The Supreme Court Battle over the Affordable Care Act Begins: What it Means for Employers

 The U.S. Supreme Court is scheduled to begin arguments today on the Affordable Care Act, and its ruling will have deep and far-reaching implications for employers in Illinois and throughout the nation.

Since the Act was signed into law two years ago, the Chamber has worked hard to ensure employers’ best interests have been represented in all facets of the healthcare reform effort. From our work on establishing Illinois’ Health Benefits Exchange to the Supreme Court amicus brief we jointly filed with 14 other chambers and business organizations earlier this year, the Chamber has led the way for our state’s businesses. The Affordable Care Act will also be the focus of the Chamber’s annual Healthcare Conference on April 19.

Given her expertise, I’ve asked Laura Minzer, the Chamber’s director of policy and the executive director of our Healthcare Council, to provide an update on the Act and the issue of healthcare reform for our members.

In just a few short hours, the Supreme Court will begin three days of oral arguments on constitutional and legal issues that will determine the fate of the federal healthcare law.

The Supreme Court’s official foray into the Affordable Care Act (ACA) this week comes almost two years to the day after President Obama signed the Act into law. The legal arguments before the Court have been selected from the onslaught of lawsuits that have plagued the law since it took effect and could either cap off a long legal drama that has played out over the past two years or add to an increasingly complex array of political, legal, and policy questions that have cast a very long shadow over the ACA.

To say the Supreme Court’s impending decision will be a landmark one is an understatement, regardless of what the nation’s highest court does hand down. It is difficult to think of a Supreme Court case in recent history that has such deep implications for such a wide swath of stakeholders, not least of which is the employer community. Unfortunately, the task before the Supreme Court is not as simple as determining whether the ACA is unconstitutional or not; the legal questions on which the oral arguments over the next three days will speak to are complex and carry far greater consequences for employers and other stakeholders than perhaps many have contemplated to date.

Whatever the decision may be, there still remains the question of what is next. Even if the law survives the ultimate legal litmus test intact, there is still the political litmus test with the upcoming presidential election to say nothing of the ongoing frustrations over implementation and interpretation of the ACA. And if the law is struck down, either in whole or in part, employers and consumers will still be left facing the realities of the healthcare coverage and delivery system in that it is expensive, fragmented, and flawed. Meanwhile, the population it is expected to serve well into the future is growing unhealthier by the year.

The Case and the Impact on Employers

The complexity of the constitutional and legal questions surrounding the ACA are immediately evident in the unprecedented amount of time the Supreme Court has set aside for oral arguments- six hours over the next three days – making it the most time allotted to a case in nearly 50 years. Once oral arguments conclude, the Supreme Court will quietly dissect the arguments and the mountain of briefs before issuing an opinion, most likely in June. It will be a decision awaited with a collective baited breath.

Anti-Injunction Act

The first argument to be heard before the Court- the subject of the oral argument today – involves an issue that has received very little public attention, but it is an issue that could effectively quash any hope of having closure on the other constitutional questions in play for at least another two years.

The question being argued today is whether the Court should interpret a long-standing federal law called the Anti-Injunction Act as applicable to the overall case. In other words, the Supreme Court has to decide whether the “stick” tied to the individual mandate – the requirement that all individuals beginning in 2014 obtain health insurance or pay a financial penalty – is really a “penalty” as appears intended by Congress and the law or a “tax.”

If the Court determines the intended financial penalty for non-coverage is in fact not a “penalty,” but a “tax”, then the Court may choose to rule that it does not have the authority to interfere with the 145-year-old federal law that prohibits court intervention on tax issues until the tax is actually assessed and paid.

The first argument, which has its legal underpinnings not in the Constitution but federal law, could create extreme and costly problems for employers, as it would delay any further legal action on the ACA until 2014 or later.

The Illinois Chamber recognizes the gravity of such a ruling and joined forces with 14 other state chambers to file an Amicus Brief on February 13 citing the potential devastating impact such a delay in ruling could create on the employer community. While the brief sides with the respondents in regards to Congress’ clear intent to characterize the individual mandate as a penalty and not a tax, the major focus of the Chamber’s brief is the direct financial implications such a ruling would have, arguing that a delay will make it impossible for employers to plan with any confidence potential benefit changes and workforce needs in the future.

Furthermore, employers are expected to incur a direct cost of more than $50 billion in penalties for lack of coverage or adequate coverage beginning in 2014. If the Court chooses to pull the Anti-Injunction card and later finds the ACA unconstitutional post-2014, the amount forfeited by employers prior to such a ruling represents an enormous opportunity cost that employers could have otherwise invested elsewhere to spur job and business growth.

The Individual Mandate and Severability

Tomorrow’s oral arguments will focus on the most publicly debated of all of the constitutional issues: the individual mandate. The question before the Court is whether Congress has the Constitutional authority to require individuals to purchase a commercial product, or in this case health insurance. Lower court decisions have been somewhat split on this question, with some ruling that the individual mandate does indeed violate the Constitution’s Commerce Clause meaning Congress does not in fact possess the authority to require individuals to purchase health insurance.

Other lower court rulings, however, have found that the individual mandate does not violate the Commerce Clause, which does give Congress the authority to regulate “economic activity amongst the states.” The argument in favor of constitutionality follows that since the uninsured are making an economic decision that not only impacts themselves, but also that of the entire market, Congress is within its authority to regulate individual purchase of health insurance.

The Supreme Court’s consideration of the constitutionality of the individual mandate, however, will also have to weigh the issue of severability; a subject that will be debated on the final day of oral arguments this week. Since the ACA did not contain a “severability clause,” which protects laws from being struck down in their entirety if one provision is struck down by the courts, the Supreme Court must now decide whether the individual mandate provision, if found unconstitutional, is in fact severable from the rest of the Act.

If the Court clears the first legal hurdle and decides that it does indeed have the authority to rule now on the constitutionality of the individual mandate, inseverability will be crucial, particularly if the Court finds the mandate unconstitutional.   The individual mandate is considered to be the lynchpin to the entire Act and without such a provision in place in 2014, the percentage of individuals obtaining health insurance will fall dramatically while insurers will be forced to take on high-risk individuals without any mechanism to mitigate the costs associated with those individuals.

The Illinois Chamber of Commerce has publicly expressed concerned at the state level that if the Supreme Court does find the individual mandate unconstitutional without finding the entire Act unconstitutional, the negative effect of that ruling would be profound on employers and their employees, including sharp increases in premiums and loss of affordable/quality insurance options, unreasonable regulations, increased penalties, and a greater disruption in employer-sponsored coverage.

What’s Next for Health Reform

How the Supreme Court will ultimately rule on all of these issues is anyone’s guess. The “cleanest” decision outcomes, assuming the Court does not rule the Anti-Injunction Act applicable, is that the Court either rules the individual mandate constitutional and therefore, the entire Act constitutional or the Court rules the individual mandate unconstitutional and not severable, which means the entire Act is struck down.

But neither of those decisions is without consequence. Striking down the entire Act, while appealing to those who staunchly opposed the ACA, will be messy as we struggle to figure out how to undo two-years of changes that have expanded coverage opportunities, instituted other benefit and regulatory changes, provided financial support to small businesses for the purchase of health insurance, and spent billions of dollars in federal funds to support state ACA planning and implementation activities.  

The ACA’s arrival before the Supreme Court was inevitable, even before the first lawsuit was even filed. Nevertheless, the closer we have come to the reality of this day, the more uncertainty and frustration over the law and its future have been allowed to flourish. In some cases, particularly in state’s like Illinois that are attempting to implement health benefit exchanges, it has created all out paralysis.

Leaving the ACA intact will re-establish certainty in the status quo for the past two years, but even that status quo has been fraught with uncertainty and frustration over the sheer complexity of the law and its true ability to influence the overall cost of healthcare. Clearing the way for the ACA to proceed in whole is also not a guarantee that planning and implementation efforts will begin again in earnest. Politics has always played a prominent role in the debate over the ACA and even the Supreme Court won’t be able to eradicate that in the middle of a presidential election year.

Nevertheless, the Supreme Court’s decision matters greatly to the process moving forward. It will set a tremendous legal precedent and it will determine the policy and regulatory landscape in the months and years to come.

What the Supreme Court’s decision- whatever it may be- won’t be able to do, however, is address the fundamental problems that still plague our health coverage and delivery system. Health insurance costs are still pricing individual and small businesses out of the market, healthcare costs in general are outpacing the rate of inflation, the system is still plagued with inefficiencies, and the overall prevalence of preventable, treatable chronic conditions is developing at a disastrous rate of speed.

The ACA was certainly the President’s answer to those fundamental problems of access, affordability, and quality, but the Illinois Chamber continues to maintain that none of these fundamental problems will be adequately tackled in the chambers of the Supreme Court or within the current parameters of the ACA.

If there is a lesson to be learned from our collective hand-wringing over the ACA and the Supreme Court’s ruling, it should be that health reform transcends both of these. The ACA is merely the government’s response to health reform complete with ugly politics and legal battles, but the market has been working to transform how coverage is provided, delivered, and improved for many years. To be clear, there are still plenty of barriers to overcome, not least of which is making coverage more affordable for employers, their employees, their families, and individual consumers.

Employers, providers, insurers, agents/brokers, pharmaceutical companies and other stakeholders, however, are already taking on those systemic challenges by implementing innovative approaches to coverage and care every day.

The Illinois Chamber, by way of its annual healthcare conferences and the Healthcare Council, strives to leverage these market innovations in the hopes of shifting the conversation around health reform beyond that of just the ACA.

Register Today

On April 19, the Illinois Chamber of Commerce will host its seventh annual Healthcare Conference that will look beyond the ACA and help employers navigate their health benefits in an “era of health.” The conference is also designed to help employers and other members of the healthcare community learn about best practices and access resources necessary to build a proactive and effective healthcare cost management strategy.

Keynote speaker Dr. Stephen Aldana, Founder and President of Lifestyle Research Group (LRG), will discuss how employers can bend the healthcare cost curve and improve their bottom lines by improving their employee’s health. Conference attendees will also hear thoughts on the need to define our value and our vision for healthcare to pave the way for successful reform from Dr. Edward Hughes, a Professor of Management and Strategy at the Kellogg School of Management and how organizations like Advocate are transforming the healthcare delivery system through new models of care from Dr. Mark Shields, Advocate Physician Partner’s Senior Medical Director. Those in attendance will also be able to take advantage of breakout sessions offering key insights into how the ACA and the pending legal battle may impact planning and health benefit design, as well as new private coverage models that may help employers promote choice and lower costs.

To register for the Illinois Chamber’s Healthcare Conference, visit our conference website or contact Julie Brennan at jbrennan@ilchamber.org.