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Affordable Care Act Held Constitutional With Some Limitation

June 2012

Gregory Drutchas, Lisa Panah, Michael Watza

On June 28, 2012, the United States Supreme Court announced its decision on challenges to the Patient Protection and Affordable Care Act (“ACA”).  The case focused on whether Congress exceeded its Constitutional authority in enacting two specific provisions of the ACA: the individual mandate requiring that all individuals purchase health insurance or face a penalty, and the requirement that states expand their Medicaid programs. 

The court ruled 5 to 4, with Chief Justice John G. Roberts siding with the majority, to uphold the individual mandate.  The majority determined that the penalty an individual faces for not purchasing health insurance is functionally a tax.  As a tax, the individual mandate is constitutional because it falls within Congress’ authority to lay and collect taxes.

However, the Court struck down the ACA’s requirement that states expand their Medicaid programs.  Under ACA, states that did not expand their Medicaid programs would have faced a ten percent reduction in federal funding.        

The immediate takeaway for the healthcare industry is that the ACA’s reforms, such as health insurance exchanges and accountable care organizations, remain in place and the law will continue to be implemented.

The Court’s full opinion can be found here: http://www.supremecourt.gov/opinions/11pdf/11-393c3a2.pdf