The constitutionality of the Patient Protection and Affordable Care Act (ACA) was challenged in two cases before the Supreme Court in 2012.
Additional cases on the law are pending. In 2014, the Supreme Court announced it would hear a case concerning the individual tax credit.
Individual Mandate Challenge
A case brought before the Supreme Court in 2012, National Federation of Independent Business v. Sebelius, challenged the constitutionality of the so-called “Individual Mandate.”
The case asserted that the so-called “Individual Mandate,” the requirement for all individuals to obtain insurance coverage, by 2014 or face a tax penalty to be a wrongful use of Congress’s taxation and commerce powers.
On June 28, 2012, the Court handed down a 5-4 decision that upheld the law, and the tax penalty as constitutionally within Congress's legislative powers to require.
The second case brought before the Supreme Court in 2012, filed by 26 states, challenged the required Medicaid Expansion under the ACA in each state.
On June 28, 2012, the Court declared that although the law requiring the states to expand the Medicaid program was valid, the Federal government cannot force participation in the expansion, by removing all federal funding for those states that do not comply.
Policy Outcome for Medicaid Expansion
The Court’s decision effectively left states with the ability to opt-in or opt-out of the proposed expansion of the Medicaid program. In 2011, guidance from HHS was issued clarifying that the Medicaid expansion would be available to states in perpetuity – meaning that even states that do not initially expand the Medicaid program in 2014, would have the option of taking up the Medicaid Expansion at any time in the future.
Starting in 2014, states that expand Medicaid, receive federal funding for the Expansion, included in the law. However, states may not expand the program only in part, as they choose.
Under the law, as it was originally passed, the Medicaid Expansion should have made coverage available to every citizen in a state, up to 133% of the federal poverty level (FPL). Those with incomes higher than that amount who still lacked coverage, would have to purchase insurance in the State Insurance Exchanges. However, the law provided for tax subsidies for those up to 400% FPL. In states that forgo the Medicaid expansion, many low-income persons who are not eligible for the government subsidies for purchasing insurance, but who would have otherwise qualified for the expanded Medicaid were left with a requirement to obtain coverage, but no financial assistance to do so.
Individual Mandate Challenge
In 2014, the Supreme Court announced its intent to hear a new challenge to the ACA law, a case named “King v. Burwell,” which questions the legality of tax credits (subsidies) that were credited to individuals who used the subsidies to purchase insurance coverage as required by the individual mandate in states where a Federally-run Exchange was established. The case is still pending.