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Supreme Court upholds health-care-reform law

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Although the Supreme Court upheld nearly all provisions of the landmark Patient Protection and Affordable Care Act, the law’s goal to dramatically increase health-care access for uninsured individuals still might suffer.

That’s because the court blocked a provision from President Barack Obama’s 2-year-old health-care-reform initiative that was designed to expand Medicaid eligibility in each state.

Nonetheless, the June 28 ruling keeps in place a controversial government decree that says individuals who refuse to purchase a health-insurance policy must pay a tax. The court also upheld major consumer-protection components.

The nine-member Supreme Court voted 5-4 in favor of upholding the law. Chief Justice John Roberts joined Justices Ruth Bader Ginsburg, Stephen Breyer, Elena Kagan and Sonia Sotomayor in ruling that the law is constitutional. Justices Samuel A. Alito Jr., Anthony Kennedy, Antonin Scalia and Clarence Thomas dissented, saying all provisions of the law were invalid.

The decision follows rancorous partisan debate over the law, which President Obama signed in March 2010. In November 2011, 26 states filed a joint appeal that challenged the constitutionality of the Affordable Care Act. Opponents of the law, including Republican lawmakers, said the court’s ruling makes them more determined than ever before to dismantle it.

The debate centers on whether the federal government can force consumers to purchase insurance, which is the so-called individual mandate. The law says that starting in 2014, individuals who don’t have health insurance must pay a federal tax.

Roberts, who wrote the majority opinion, indicated that the federal government doesn’t have the power to force individuals to purchase health insurance. However, Roberts said it’s legal for Congress to use its taxing power to impose a penalty on individuals who choose to not purchase insurance. In other words, the majority opinion concluded that declaring the law unconstitutional would have meant Congress no longer has the authority to impose taxes.

“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,” Roberts wrote in the majority opinion. “Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.”

Overall, the ruling was a victory for consumers, experts tell Consumers Digest. For instance, analysts tell Consumers Digest that the individual mandate will lead to lower health-insurance premiums for everyone who has insurance, because the premiums that healthier consumers pay would compensate for the costs of individuals who are sick.

In addition, health-insurance companies stand to gain as many as 16 million new customers through the individual mandate. If the court had abolished the individual mandate, health-insurance companies likely would have increased premiums in an attempt to recoup potential losses, experts say.

However, the Court’s decision to block the Medicaid-expansion provision could mean that fewer individuals will have access to health care in the years ahead than what the law was designed to provide, experts tell Consumers Digest. The law seeks to expand Medicaid eligibility in each state for an additional 12 million individuals, and the federal government will pay states to cover the overwhelming majority of those costs.

Roberts said the federal government can’t force states to expand Medicaid, nor can it punish states that don’t comply by withholding federal subsidies that pay for existing Medicaid recipients.

It’s unclear how many states—particularly among the 26 states the challenged the law—will follow through with Medicaid expansion. Linda Blumberg, who is a senior fellow at Urban Institute, which is a social and economy policy research center, believes that it’s unlikely that states will turn down the federal subsidies that would cover from 90 to 100 percent of costs that are related to Medicaid expansion.

“There has been a lot of political talk and posturing, but the truth is that I think it is going to be very difficult for the vast majority of states to leave that money sitting there,” she says.

The expansion of Medicaid was designed to help to mitigate health-insurance costs for individuals who earn less than $44,000 per year, Blumberg says. However, in states where Medicaid expansion is rejected, individuals who earn up to $11,000 annually and four-person families that earn up to $23,000 annually would be affected most severely. If those individuals sought private-market health insurance, they would have to do so through an employer or they would have to purchase a nongroup policy, which could be unaffordable at their level of income, Blumberg says.

Nonetheless, the Supreme Court decision also keeps in place key consumer protections. For instance, in 2014, health-insurance companies won’t be able to discriminate coverage because of a person’s pre-existing medical condition. Health-care advocates long have hailed that provision as a significant victory for consumers. In addition, the law also allows young adults to remain on their parent’s health-insurance plan until they turn 26.

President Obama called the ruling “a victory for people all over this country.” But Republicans immediately vowed to repeal the law.

Yet the likelihood that lawmakers dismantle the Affordable Care Act hinges on whether Republicans take control of the White House and Congress after the November 2012 elections. GOP presidential candidate Mitt Romney says he’ll repeal the law if he’s elected, even though the health-care reforms that he created as governor of Massachusetts provided a blueprint for existing federal reforms.

If you want to get a better grasp of the consequences of the health-care-reform law, read “Health-Care Reform: Putting Benefits and Costs Under the Microscope,” in the July/August 2010 issue of Consumers Digest.

Katie Fanuko is the Associate Editor-Online at Consumers Digest.

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