Ernst & Young LLP to offer insights on the implications of the US Supreme Court’s decision to uphold the Affordable Care Act
Washington DC, 28 June 2012 — Ernst & Young LLP is scheduled to host an Ernst & Young Thought Center webcast on July 17 to discuss the implications of the US Supreme Court’s ruling on individuals, employers, and health care providers. To register for the webcast, please go to the following link.
Ernst & Young shared the following brief with clients today providing additional insights into the decision:
The Supreme Court of the United States today upheld the Affordable Care Act (ACA), ruling that the law’s individual mandate is a constitutional exercise of Congress’s power to impose taxes. With the Court’s decision, compliance efforts likely will move ahead at full speed with major provisions of the ACA becoming effective in 2013 and 2014.
In a 5-4 decision, Chief Justice Roberts, joined by Justices Ginsburg, Breyer, Sotomayor and Kagan, concluded, “The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”
In the Court’s analysis of the ACA’s Medicaid provisions, it held that it would be unconstitutional for the federal government to withhold all Medicaid funding in order to force states to comply with the Medicaid expansion. Chief Justice Roberts wrote, “Nothing … precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.”
The Court ruled that the Anti-Injunction Act, which limits lawsuits challenging a tax before it is assessed, does not apply because Congress specifically provided that the penalty payment enforcing the individual mandate would not be treated as a “tax.” Notwithstanding acceptance of Congress’s penalty label for purposes of application of the Anti-Injunction Act, the Court ruled that for purposes of determining whether the individual mandate is constitutional, the penalty payment falls within Congress’s general power to tax and, therefore, is upheld.
The decision arises from cases brought by the state of Florida (and joined by 25 other states), the National Federation of Independent Business, and several individuals challenging the constitutionality of the individual mandate and the Medicaid expansion. The cases were later consolidated.
In their dissent, Justices Kennedy, Scalia, Thomas and Alito wrote that the law should have been struck down in its entirety.
With the exception of the limitation on the federal government’s authority to withhold Medicaid funding, all provisions of the ACA stand and compliance efforts likely will move ahead at full speed. In preparation for the major coverage expansion to occur under the ACA in 2014, the Administration is expected to release a host of regulations dealing with the definition of minimum essential coverage, employer coverage and reporting requirements, and an array of new taxes and fees.
Background on the law
The Affordable Care Act was enacted in March 2010; it comprises the Patient Protection and Affordable Care Act of 2010 (which President Obama signed on March 23, 2010) and the Health Care and Education Reconciliation Act of 2010 (which the President signed on March 30, 2010).
The primary goals of the ACA are to: (i) expand coverage to an estimated 32 million Americans without health insurance; (ii) reform the delivery system to improve quality and drive efficiency; and (iii) lower the overall costs of providing health care.
To accomplish the goal of expanding coverage, the ACA mandates that all Americans maintain a minimum level of health coverage (the so-called individual mandate) or face a tax penalty. The law expands Medicaid coverage and provides federal premium tax credits and cost-sharing subsidies to assist low and moderate income individuals without affordable employer-sponsored insurance in obtaining health insurance through state-based insurance Exchanges. The ACA mandates, for the first time, that employers with 50 or more full-time employees provide certain minimum benefits or pay penalty fees.
The law also implemented insurance market reforms, including a ban on exclusions for pre-existing conditions, premium rate restrictions, extension of dependent coverage through age 26, and mandatory coverage of preventive services.
A mix of Medicare and Medicaid reimbursement cuts; provisions to reduce fraud, waste, and abuse in those public programs; other delivery system reforms; and a series of tax increases on individuals, corporations and the health industry are used to offset the cost of the law.
For more information
A video highlighting key elements of the Supreme Court's decision will be available on www.ey.com.
For current insights on the decision, please contact Michelle Sing at 201-872-1362, or Michael Devine at 617-761-6756.
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