Mar 30, 2012

Supreme Court Hears Oral Arguments on Constitutionality of PPACA

On Wednesday, March 28, the Supreme Court concluded six hours of much anticipated oral arguments on the Patient Protection and Affordable Care Act (“PPACA”). If you followed the coverage in the media, you are familiar with the differing views on the meanings behind the comments made during the arguments. As these arguments can provide insight into how the Justices will ultimately decide the fate of PPACA, the following is a summary of the oral arguments:

Can the constitutionality of PPACA be determined now, or do we have to wait until the penalties are effetective?

Day one of the oral arguments focused on the application of the “Anti-Injunction Act,” which could prohibit the Supreme Court from ruling on the constitutionality of PPACA because the penalties do not become applicable until 2015. Most commentators agree that the Justices’ questions regarding this issue indicate that the Supreme Court will not postpone their review until the penalties become applicable.

Is the individual mandate in PPACA constitutional?

Day two of the oral arguments focused on one of the most controversial aspects of PPACA – the requirement that individuals purchase health insurance or pay a penalty (commonly referred to as the “individual mandate”). The U.S. government argued in favor of the constitutionality of the individual mandate by claiming that the mandate is within Congress’ authority to regulate interstate commerce under the Commerce Clause. In response, the 26 states challenging the constitutionality of the individual mandate argued that the mandate exceeds the scope of Congress’ authority under the Commerce Clause because the mandate requires individuals to actively engage in commerce when they might not otherwise choose to do so. The Justices posed challenging questions to both sides and included several interesting hypothetical situations, including asking how health care coverage is different from burial coverage – that is, if individuals must buy health care coverage, can Congress require all individuals to buy burial coverage since the use of both is inevitable.

If the individual mandate is unconstitutional, must the rest of PPACA be struck down, or can we sever selected provisions and allow them to survive? What about the expansion of Medicaid under PPACA – is it constitutional?

Day three of the oral arguments addressed the “severability” issue – that is, whether PPACA should be struck down in its entirety if the individual mandate is declared unconstitutional. The Justices expressed concern regarding the fate of provisions in PPACA that are unrelated to health care if the Supreme Court strikes down PPACA in its entirety. Interestingly, the Justices were also concerned that, if they determined that certain provisions could be severed from PPACA, the process of going through the 2,700 plus pages of PPACA to determine which provisions could be severed would be a lengthy, cumbersome process. In addition, on day three, the Supreme Court heard oral arguments regarding the legality of PPACA’s expansion of the Medicaid program, although most commentators do not believe that the decision will rest on this issue.

What was the outcome of the oral arguments?

Generally, the Supreme Court holds oral arguments to clarify the issues and to further probe the arguments of the parties. As mentioned above, commentary from this past week has centered around who “won” or “lost” based on the oral arguments. However, it is usually difficult to determine the ultimate position that any particular Justice will take based on the questions posed during oral arguments. However, most commentators agree that it is likely that the Supreme Court will render a decision in June, rather than postponing a decision until 2015, when the penalties under the individual mandate become applicable.

What should group health plan sponsors do now?

The impact of the Supreme Court’s ruling on group health plan sponsors will depend upon whether the Supreme Court decides to invalidate the individual mandate and strike down the remaining provisions of PPACA, including the provisions affecting employer group health plans. Despite much speculation in the media regarding the decisions of the Supreme Court, at this time, it is unclear how the Supreme Court will rule regarding these issues. As a decision is not expected from the Supreme Court until late June, group health plan sponsors should continue to maintain their group health plans in compliance with the existing PPACA mandates. In addition, employers should avoid delaying implementation of upcoming PPACA mandates, as delaying such implementation would likely hinder a group health plan sponsor’s ability to timely comply with the PPACA mandates, and could lead to potential penalties and administrative difficulties.

For more information, please contact your Employee Benefits, Executive Compensation and ERISA Litigation counsel at SGR.

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