Jun 28, 2012

BREAKING NEWS: U.S. Supreme Court Upholds Health Care Reform, Including the Individual Mandate, but Declares the Medicaid Expansion Unconstitutional

This morning, the U.S. Supreme Court issued its landmark decision regarding the Patient Protection and Affordable Care Act (the Act). In a mixed opinion, the Court held that the individual mandate which requires all Americans to purchase health insurance or pay a penalty, is constitutional, but the expansion of Medicaid is unconstitutional. The remainder of the Act was found to be constitutional.

In a complex decision, the Court declared that the individual mandate could not be upheld under the Commerce Clause, as the mandate would greatly expand the power of Congress “to compel commerce, not regulate it.” Instead, the Court upheld the mandate as a “tax,” based on a secondary argument of the Federal Government that the mandate was a valid exercise of Congress’ taxing authority. ­

The Court also held that the expansion of Medicaid to adults with incomes below 133% of the federal poverty level is unconstitutional. Specifically, the Court held that threatening states with the loss of existing funding if they did not comply with this expansion of Medicaid is unconstitutional. In the opinion of the Court, precluding the Federal Government from withholding existing Medicaid funds from the states that choose not to comply with the Medicaid expansion of coverage will remedy this constitutional violation.

What Does This Mean for the Act?

In the near term, this decision means that employers must continue implementing the provisions of the Act, including preparing summaries of benefits and coverage for this Fall. See Previous Client Alert. Of course, the decision of the Court will not end the controversy over health care reform. While popular provisions of the Act, such as dependent coverage for children up to age 26, and first dollar preventive coverage, will likely continue, the future of the Act will be subject to future political and legislative actions.

Washington appears ready for a fight to determine what happens to the Act. Opponents of the Act will continue to push for its repeal. Comments from nonpartisan experts seem to indicate that the loss of Medicaid expansion will not greatly impact the overall effectiveness of the Act, as it is anticipated that the insurance markets and the Act will likely be adjusted to provide coverage to affected individuals in the states where Medicaid coverage is not expanded.

Free Webinar to Address Your Questions about Next Steps for Your Group Health Plans

To assist you in determining the “next steps” for your group health plans, we will be holding a complimentary webinar on July 3rd. During this webinar, we will discuss the expected impact of health care reform on your group health plans and your employees, as well as take your questions about the Supreme Court’s decision. For your convenience, if you are unable to join us on Tuesday, we will be uploading a recording of the webinar to our website. We look forward to your participation next week.

In the meantime, if you would like to discuss the ramifications of the Supreme Court’s decision on the Act, please contact your SGR Executive Compensation and Employee Benefits Counsel.


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