It’s not often that the smallest branch of the federal government receives as much attention as the White House and the Capitol. This week, however, the spotlight is on the U.S. Supreme Court building – which is tucked away behind the Capitol next to the Library of Congress – as the Court hears three days of oral arguments on various challenges to the Affordable Care Act.
Predictably, the Court is not basking in the spotlight and will not change its rules against any sort of broadcasting of oral arguments. In a bow to the public attention, however, the Court has agreed to expedite the availability of audio recordings and transcripts of the arguments, which should be up on the Court’s web site within hours after the actual arguments.
Here’s a preview of what the arguments are about and what the Supreme Court is likely to do:
Day One: The Tax Anti-Injunction Act
Never heard of this Act? That may be because it dates back to just after the Civil War, when the federal government was concerned about challenges to taxes designed to fund reconstruction of the South. Basically, the Act prevents people from challenging a tax until after they’ve paid the tax. How does that relate to the Affordable Care Act? Well, the so-called individual mandate – the requirement to buy health insurance at the heart of the Affordable Care Act – is enforced by a “penalty” that is collected by the IRS via tax returns.
If the Supreme Court finds that this penalty is a tax under the Tax Anti-Injunction Act, the whole challenge to the Affordable Care Act would have to be delayed until someone pays that penalty. Since the penalty first applies in 2014, it won’t be paid until someone files their return in 2015. Certainly, a decision on this ground would be a huge anticlimax, but it would allow the Supreme Court to avoid being front and center on a huge campaign issue in an election year. However, it seems unlikely that the Court will let such an important national issue – one that affects virtually every American – remain up in the air for another three years or so.
Day Two: The “Individual Mandate”
This is the main event on most everyone’s fight card. While the Affordable Care Act calls this provision the “individual responsibility requirement,” everyone else is calling it an individual mandate because it requires almost everyone to have health insurance in effect or pay a penalty.
The legal issue is whether Congress has authority to impose this requirement. While it may seem hard to believe in this day and age, the federal government is supposed to be a government of limited powers, whereas the states have broad authority to enact laws for the public good. It didn’t get him too far, but that’s what Mitt Romney was trying to explain when he distinguished between his state, Massachusetts, requiring everyone to have health insurance, and the federal government doing the same thing.
The power Congress said it was exercising in imposing the individual mandate was its Constitutional power to “regulate commerce…among the several states.” Giving that power to the federal government makes sense, because otherwise the states could enact all sorts of conflicting regulations that might stifle what became the biggest market in the world.
Challengers say requiring someone to engage in commerce – that is, to buy health insurance – is an unprecedented exercise of power that goes beyond regulating commerce. Supporters start with the proposition that everyone needs health care, and thus will participate in this multi-trillion dollar segment of the economy. From there they argue that requiring everyone to have insurance is an essential part of regulating this economic activity: First, many of those who use health care but don’t buy insurance shift costs to everyone else and, second, there is no way to require insurers to issue coverage to everyone unless everyone is required to buy it (otherwise, people have an incentive to wait until they get sick to buy insurance).
Supporters also point to Congress’s power to levy taxes, saying that the penalty for not buying health insurance is a tax. Challengers say it’s not called a tax, and Congress and the President knew they couldn’t pass the law if it involved a new tax.
The Supreme Court has broadly interpreted Congress’s power to regulate commerce and levy taxes, and seems likely to do so here. The four Justices appointed by Presidents Clinton and Obama are likely to uphold the individual mandate, and the record of the Justice appointed by the first President Bush indicates that he will vote to overturn it. Only one additional vote is needed for a majority, and that is likely to come from the moderate Chief Justice appointed by the second President Bush, the moderate Justice appointed by President Reagan, or even the more conservative Justices appointed by those two Presidents (who have regularly upheld federal authority).
Day Three: Severability and Medicaid
If the Court does overturn the individual mandate, then it will have to decide whether Congress would have wanted the rest of the law to remain in place. The answer is likely to be “yes,” with the possible exception of the requirement that insurers issue coverage to everyone (because of the unwanted incentive mentioned above).
Finally, some states are arguing that the Affordable Care Act’s huge expansion in Medicaid goes too far in requiring them to spend more money. The federal government counters that the states are not required to spend the money unless they participate in the program, and that argument is likely to carry the day.
There has been a lot of speculation on how these complicated cases will be decided, and that is likely to spike during this week of oral arguments. Of course, we won’t know for sure until the Court issues its decision, which should be before July.
Bill Toman is a partner at Quarles & Brady LLP who specializes in insurance regulation and administrative law.