Stanford’s Michelle Mello and David Studdert on SCOTUS ACA Decision

In its third major decision about the Affordable Care Act, the U.S. Supreme Court on Thursday rejected efforts to undo the now popular health care law. Passed in 2010, the ACA is today a cornerstone of American health care—enabling millions of people who could not qualify for or afford private health insurance to receive it. Here, Stanford Law School health law experts Michelle Mello and David Studdert discuss California v. Texas, the role of the ACA during the COVID-19 pandemic, and how the law might be strengthened during the Biden administration.

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Stanford Law Professors David Studdert and Michelle Mello

What was the nature of the dispute the Supreme Court ruled on today?

Like so much else with the Affordable Care Act (ACA) reforms, it’s complicated.

Opponents of the ACA always detested one feature above all others: the so-called “individual mandate”.  This rule required people who were not poor or covered by Medicaid to buy at least a basic health insurance plan or else pay a penalty. The penalty was administered by the IRS as part of the income tax system.

When the Supreme Court first heard a challenge to the ACA back in 2012, it ruled that requiring people to buy insurance exceeded the scope of Congress’s constitutional power to regulate interstate commerce; however, it could be upheld as a valid exercise of its power to levy taxes.

A Republican-led effort in Congress subsequently removed the financial penalty for not buying insurance. That created a conundrum: was the individual “mandate” at this point still a tax, and if not, did that mean the entire ACA was now unconstitutional because the previous basis for upholding the mandate had evaporated? That was the issue in California v Texas.  The original suit was brought by 18 Republican-led states and two individuals.

How did the Court respond to this argument?

To win, the plaintiffs had to clear three hurdles: (1) prove they had “standing” to bring the case, which involved demonstrating that the ACA’s continuation in the absence of the individual mandate harmed them; (2) show that, without the penalty provision, part of the law was indeed unconstitutional; and (3) convince the Court that this part could not be “severed” from the rest of the ACA scheme, so that the entire scheme had to be struck down.

A 7 to 2 majority ruled the plaintiffs tripped at the first hurdle, which meant the Court  didn’t need to consider the others. The justices held that because the IRS could no longer impose penalties on people who didn’t buy insurance, the individuals who had challenged the law hadn’t suffered any injury.

The state plaintiffs had argued that the penalty-free mandate led people to enroll in Medicaid and created administrative costs.  The individuals had argued that they were hurt financially by being forced to buy health insurance. The majority opinion found these arguments illogical and did not accept that such harms flowed from a requirement to buy insurance that was toothless and unenforceable.

Were you surprised at this outcome?

No.  Like many health law scholars, we were somewhat astonished that the case even made it this far.  The plaintiffs’ argument was strained at best.

Does the Supreme Court’s ruling today end Republicans efforts to undo the Affordable Care Act?

“End” is a strong word. But we think the era of existential challenges to the ACA has probably passed.

The ACA has now survived a barrage of litigation, including three fundamental challenges that reached the Supreme Court. The others, in 2012 and 2015, were in many ways more serious legal arguments.  In his dissenting opinion today, Justice Alito referred to the series as an “epic Affordable Care Act trilogy”.

Today’s decision ends the most significant and high profile of the remaining wave of challenges to the ACA.  No doubt there are more weak spots to prod in this sprawling law. But the politics have changed. Republicans had a hard time finding traction with their platform of dismantling the ACA during the 2020 election because Americans have been struggling under the weight of the Covid-19 pandemic. Health insurance is a pretty nice thing to have during a pandemic. The connection between Obamacare and access to good health care is not as opaque as it once was to the many Americans. It is increasingly difficult to imagine turning the clock back.

In fact, there is momentum in the opposite direction. The Biden Administration has vowed to shore up the ACA and is making headway. For example, Congress’s Covid-19 relief package included a $34 billion boost to the subsidies that help people find affordable insurance on the health insurance marketplaces that the ACA established.

What role has the ACA played during the COVID-19 pandemic?

It has been very important.  Although other federal legislation made Covid-19 testing and treatment essentially free, millions of Americans lost their jobs during the pandemic, along with the health insurance that went with those jobs. ACA reforms allowed many of them to find affordable alternatives. Also, although use of health care services declined sharply during the worst of the pandemic, health care use has rebounded. Many who delayed care—from counseling to elective surgeries—now need it more than ever, and the ACA’s expansion of insurance coverage helps make this possible for more than 20 million Americans who might otherwise have struggled.

So today is a win for the Biden Administration.  Does it mean we should expect more and bolder healthcare reform over the next few years?

Expect some changes, but not big reforms.  The President and Congressional Democrats have a slew of priorities on their policy agenda right now; major healthcare reform doesn’t appear to rate high among them.

As a candidate for President, Biden promoted the idea of a “public option” for health insurance—an alternative to commercial insurance that would be available on the marketplaces for those who wanted it. He also proposed to lower the age of eligibility for Medicare to 60 years. But we’ve not heard much about those proposals lately.  The best bet for the time being would be several modest reforms aimed at ensuring the ACA delivers on its promise.

David Studdert and Michelle Mello are experts in the fields of health law and empirical legal research.  Both are Professors of Law at Stanford Law School and Professors of Medicine in the Stanford University School of Medicine.