Supreme Court Considers Healthcare Law - Day One

This is a dispatch prepared by Day Pitney's Bruce Boisture, who attended today's Supreme Court session concerning the constitutionality of key provisions of the Patient Protection and Affordable Care Act.

The U.S. Supreme Court today held the first of three days of hearings to consider the constitutionality of two key provisions of the Patient Protection and Affordable Care Act ("ACA"). In this and three subsequent dispatches, we will summarize the issues under consideration and share the observations of our colleague in attendance at the hearings about the issues and themes that come to the fore during the oral arguments to the Court.

Overview

The ACA makes fundamental changes in the health insurance market, aiming, in the words of one of its provisions, at "near-universal health insurance coverage." Among other changes, it compels guaranteed issuance and community rating in the markets for individual coverage. It also requires (with some exceptions and some subsidies) that, beginning in 2014, all people who file a federal income tax return obtain health insurance coverage for themselves and their dependents or pay a penalty -- the controversial "minimum-coverage requirement."

Beginning in 2014, the ACA extends Medicaid coverage to able-bodied single adults without dependents. Although Medicaid is a state-administered program, the federal government will bear nearly the entire cost of Medicaid benefits for these newly eligible recipients, as well as most of the associated administrative costs. The resulting costs to the states are variously estimated at $20 billion to $40 billion over the next 10 years. States must implement this eligibility expansion (and other related program changes) or lose their eligibility for all federal Medicaid payments. Under the ACA, however, Medicaid remains a cooperative federal-state partnership, with states free to elect not to participate.

The U.S. Supreme Court has agreed to consider challenges to the constitutionality of these two ACA provisions after several federal courts reached divergent conclusions. In the three cases it has under consideration,1 individuals, business organizations and 26 states assert these statutes exceed Congress' constitutional authority, while the U.S. Solicitor General maintains the contrary position on behalf of the federal government.2 In an unprecedented three days of oral argument, the Court will take under consideration four fundamental issues:

Jurisdictional Issues: Whether the federal courts even have authority (technically, "jurisdiction") to decide the challenge to the minimum-coverage requirement at this time or whether such jurisdiction is denied by the federal statute that generally bars lawsuits challenging tax impositions until after the taxes are paid. Also, do the states have the right to invoke the Court's authority to decide the minimum-coverage issue?

Article I Issue: Whether Congress, when it enacted the minimum-coverage requirement, exceeded its legislative authority under the commerce clause and its taxing power, both of which are contained in Article I of the Constitution?

Severability Issue: If Congress did exceed its authority, what is the appropriate remedy: Should the Court declare only the minimum-coverage requirement constitutionally invalid, or should it declare some broader set of ACA provisions -- or even the entire ACA -- invalid?

Spending Powers Issue: Did Congress exceed its taxing and spending powers under Article I when it conditioned each state's right to future federal Medicaid funding on the state's participation in the ACA's Medicaid-eligibility expansion?

Hearing -- day one -- the jurisdictional issue

The federal Anti-Injunction Act ("AIA") prohibits any persons from suing in the federal courts to restrain the assessment or collection of federal taxes. Instead, as a general rule, one must pay the assessed tax and then bring any challenges to the tax before...