including:
- Will the 26 states who were parties to the lawsuit opt-out of the Medicaid expansion?
- Will additional states facing budget crises opt-out of the Medicaid expansion?
- Will individuals with incomes below 133% of the poverty line be eligible to obtain insurance through the health insurance exchanges?
- Presuming these individuals are eligible to obtain insurance through the exchanges:
- How will their enrollment affect premiums for health insurance plans offered through the exchanges?
- Will they be able to navigate the IRS processes for obtaining the refundable tax credit designed to help them pay the costs of the insurance?
Share This Page
- Physician Payment Sunshine Final Rule on the MoveAs the final rule implementing the »
- Black Friday at CMS: Request for Information Regarding Health Care Quality for ExchangesToday (11/23/2012), CMS released th »
Following Us on Twitter!