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U.S. Supreme Court Upholds Constitutionality of Patient Protection and Affordable Care Act

Ending months of uncertainty and speculation, the U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act (the "ACA") on Thursday, June 28, 2012. The Court held by a 5-4 vote that the ACA's individual mandate, requiring virtually everyone in the country to obtain qualifying health insurance by 2014 or pay a penalty, is constitutional because it is within Congress's taxing power.

Chief Justice Roberts joined the four liberal justices (Justices Ginsburg, Breyer, Sotomayor and Kagan) to form the majority upholding the ACA. The opinion stopped short of endorsing the ACA on policy grounds, however; it opens with the disclaimer, "[w]e do not consider whether the Act embodies sound policies. That judgment is entrusted to the Nation's elected leaders. We ask only whether Congress has the power under the Constitution to enact the challenged provisions."

The majority opinion upholds the ACA by framing the individual mandate as a constitutional penalty triggered by an individual's choice not to purchase qualifying health insurance, as opposed to a command that individuals affirmatively purchase such insurance. The opinion explains, " our precedent demonstrates that Congress had the power to impose the [penalty for noncompliance with the mandate] under the taxing power, and that [the provision] need not be read to do more than impose a tax. That is sufficient to sustain it." The majority concludes that the ACA's "requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness."

The dissenting justices (Justices Scalia, Kennedy, Thomas and Alito) would have invalidated the ACA altogether. Chief Justice Roberts joined the dissenting justices for a key portion of the opinion holding that the ACA is not constitutional under the Commerce Clause power, as the Obama Administration had primarily argued. Although this holding will have an impact on future Congressional legislation, it does not affect the validity of the ACA because the mandate is constitutional under the taxing power.

The other key portion of the ruling is a holding that the ACA's Medicaid expansion, which was challenged by over half the states as unconstitutionally broad, is also constitutional. However, the Court held that Congress may not penalize states for refusing to join the expansion by withholding all Medicaid funding.

The bottom line for employers-and everyone else-is that the ACA is valid and will move forward. The time for wait-and-see is over; we now know that the ACA is constitutional and should plan for it to be implemented on schedule. Look for the implementing agencies (the Department of Labor, Department of Health and Human Services, and the I.R.S.) to kick into overdrive. Those agencies have already issued numerous pieces of guidance and regulations on the law, but there is much, much more to come. Although Congressional Republicans are renewing their calls to repeal the ACA in the wake of the Supreme Court's decision, it is highly unlikely that Congress will enact a wholesale repeal of the ACA.

Wimberly Lawson will continue to keep you updated on employer compliance responsibilities, including timelines, tips, and resources. Stay tuned!

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