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Supreme Court turns back Obamacare challenge, allowing individual coverage mandate to stand

  • June 17, 2021

The Supreme Court turned back a major challenge to the Affordable Care Act, allowing the 2010 law to survive even though a controversial provision requiring all Americans to buy health insurance no longer has a monetary penalty associated with it.

In a 7-2 ruling, the court held that the states that sued over the law did not have standing to do so. 

After upholding the law in 2012 and again in 2015, the court was faced with the latest Republican challenge to former President Barack Obama’s signature domestic policy achievement, this one stemming from a move by the GOP-controlled Congress to zero-out a tax penalty for most Americans who fail to purchase health insurance. 

The penalty was initially upheld under Congress’ constitutional power to levy a tax, but the Republican attorney general in Texas, Ken Paxton, argued the penalty stopped being a tax once President Donald Trump signed a law in 2017 cutting it to zero.       

rest of Obamacare also had to be thrown out because its other provisions – such as protections for people with preexisting conditions and the prohibition on lifetime benefit caps – rested on the requirement that all Americans obtain health coverage in some form. 

But the nation’s highest court didn’t get those questions in its opinion Monday.

Supreme Court appears unlikely to topple Affordable Care Act

The fate of Obamacare was top of mind for senators during the confirmation of Associate Justice Amy Coney Barrett last fall. Democrats on the Senate Judiciary Committee urged her to recuse herself from the Texas case because, as a law professor at Notre Dame, she had openly criticized the court’s earlier rulings upholding the law.  

Barrett, seated in October to replace the late Associate Justice Ruth Bader Ginsburg, refused to commit to recusal but asserted she wasn’t “on a mission to destroy the Affordable Care Act.”  

California and other blue states stepped in to defend the law after Trump’s Justice Department declined to do so. They argued that the zeroed-out penalty at the heart of the case couldn’t be unconstitutional because it didn’t require anyone to do anything. And if it was so central to the rest of the health care law, they added, then Congress would have repealed the entire law instead of just one piece of it. 

Chief Justice John Roberts made a similar point during oral argument last fall, pointing out that Congress had not tried to do away with the entire law when it removed the tax penalty in 2017. In fact, at the time, several Republican lawmakers said explicitly that removing the tax would not undermine other protections.  

“They wanted the court to do that, but that’s not our job,” Roberts, who has played a leading role in rescuing the law in the past, said during the November argument.  

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And Associate Justice Brett Kavanaugh had also hinted at the outcome by calling the dispute “a very straightforward case,” suggesting that the mandate to purchase insurance could be easily separated from the rest of the law. Taken together, the statements from the two conservative justices left many court observers with the sense that most of the health care law would survive the challenge from Texas and other red states

“It does seem fairly clear that the proper remedy would be to sever the mandate provision and leave the rest of the act in place, the provisions regarding preexisting conditions and the rest,” Kavanaugh said during oral argument. 

The landmark Affordable Care Act, hotly debated early in Obama’s tenure, created health care marketplaces that nearly 12 million Americans who don’t get insurance through their work or a government program used last year to buy coverage. It also created incentives that 36 states took advantage of to expand their Medicaid programs.

Obamacare also imposed new requirements on other segments of the industry, which accounts for nearly one-fifth of the nation’s economy. For instance, it prohibited insurance firms from denying coverage to people with pre-existing conditions, such as cancer or diabetes, that had previously left ill Americans stuck without insurance.

Lawmakers at the time were concerned the policy would encourage people to forgo coverage until they got sick: Why pay for a policy in health if insurance companies would be required to provide coverage after a patient became ill? The solution: The so-called individual mandate, a requirement that most Americans have coverage or pay a penalty.

Conservatives balked at the idea that the government could force people to purchase something, and the individual mandate quickly became one of the most controversial aspects of the law. Trump repeatedly sought to undermine the individual mandate, first by signaling that his administration wouldn’t enforce it and then by supporting the 2017 law that technically kept the penalty on the books but set the amount to $0. 

In December 2018, federal District Judge Reed O’Connor ruled that because the Supreme Court originally upheld the individual mandate under Congress’ power to tax, it could not survive with a penalty that had been zeroed out. His ruling, which was put on hold while it was appealed, threatened to wipe out the entire health care law.

A panel of the New Orleans-based U.S. Court of Appeals for the 5th Circuit agreed that the individual mandate is unconstitutional “because it can no longer be read as a tax.” But rather than strike down the entire law, as O’Connor would have done, the panel sent the case back to the district court for additional analysis to determine which parts of the law could be separated from the individual mandate. 

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