U.S. Supreme Court Upholds Affordable Care Act

The U.S. Supreme Court upheld the constitutionality of the Patient Protection and Affordable Care Act in a ruling issued June 28, 2012.  The ruling consisted of three primary components:

1. The Court allowed the mandate that requires individuals to purchase health insurance or else pay a penalty (beginning in 2014).  The Court concluded that the penalty could reasonably be considered a tax and that Congress has the power to impose taxes.  However, in order to be able to rule on this issue, the Court first had to determine that the penalty was not a tax because the Anti-Injunction Act prohibits a court challenge of a tax before it is paid.  The mandate first applies to 2014 tax returns filed in 2015.  The Court reasoned that since Congress never called the required payment a tax, but rather a "shared responsibility payment" (or penalty), that it wasn't a tax for this purpose.  Therefore the Court could proceed with a decision.  Then 18 pages later, the Court called the payment a tax in order to uphold the law!
2. The Court limited the Commerce Clause of the Constitution stating that Congress could not regulate economic inactivity, like a decision not to purchase health insurance.  This holding would have invalidated the law except for the tortured reasoning above.
3. The Court restricted Federal power to punish States choosing to opt out of expanding Medicaid, ruling that the Federal government could not cut off Federal funding of current Medicaid programs.  Only new Federal funding of the expanded Medicaid program could be withheld from non-participating States.

Chief Justice Roberts, who wrote the majority opinion, added this observation at the end of his opinion:  "But the Court does not express any opinion on the wisdom of the Affordable Care Act.  Under the Constitution, that judgment is reserved to the people."  The opposing political parties will be taking their cases to the American people, as national elections are on November 6, 2012.

Now that the Supreme Court has ruled, it is time to get serious about the implications of the looming tax increases and administrative burdens on individuals and businesses.  Future blog posts will examine these taxes and responsibilities, and suggest planning ideas for coping with the Affordable Care Act.