What the Supreme Court hearings on health care reform mean for you

Leah Carlson Shepherd

In March 2012, the U.S. Supreme Court heard an unprecedented three days of arguments in a case challenging the constitutionality of the federal health care reform law. Whatever the nine-member court decides will affect millions of Americans, particularly those bought health insurance on their own or don’t have any coverage at all.

The Patient Protection and Affordable Care Act — frequently called “ObamaCare” — passed in 2010 with some provisions that took effect immediately and others that won’t take effect until 2014 or later, including the requirement for most Americans to obtain health coverage or pay a penalty.

The legal arguments addressed three main questions: whether the case was brought prematurely, whether Congress had the authority to force people to buy insurance, and whether the court can overturn the individual mandate without striking down the rest of the law.

What are the possible outcomes?

A ruling is expected in June, and the law remains in effect until the court issues its opinion. The court could uphold the whole law, overturn the whole law, strike down parts of it or rule that a decision can’t be made until after all the provisions have taken effect.

What happens to the provisions that already have taken effect, like the requirement to cover adult children on their parents’ plan up to age 26?

Those provisions would be invalidated if the court overturns the whole law. However, some states have passed similar insurance laws that would remain in effect even if the court rejects the federal law. In addition, some insurers may continue to voluntarily comply with certain provisions, such as the requirement to cover an adult child on his parent’s policy up to age 26, even if the court overturns the federal law.

What did the justices say about the individual mandate?

Paul Clement, an attorney representing the 26 states that challenged the law, argued that the individual mandate is unconstitutional: “The Commerce Clause gives Congress the power to regulate existing commerce. It does not give Congress the far greater power to compel people to enter commerce.” The Commerce Clause of the U.S. Constitution lets Congress regulate commerce with other countries and among the U.S. states.

U.S. Solicitor General Donald Verrilli, the federal government’s lead attorney in the Supreme Court case, maintained that the individual mandate is constitutional: “Everyone subject to this regulation is in or will be in the health care market. They are just being regulated in advance.”

The nine justices appeared to be split on this question.

Justice Stephen Breyer said: “If we look back into history, we see sometimes Congress can create commerce out of nothing. That’s the national bank, which was created out of nothing to create other commerce out of nothing. … If there are substantial effects on interstate commerce, Congress can act.”

Justice Ruth Bader Ginsburg likened this situation to the start of the Social Security system. Congress “said everybody has got to be in it because, if we don’t have the healthy in it, there’s not going to be the money to pay for the ones who become old or disabled or widowed. So they required everyone to contribute,” Ginsburg said.

However, Justice Antonin Scalia favored the states’ position.

“The federal government is not supposed to be a government that has all powers,” Scalia said. “It’s supposed to be a government of limited powers. … The 10th Amendment says the powers not given to the federal government are reserved, not just to the states, but to the states and the people.”

Justice Samuel Alito said the mandate requires consumers to “subsidize services that will be received by somebody else.”

But Justice Elena Kagan countered that the “subsidizers eventually become the subsidized,” meaning everyone gets older and needs health care at some point.

Verrilli noted: “This is not a market in which you can say that there is an immutable class of healthy people who are being forced to subsidize the unhealthy. This is a market in which you may be healthy one day, and you may be a very unhealthy participant in that market the next day.”

Clement contradicted Verrilli: “A lot of the insurance that’s being covered is for ordinary preventive care, ordinary office visits, and those are the kinds of things that one can predict. So there is a big part of the market that’s regulated here that wouldn’t pose the problem that you’re suggesting.”

If the individual mandate is constitutional, does that mean the government can require Americans to buy things like vegetables and gym memberships?

The two sides in this case, as well as the justices, disagree on the answer to this question.

Verrilli said the mandate to buy health insurance would not start a precedent of allowing the government to require people to buy other things. He argued that health care is different from other products and services because everyone is in the health care market, and we can’t control when we enter that market or what services we need.

Chief Justice John Roberts said the same is true for police, fire and ambulance services. “So can the government require you to buy a cellphone because that would facilitate responding when you need emergency services?” he asked.

Scalia expressed similar concerns, questioning whether the government could require people to buy broccoli. Verrilli argued that the food market isn’t characterized by involuntary and unpredictable participation, as health care is.

Health care also is different because you’ll get it whether you can pay for it or not. Hospitals must provide adequate care for insured and insured patients alike.

Verrilli pointed out that “the many billions of dollars of uncompensated costs are transferred directly to other market participants. It’s transferred directly to other market participants because health care providers charge higher rates in order to cover the cost of uncompensated care, and insurance companies reflect those higher rates in higher premiums, which Congress found translates to a thousand dollars per family in additional health insurance costs.”

What will happen if the court rejects the individual mandate and upholds the rest of the law?

The Congressional Budget Office estimated that premiums for individual coverage would rise by 15 percent to 20 percent without the individual mandate. It also estimated that without the mandate, 16 million fewer Americans would be insured in 2021, compared with how many Americans are supposed to be covered under the mandate.

Some justices appeared to agree that the individual mandate could be removed without invalidating the rest of the law, but others did not.

The law includes two key provisions:

• Guaranteed issue, which prohibits insurers from denying coverage to people with pre-existing conditions.

• Community rating, which bars insurers from charging dramatically higher rates to people who are older or sicker than others.

Kagan suggested that the individual mandate is tied only to guaranteed issue and community rating, not to any other provisions in the law. But Clement, representing the states, argued that the mandate is tied to many other provisions, including the state-run health care exchanges. The law requires states to set up exchanges, or marketplaces, where consumers can choose from several insurance plans with different benefit levels and prices.

Kagan asked: “Does Congress want half a loaf? Is half a loaf better than no loaf? And on something like the exchanges, it seems to me a perfect example where half a loaf is better than no loaf.”

However, Scalia said it would be a “gross distortion” of the democratic process if the court strikes down the individual mandate and keeps everything else. “My approach would say, if you take the heart out of the statute, the statute’s gone. That enables Congress to do what it wants in the usual fashion,” he said.

Justice Anthony Kennedy agreed: “We would be exercising the judicial power if one provision was stricken and the others remained to impose a risk on insurance companies that Congress had never intended. By reason of this court, we would have a new regime that Congress did not provide for, did not consider.”

Was the challenge to the law filed prematurely?

The court invited attorney Robert Long of Washington, D.C., who specializes in appellate and administrative law, to present the argument that under the federal Anti-Injunction Act’s “pay first, litigate later” rule, no court should hear this case until someone has to pay a penalty on his or her 2015 income tax returns for not obtaining health insurance. The penalty is $695 or 2.5 percent of income, whichever is greater.

Long argued that the Anti-Injunction Act applies because the penalty for not having coverage is virtually the same as a tax, since it would be collected in the same way taxes are. However, a number of justices seemed to disagree with that line of thinking.

Ginsburg concluded that the rule “does not apply to penalties that are designed to induce compliance with the law, rather than to raise revenue. And this is not a revenue-raising measure because, if it’s successful, nobody will pay the penalty, and there will be no revenue to raise.”

Both the federal government and the states that are challenging the law prefer to see the case decided sooner rather than later.

What do consumers need to know or do?

If you have health insurance through your employer or your spouse’s employer, you probably don’t need to do anything.

The guaranteed issue and community rating provisions still will apply to group insurance plans, even if the court overturns the whole law. Keep an eye on your premiums, which could go up if the court strikes down just the individual mandate. You may have to start paying more for preventive care if the whole law is overturned. The law requires insurers to fully cover preventive care, with no deductibles, co-pays or co-insurance.

If you have bought health insurance on your own, you should pay attention to what the court decides about the community rating and guaranteed issue provisions. If the court overturns those two provisions, then it may be wise to call your insurer to ask whether it plans to change anything in your coverage as a result of the court’s decision, and find out whether your state has laws protecting patients who have pre-existing conditions.

Overturning the whole law could mean that providers of individual insurance plans once again could deny coverage for pre-existing conditions, drop coverage if they find a technical error in a patient’s application, place annual and lifetime limits on coverage, and charge people much higher prices if they’re older or sicker than average. All of those are practices that the law bans.