Bloomberg News

Obama’s Health-Care Law Gets Review By U.S. Supreme Court

November 25, 2011

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Nov. 14 (Bloomberg) -- The U.S. Supreme Court agreed to review the constitutionality of President Barack Obama’s health- care overhaul in a clash that will shape the 2012 election and spell out the extent of the federal government’s power.

The justices today said they will consider whether Congress exceeded its authority by requiring all Americans to either acquire insurance by 2014 or pay a penalty. The court will hear arguments in March.

The court will wield unprecedented influence over the presidential campaign, with a decision in the case likely in late June, months before the election. The eventual ruling may define Chief Justice John Roberts’s court, either as an aggressive enforcer of the constitutional constraints on Congress or as a nonpolitical body inclined to defer to the elected branches on policy questions.

The dispute turns on Congress’s constitutional power to regulate interstate commerce. Opponents of the law, including a group of 26 states led by Florida, contend that Congress exceeded that authority by requiring people to buy insurance even if they say they want to pay their own health expenses or don’t plan to ever seek medical care.

“The act is without precedent both in its coercive impositions on the states and in its effort to force individuals to engage in commerce so that the federal government may regulate them,” the 26 states argued in a brief filed by former U.S. Solicitor General Paul Clement.

Divided Courts

In a sign of the case’s importance, the justices scheduled 5 1/2 hours of argument, an unusually large amount of time at a court that typically holds one-hour argument sessions.

“This will be the most important case about the scope of Congress’s regulatory power at least since the cases challenging the constitutionality of the 1964 Civil Rights Act and maybe since the New Deal,” said Richard Fallon, a constitutional law professor at Harvard Law School in Cambridge, Massachusetts.

The commerce clause issue has divided federal appeals courts, with two upholding the law, a third declaring it unconstitutional and a fourth saying that a definitive ruling would be premature.

The Obama administration argues that uninsured people inevitably need medical care -- and shift billions of dollars in costs onto other participants in the system.

Taxing Power

The administration also says the so-called individual mandate will help keep premiums low, offsetting other provisions that require insurers to offer coverage to sick people at the same rates as other customers.

“It is an integral part of a comprehensive regulatory scheme that the commerce power plainly authorizes Congress to enact,” argued U.S. Solicitor General Donald Verrilli, the administration’s top Supreme Court advocate.

The government also points to Congress’s constitutional power to impose taxes, calling that an independent source of authority for the mandate and penalty.

Wellpoint Inc., the largest U.S. health insurer by enrollment, fell 45 cents to close at $70.30 in trading on the New York Stock Exchange. UnitedHealth Group Inc., the largest U.S. insurer by revenue, fell 19 cents to $46.94.

Landmark Law

The law, known as the Affordable Care Act, would expand coverage to an estimated 32 million Americans who lack insurance, largely through an expansion of the federal-state Medicaid program for the poor and by setting up “exchanges,” in which consumers will be able to buy insurance.

Both sides said they were pleased the court agreed to take up the case. U.S. Health and Human Services Secretary Kathleen Sebelius said a high court ruling would clear up legal uncertainty that might interfere with implementing the law’s central provisions by 2014.

“We’re eager to have states, who may be sitting on the sidelines, engage fully in putting together these exchanges,” she said.

White House Communications Director Dan Pfeiffer said in a statement that officials “know the Affordable Care Act is constitutional and are confident the Supreme Court will agree.” He pointed to provisions of the law that have already kicked in, including a rule that lets young people stay on their parents’ health plans until age 26.

Rest of the Law

Florida Attorney General Pam Bondi said, “We have urged swift judicial resolution because of the unprecedented threat that the individual mandate poses to the liberty of Americans simply because they live in this country.”

Should the justices conclude that the mandate is unconstitutional, they also will consider whether that provision can be “severed” from the rest of the law, the court said today.

Obama’s legal team contends that much of the law could remain intact. Even so, the administration is joining the states in saying the court would also have to invalidate the so-called insurance reform provisions, which require insurers to issue a policy to anyone who applies and bar them from charging higher premiums to people with preexisting conditions.

The justices said they also will hear arguments on a jurisdictional issue that potentially could prevent them from ruling on the substance of the law. The question centers on the Anti-Injunction Act, an 1867 law that bars courts from hearing challenges to taxes before they are collected.

Medicaid Expansion

Both the Obama administration and the states say that the AIA, as the law is known, isn’t applicable to the health-care statute. One federal appeals court disagreed and said judicial review of the law must wait until a fine is assessed in 2015.

“It could well be that, in the end, the court will tell us that it is too early to rule on the congressional-power questions,” said Rick Garnett, a constitutional law professor at Notre Dame Law School in South Bend, Indiana. “In that case, the matter will probably be settled the old-fashioned way -- by elections.”

In its order today, the high court also agreed to consider arguments against the law’s expansion of Medicaid, the joint federal-state health-care program for the poor. The states say that provision unconstitutionally coerces them into spending additional money.

The justices declined to consider exempting the states from the penalties that they and other employers would face for failing to offer adequate health insurance to workers. The states were calling on the court to overturn a 1985 Supreme Court decision that said Congress may subject states to laws that apply to employers generally.

Kagan, Thomas

All nine justices took part in today’s decision to accept the case. Justice Elena Kagan had faced calls from people not involved in the case to disqualify herself because of questions about her involvement in the health-care law when she was an Obama administration attorney. Justice Clarence Thomas’s involvement drew questions because of the work of his wife, a political activist.

The cases the court will hear are National Federation of Independent Business v. Sebelius, 11-393; Department of Health and Human Services v. Florida, 11-398; and Florida v. Department of Health and Human Services, 11-400.

--Editors: Justin Blum, Laurie Asseo

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net


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