The Affordable Care Act

Round 2 for Obamacare at the Highest Court

On Wednesday March 4, 2015 the Affordable Care Act (“ACA”), also known affectionately as “Obamacare” was back in front of the Supreme Court of the United States (“SCOTUS”).

First, a little background. Back in 2012, SCOTUS determined that the ACA was constitutional in a 5-4 vote. The ruling addressed the law’s most controversial part, which was the “individual mandate.” This mandate would require all Americans to either purchase health insurance or pay a “fine,” categorized as a “shared responsibility payment” to the government. In rejecting the Government’s argument that the Commerce Clause in the Constitution permitted such a mandate, the Court held that it was indeed a “tax” and not a “penalty,” therefore it was a permitted action under the Congress’ taxation power. In a key passage, the Court stated,

The Affordable Care Act’s requirement that certain individuals pay the financial penalty for not obtaining health insurance may be reasonably 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 Based on the SCOTUS’ 2012 ruling, the ACA would roll out as planned, until now. The newest opposition to the ACA is that the law does not authorize subsidies to make mandated insurance affordable in 34 states. Basically, in one sentence in the law it states, subsidies are available through “an exchange established by the state.” The problem is that not all states set up subsidies, and opponents to the law claim that pursuant to this language not everyone will be treated the same since people in the states with no exchanges will not receive subsidies. The Government argues that “established by the state” means individual state or federal government, and therefore everyone will receive a subsidy that qualifies.

The IRS has ruled that it will provide subsidies for everyone who qualifies under a state or federal exchange. Also not great for the ACA challengers is there is no testimony from any committees where Republicans thought the subsidies would only go to those who signed up on state-run exchanges and not everyone who was in need. The ACA opponents have countered the language existed as an incentive for each state to run its own exchange and the meaning is precisely what it states, “established by the state.”

What would be the effect of a successful challenge? According to one NPR article, “9.3 million people who get subsidies now through Obamacare in those 34 states would lose about $29 billion in subsidies and would not be able to afford coverage.”

All of these legal challenges have yet to stop the implementation of the ACA and small businesses have felt the brunt of the effects. ACA is driving rate increase for small business, even if they fall below the employee mandate to provide health insurance. This is because insurance is now priced higher due to the prohibition of medical underwriting (carriers no longer permitted to use a risk rating process to compute premiums in the small business market), health insurance premium pricing is limited to three factors, known as an “adjusted community rating process” (place of residence, age of insured, and tobacco usage), and the ACA requires insurers to use adjusted community rating system for all new policies.



This article was written by Attorney Maureen A. Carlson.