Litigation Update: the Affordable Care Act

NCPA January 14, 2015

The Affordable Care Act is now law, but controversy over the bill is far from over. Plaintiffs of all stripes -- from nuns to businesses to Congress itself -- have challenged Obamacare, as well as its implementation by the executive branch.

In a new report from the NCPA, Senior Research Fellow Ann Purvis outlines many of the cases surrounding the Affordable Care Act. Ongoing controversies include:

• The religious accommodation: The Little Sisters of the Poor, a group of nuns, are opposed to the requirement that their insurance plans offer contraceptive coverage. The Obama administration has issued an "accommodation" -- if religiously affiliated groups object to the contraceptive mandate, the government itself will direct the insurer to provide contraceptive coverage. But the Little Sisters say that certifying their objections triggers provision of the services they find objectionable, doing nothing to relieve the law's burden on their conscience. Does the law violate their religious liberty? The case is pending before the Tenth Circuit Court of Appeals.
• The Origination Clause: Revenue-raising measures (taxes) are required to originate in the House of Representatives, but the Affordable Care Act originated in the Senate. Because the Supreme Court deemed the individual mandate penalty a "tax" in the 2012 case that upheld the mandate, litigants contend the tax is invalid under the Origination Clause. The plaintiffs recently filed for a rehearing before the D.C. Circuit Court of Appeals.
• The Independent Payment Advisory Board (IPAB): The ACA created IPAB, a panel which makes Medicare budgetary recommendations. Those recommendations become law unless Congress and the president can agree to an alternative proposal. Coons v. Lew challenges IPAB as an unconstitutional delegation of congressional authority. Plaintiffs have appealed to the Supreme Court after an unfavorable ruling before the Ninth Circuit Court of Appeals.
• Premium subsidies: The IRS decided to grant premium subsidies to enrollees in federally-run exchanges, even though the text of the law only provides subsidies to those in state-run exchanges. Are the subsidies valid, or did the IRS exceed its authority? The Supreme Court will hear the case this spring.

The Supreme Court will hear King v. Burwell on March 4, 2014. If the Court rules in favor of the plaintiffs, the individual and employer mandates would be affected. While all Americans are required to carry insurance, the individual mandate penalty is waived for individuals whose insurance is "unaffordable" (meaning that it costs more than 8 percent of their income). If subsidies are not available, estimates indicate that insurance would be deemed "unaffordable" for 99 percent of subsidy-eligible Americans. As such, those individuals would not have to pay the individual mandate penalty. Additionally, the ACA imposes penalties on employers who fail to offer their employees insurance, but the penalties only apply if their employees receive subsidized coverage in a health insurance exchange. Because receipt of subsidies is what triggers the employer penalty, employers would face no penalty for failing to offer health coverage if the Court rules that subsidies in federal exchanges are invalid.

Source:  Ann N. Purvis, "Litigation Update: the Affordable Care Act," National Center for Policy Analysis, January 2015.