Supreme Court Upholds the Affordable Care Act

On June 28, 2012, the U.S. Supreme Court upheld the Patient Protection and Affordable Care Act (ACA), landmark legislation that will significantly increase the number of Americans covered by health insurance starting in 2014, and make many improvements to Medicare, among other things. The decision is also a significant victory for people over age 50 for whom lack of health insurance - or affordable coverage - has been a serious challenge.

The Court's Rulings

The Minimum Coverage Provision:

The most controversial question before the Court was whether the ACA's requirement that all Americans, with certain exceptions, obtain minimum health insurance (the so-called individual mandate) by 2014 or pay a tax penalty is constitutional. In a 5-4 decision, the Court held that the minimum coverage provision was constitutional under Congress's taxing powers. A majority of the Court, however, rejected the federal government's main defense of the law, namely that Congress had the authority to enact the mandate under the Commerce Clause. Chief Justice John Roberts found that a person's failure to buy insurance is not an "activity" that can be regulated.

Medicaid Expansion:

Another critically important issue the Court addressed is whether the ACA's provisions expanding Medicaid coverage to all adults under 65 with incomes below 133 percent of the poverty level unconstitutionally coerces states to participate in the expansion. Medicaid is a state- and federal-run program that provides health coverage for people with lower incomes, older people, people with disabilities, and some families and children. The Court held that the federal government may place restrictions upon states when enacting laws, such as the ACA, under Congress's spending powers, but that the federal government cannot threaten to withdraw all of a state's existing Medicaid funds if a state chooses not to expand Medicaid eligibility in its state. If, however, a state accepts federal funds for the new Medicaid expansion, the state must comply with the requirements associated with the expansion. Thus, states have a choice whether to expand their Medicaid programs.

Background and AARP's Friend of the Court Briefs

At enactment of the ACA, 45 million Americans did not have health insurance. Health care costs were outpacing the rate of inflation. People were falling into financial ruin and/or foregoing critical medical care when faced with health care needs they could not afford to address. The problem was particularly acute among older people, who have a higher incidence of chronic health conditions and often live on fixed or limited incomes, making an unanticipated expense a significant problem.

Challenges to the ACA were filed in numerous federal courts and the cases quickly worked their way through the lower courts, reaching the U.S. Supreme Court on four issues: (1) whether the law's requirement that people obtain minimum coverage either from the government or through the private market is constitutional; (2) whether the law's expansion of the Medicaid program ( a federal-state run health insurance program for low income people) to help provide coverage for at-risk populations is constitutional; (3) if either of those provisions is unconstitutional, whether the offending provisions can be severed and the remainder of the law - which includes important Medicare provisions - can stand; and (4) whether challengers to the minimum coverage provision, which does not go into effect until 2014, have standing to sue if the penalty is a tax that pursuant to the Anti-Injunction Act cannot be challenged until collected.

AARP Foundation Litigation attorneys filed AARP's three friend of the court briefs in the Supreme Court. The first brief addressing the minimum coverage provision argued that the ACA was constitutional under Congress's Commerce Clause and Taxing powers. The brief provided the Court with massive evidence showing that people 50-64 without employer-provided or government health insurance are systematically denied coverage or priced out of the private individual market because of their age or pre-existing health conditions; describing the effect on the national economy and on public health by millions of un- and underinsured people who cannot afford medical diagnosis and treatment and go into debt or bankruptcy; and the "job lock" preventing people from retiring or changing jobs because they cannot obtain or afford health insurance on the private market for them or family members.

In the second brief, AARP joined with 39 organizations in filing a brief explaining how (1) state participation in Medicaid is and always has been voluntary; (2) starting in 2014, states will receive near total funding for the expansion; and (3) the expansion in ACA is consistent with the history and structure of the Medicaid program and other numerous changes to the program since its inception.

In a third brief addressing the severability issue, AARP joined with several other national organizations that advocate for older people. The brief provided the court with a description of the many provisions in the ACA that are vitally important to older people yet unrelated to the minimum coverage provision, such as improvements to Medicare benefits and prevention of elder abuse.

What's at Stake

What the decision means for people who have private or employer-based insurance is that insurance companies can no longer drop coverage if the person becomes sick or disabled or place lifetime dollar limits on health coverage, and plans must now cover more preventive care services (such as mammograms and other screenings) at no additional cost.

People who do not have insurance or have preexisting conditions limiting their ability to acquire services get relief as well - many adults and all children up to age 19 with a preexisting condition can no longer be denied coverage (a protection that will expand in 2014 to cover all persons with preexisting health conditions), and children up to age 26 can now be covered under a parent's health insurance plan.

States that decline to expand Medicaid eligibility for low-income citizens within its state will not receive the federal government's offer to provide 100 percent funding to cover the expansion for the first three years and 90 percent thereafter. If a state does not expand coverage, many low-income people will not be able to obtain health insurance. Those individuals will not be responsible for paying the optional tax for not having insurance starting in 2014. In addition, many of those affected will be eligible for subsidies to help pay for insurance through their state exchange beginning in January 2014.

Finally there are benefits for Medicare beneficiaries, including expanded coverage of wellness visits and preventive care services, discounts on prescription drugs for those harmed by the "doughnut hole" that inadvertently left some recipients without coverage, and there are new strong tools to fight waste, fraud and abuse in the Medicare program as well as strengthen its solvency.

Case Status

The U.S. Supreme Court held the Patient Protection and Affordable Care Act constitutional in the cases Florida v. HHS, HHS v. Florida, and NFIB v. Sebelius.