Upheld: The Patient Protection and Affordable Care Act


On June 28, 2012, the United States Supreme Court handed down a decision on the Patient Protection and Affordable Care Act of 2010.  The Supreme Court’s decision is based upon the review of two provisions of the Act: (1) the individual mandate requiring all Americans, with a few exceptions, to maintain health insurance or pay a penalty, and (2) the expansion of Medicaid by which States would receive federal funds provided that certain health care would be afforded to citizens whose income falls below a certain level.  The Court upheld the individual mandate, while it limited the Medicaid expansion.
Individual Mandate  
The individual mandate requires all Americans to maintain “minimum essential” health insurance coverage beginning in 2014.  Excluded from this mandate are those incarcerated and undocumented aliens.  Individuals who choose not to comply with the individual mandate must make what is termed a “shared responsibility payment” to the federal government.   For example, in 2014, the shared responsibility payment will be the greater of $285 per family or one percent of an individual’s household income.  In 2016, the shared responsibility will increase to the greater of $2,085 per family or 2.5 percent of an individual’s household income.  This payment, or tax, as described by the Supreme Court, would be paid to the Internal Revenue Service and collected in a way similar to its current method for collecting tax penalties.  The IRS, however, is prohibited from using a number of its enforcement methods, such as criminal prosecution and levies to collect the shared responsibility payment.  Exempt from payment of the shared responsibility payment are those with an income falling below a certain level, members of Native American tribes, and certain other individuals.
Medicaid Expansion
Currently, Medicaid requires States to cover certain categories of persons, including pregnant women, children, needy families, the elderly, the blind, and disabled persons.  The Affordable Care Act allows States to choose whether or not to participate in the Medicaid expansion pursuant to the Act.  If a State chooses to participate, it is required to expand its Medicaid programs to cover all individuals under the age of 65 with income levels below 133 percent of the federal poverty line.  Additionally, the State would be required to implement an “essential health benefits” package for all new Medicaid recipients.  Under the Act, the federal government would pay 100 percent of the costs to cover the new Medicaid recipients through 2016.  In the subsequent years, the federal payment level would decrease to a minimum of 90 percent.  The Supreme Court did not reject the offering of funds by the federal government for the expansion of Medicaid, but did reject the penalizing of a State for failure to participate in the expansion by withdrawing that State’s Medicaid funds.  Accordingly, the Supreme Court held that States can choose to participate in the expansion in exchange for the new funds provided through the Act.  If a State so chooses, then it must comply with the Act and expand its coverage.  Further, if a State that has chosen to participate fails to comply with the requirements of the Act, then the federal government may withdraw funds provided through the Act.  On the other hand, a State can opt out of the expansion program and not be penalized for continuing its Medicaid program as is without the expanded coverage. 
Impact of the Supreme Court’s Decision
Aside from the decisions on the aforementioned provisions of the Patient Protection and Affordable Care Act, the Supreme Court preserved the remainder of the Act.  Thus, beginning in 2014, employers with fifty or more employees must provide minimum essential coverage to their full-time employees or face penalties.  Insurance companies will not be able to exclude, limit or set unreasonably high rates for coverage for those with pre-existing conditions, and young adults up to the age of twenty-six will remain eligible to stay on their parents’ health insurance.
For additional information or if you have questions pertaining to health care reform, please contact Chris Crevasse, Christie Burbank, Jade Dodds or any member of Miller & Martin's Health Care Reform Task Force.  Be on the lookout for our next alert, which will cover a timeline of health care reform compliance deadlines.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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