In a landmark ruling, the Supreme Court yesterday upheld key provisions of the Patient Protection and Affordable Care Act (“ACA”), while at the same time stressing the limits of federal regulatory authority. The most immediate and direct impact of the Court’s opinion will be to spare health care providers, insurers, and insureds the task of unwinding steps they have already taken to implement the law, which many commentators believed would be held unconstitutional in whole or in part. In a sharply divided opinion with shifting majorities, the Court held that the ACA’s individual mandate provision — which requires that nearly every individual obtain health insurance or pay a monetary penalty — was beyond Congress’s power to regulate commerce, but could nonetheless be upheld as a valid exercise of Congress’s power to lay and collect taxes. The Court also upheld the ACA’s expansion of Medicaid programs, but effectively rendered participation in the expanded scope optional to the States. The Court found that a provision threatening States with the loss of all Medicaid funding if they did not comply with the expansion was impermissibly coercive.

The mix of rulings came as a surprise to many commentators, who had thought that the Court would strike down the individual mandate, and perhaps the whole ACA. However, the biggest surprise of the day was not the Court’s ruling, but its alignment, with the Chief Justice (rather than Justice Kennedy) casting the swing vote to save key provisions of the statute. While the decision’s final judgment upholds the law, the Chief Justice’s opinion — in civics lesson fashion — offers a strong reaffirmation of the principles of federalism and separation of powers that limit what some on the Court see as an ever-expanding assertion of federal power. For the ACA in particular, the decision returns the debate to the political realm.

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