Supreme Court and the Affordable Care Act: What Does it Mean for You?

By Kimberly Johnke, LCSW, and Letha Sgritta McDowell, CELA
July 20, 2012

The recent Supreme Court decision regarding the Affordable Care Act (ACA) has been long awaited, much publicized, and touted as surprising. The publicity surrounding this decision has been sensational, but it offers little explanation about what the law means for the average person.

The ACA was signed into law in 2010, and its implementation began by year’s end. While many provisions of the act took effect immediately, others are staggered to take effect over the next few years. Currently, the following ACA provisions are in effect:

  • Children cannot be denied insurance coverage due to pre-existing conditions.
  • Plans offering dependent coverage must permit children to remain under their parent’s plan until age 26 years.
  • Insurers cannot impose lifetime limits on insurance coverage.
  • Insurers cannot cancel or deny coverage to sick persons, except in cases of fraud.
  • Adults with pre-existing conditions can purchase coverage from temporary high-risk pools until 2014 when coverage cannot be denied.

One of the most controversial provisions of the law is the individual health insurance mandate that requires Americans and legal residents to purchase qualifying health insurance (Exceptions for economic hardship, religious beliefs, and other situations can apply.) or be subject to a fine in the form of a tax of up to 2.5% of household income on individuals. This provision of the law is scheduled to take effect in January 2014. To facilitate the purchase of health insurance, states will be required to establish an American Health Exchange by January 2014. Also effective on this date will be the availability of tax credits to qualifying individuals to offset costs of health insurance premiums. Qualifying individuals will include those with income levels between 100% and 400% of the federal poverty level. (Currently, 400% of the federal poverty level equates to an annual income of $43,000 for a single individual and $88,000 for a married couple.)

Of particular concern to states were sections of the ACA that expanded Medicaid benefits to individuals not previously eligible for Medicaid under current law. Beginning in January 2014, states will be required to cover nearly all people under age 65 with household incomes below 133% of the federal poverty level. States will be able to receive federal matching funds for covering some low-income individuals and families; however, failure to implement supporting policies could result in a complete loss of federal funding for state Medicaid programs.

A total of twenty-five States challenged the ACA, and the Supreme Court agreed to hear argument and rule on the validity of the individual mandate provision and the Medicaid provisions. The Supreme Court ultimately decided that the individual mandate to purchase health insurance was a valid exercise of Congressional authority. Essentially, the Supreme Court held that the individual mandate was a tax, and Congress has the authority under the Constitution to levy taxes. The Supreme Court also held that, while requiring the states to allow additional people to qualify for Medicaid benefits is constitutional, eliminating federal funding for other Medicaid programs if states fail to comply is excessive. Therefore, the requirement is valid, but the penalty for failure to comply is invalid.

The following new provisions of the ACA will take effect in 2012:

  • Value Based Purchasing Program – Hospitals will be offered financial incentives to improve the quality of care. Hospital performance will be publicly reported.
  • Creation of Accountable Care Organizations – Physicians and hospitals will be allowed to work together to improve the quality of care by passing on financial rewards for the improvement in care.
  • Electronic Medical Records – EMRs will be required beginning in October 2012.

In 2013, payments to primary care providers will increase, hopefully increasing the number of physicians willing to take Medicare patients. Also in 2013, a new 3.8% tax will be levied on unearned income, which is income produced from stocks, bonds, mutual funds, etc., for taxpayers with income that exceeds $200,000 a year. This tax will go directly to funding the Medicare program. In 2014, insurance carriers will no longer be able to charge higher rates based on age or gender.

While the Affordable Care Act made sweeping changes to the health care system, the recent Supreme Court decision did not. The Supreme Court has simply upheld an act that went into effect in 2010. From the above you can see the changes that were scheduled to take effect. For more information on the ACA, health insurance, and long-term care, please contact one of the attorneys at Oast & Taylor.