SCOTUS: Health Care Reform Update II

The Obama administration on January 6 presented its first official defense of the individual mandate to purchase a minimum amount of health insurance in a brief filed with the U.S. Supreme Court. The same day, 26 states  and a private business group  filed briefs making the case that if the Court decides that the individual mandate is unconstitutional, that the entire law must be struck down. 

The individual mandate to either purchase health insurance or pay a fine is a key element of the Patient Protection and Affordable Care Act (P.L. 111-148) as amended by the Health Care and Education Reconciliation Act of 2010 (P.L. 111-152). In its brief, the Obama administration notes that “the practical operation of the minimum coverage provision is as a tax law” and that “the only consequences of a failure to maintain minimum coverage are tax consequences.” 

The Obama administration’s brief notes that the minimum coverage provision is a valid exercise of Congress’s authority to regulate interstate commerce under the Article I Commerce Clause. Further, the minimum coverage provision plays a critical role in the law’s comprehensive plan to expand health care services and control costs by regulating how health care consumption is financed, and “is key to the viability of the Act’s guaranteed issue and community-rating provisions.” 

The brief further notes, “As demonstrated by the experience of States that attempted such reforms without a minimum coverage provision, guaranteed-issue and community-rating enacted in isolation create a spiral of higher costs and reduced coverage because individuals can wait to enroll until they are sick. As Congress found, the minimum coverage provision is thus necessary to achieve Congress’s concededly valid objective of reforming the interstate market in health insurance.” 

The administration points out that in 2008, the uninsured consumed approximately $116 billion in health care services, but that providers were only compensated for $43 billion of that total, with the uncompensated costs shifted to insurance companies or individuals. The brief states that the average family’s annual health insurance premium was increased by more than $1,000 to account for the uncompensated costs of care for the uninsured. The brief notes, “the uninsured as a class presently externalize the risks and costs of much of their health care; the minimum coverage provision will require that they internalize them (or pay a tax penalty).” 

Because the health insurance market is the primary mechanism for people to pay for health care, the administration reasoned, “it was reasonable for Congress to invoke the same mechanism to address the problem of uncompensated care.” 

In making the case that the minimum coverage provision is a valid exercise of Congress’s authority to regulate interstate commerce, the administration argues that —

  1. The minimum coverage provision reasonably regulates the financing of participation in the health care market and is a reasonable means to prevent the shifting of costs and risks to other market participants;
  2. The Court of Appeals misapprehended the nature of the minimum coverage provision, the mechanics of health insurance, and U.S. Supreme Court precedents; and
  3. The minimum coverage provision is fully consistent with the allocation of authority between the federal and state governments. 

In its brief concerning the severability of the individual mandate from the rest of the law, the states note that “Congress considered the individual mandate essential to the Act’s functioning, to its passage, and to its ability to achieve Congress’ goal of near-universal health insurance. This Court cannot remove the hub of the individual mandate while leaving the spokes in place without violating Congress’ evident intent.” 

In its brief on the same matter, the National Federation of independent Business noted “The ACA was the fragile product of extensive legislative deal-making; to strip out its centerpiece would fundamentally alter the original legislative bargain. Particularly in light of the deletion of a severability clause from an earlier version of the bill, and the House’s determination to consider the Act on an all-or-nothing basis, it is clear that Congress intended this unique legislative deal to rise or fall as a whole.” 

Further briefs are expected to be filed addressing two other issues – first, that challenges to the mandate are barred by the federal Anti-Injunction Act, and second, that the expansion of the Medicaid program under the law is unconstitutional. The Court will hear oral arguments in the case on March 26 to 28.

Department of Health & Human Services et. al.,  v. State of Florida, et.al.,  No. 11-39s