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Supreme Court Upholds Health Care Reform: Virtually All Americans Required to Buy Health Insurance or Face Increased Taxes

Today, June 28, 2012, by a 5-4 vote, on the strength of an opinion authored by Chief Justice John Roberts, the United States Supreme Court upheld the individual mandate in the Patient Protection and Affordable Care Act (“ACA”) signed into law by President Obama on March 23, 2010. View the decision. The Court rejected the argument that Congress had the authority under the Commerce Clause to require individuals to purchase health insurance. However, the Chief Justice deemed the individual mandate a “tax” for constitutional purposes, and then ruled that Congress had the constitutional authority to tax people who did not buy insurance. Seven members of the Court held that Congress lacked the constitutional authority to punish states that refused to expand Medicaid as provided by the ACA.

The Decision

The Chief Justice ruled that the Commerce Clause did not authorize Congress to impose the individual mandate. However, he determined that the individual mandate was properly conceived of as a “tax” for constitutional purposes, notwithstanding Congress’s refusal to characterize it as such, and then ruled that Congress has the constitutional authority to tax people who do not buy insurance. The Chief Justice noted that the Congressional authority to tax is not unlimited, stating that “there comes a time when…a so-called tax…becomes a mere penalty with the characteristics of regulation of punishment.” However, because the individual mandate (termed by Congress a “shared responsibility payment”) does “pass muster as a tax…we need not here decide the precise point at which an exaction becomes so punitive that the taxing power does not authorize it.” He further ruled that Congress lacked constitutional authority under the Spending Clause to punish states that refuse to expand Medicaid as required by the ACA.

Justices Ginsburg, Sotomayor, Breyer and Kagan concurred with the Chief Justice’s opinion, but on the grounds that Congress had authority under the Commerce Clause to impose the mandate. Justices Ginsburg and Sotomayor dissented from the Chief Justice’s ruling that Congress over-reached by punishing states that refused to expand Medicaid. However, Justices Breyer and Kagan agreed with the Chief Justice and the dissenters on this point.

Justices Kennedy, Alito, Scalia and Thomas dissented from the individual mandate ruling, arguing that the ACA was unconstitutional in its entirety. However, they joined the Chief Justice and Justices Breyer and Kagan in striking down the Medicaid penalty provision.

What It Means

The Court’s decision will provide lawyers and scholars with years of material. On the one hand, the decision limits the Congressional Commerce Clause and Spending power, but on the other hand, it substantially expands the Congressional power to tax without articulating any limiting principle. Essentially, the law as it now stands is that Congress has the power both to tax a person who buys a product, and to tax a person who refrains from buying that very product. In other words, Congress may tax everything and nothing at all.

In more practical terms, absent ACA modification or repeal, providers and business of all sizes must prepare to meet substantial, complex and expensive compliance obligations. For now, the ACA’s regulatory machinery will operate without effective checks, balances or limits. Here is what the decision means to you.

  • ACA implementation, including all of the taxes, regulatory boards and insurance pools and requirements, will continue. This means a heavy regulatory burden for providers and businesses and, in the near term, substantial disruption in the insurance markets.
  • Individual patients will not see changes in the availability, nature, and quality of healthcare overnight, but will certainly do so within three to five years. The ACA front-loaded benefits (e.g. removal of pre-existing condition limits) but back-loaded burdens (e.g. limits on care, taxes, insurance pools). The burdens now will be felt in full force. Many taxpayers, including medical device manufacturers, will see their bills rise substantially.
  • Providers and the myriad of other businesses subject to some sort of regulation under the ACA (including tanning salons and chain restaurants) will face major compliance challenges.
© 2020 Dinsmore & Shohl LLP. All rights reserved.National Law Review, Volume II, Number 180


About this Author

Reed D. Rubinstein, Dinsmore Law, Appellate Advocacy Lawyer, FDA,
Of Counsel

Reed Rubinstein leverages his more than 25 years of experience in the regulatory industry to bring significant value to clients. His prior work with several Fortune 500 companies includes a wide variety of appeals, trials, transactions, regulatory compliance and legislative advocacy matters.

Reed has represented manufacturing, energy, technology, pharmaceutical, agricultural, land development, governmental and non-governmental organization clients in enforcement, rulemaking, Administrative Procedure Act litigation and policy matters before...

Thomas Hess, health care industry attorney, Dinsmore Shohl, law firm

Annually appearing on The Best Lawyers in America list, as well as the Ohio Super Lawyers list, Tom has over 30 years of experience representing health care providers before state, federal and administrative courts across the country. He is the Practice Group Leader for the Government Relations and Health Law Practice Groups.

Leveraging extensive experience with a thorough understanding of the issues facing the health care industry, Tom takes a practical, yet aggressive approach to help clients meet their needs while also mitigating risk. Within the constantly-evolving industry, Tom guides clients through myriad challenges, including certificate of need, health care fraud and licensure investigation issues, as well as issues related to Medicare and Medicaid audits, overpayments, certifications and reimbursement. Additionally, he also has assisted clients with the acquisition and disposition of health care facilities and practices, demonstrating a knowledge of not only the industry’s distinctive operations, but also of traditional business transactions. Understanding that complex health care reform initiatives and an unstable economy have dramatically impacted the industry’s operations, Tom, a former Assistant Attorney General in Ohio, utilizes his familiarity with the regulatory agencies and their procedures to provide clients with the insight they need to confidently move forward.