Penalty Or Tax? ACA Fate Rests On Supreme Court’s Distinction

For the third time in eight years, the Affordable Care Act will come before the Supreme Court as the justices hear oral arguments Tuesday in a case that could strike down the health care law.

California vs. Texas is the result of a major tax bill passed by Congress in 2017. One provision of the bill reduced the penalty for not having health insurance to zero. A group of Republican state attorneys general contends that the penalty – which was a tax – makes the law unconstitutional. Without the penalty, the rest of the law must fall, they claim. The Trump administration joined the Republican officials who filed the case.

Although the court isn’t expected to hand down a decision until early 2021, here are some possible outcomes, according to Kaiser Health News.

The justices could rule the entire ACA is unconstitutional. But the court also could rule that eliminating the penalty but not the rest of the mandate means that lawmakers “didn’t mean to coerce anyone to do anything, and so there’s no constitutional problem,” University of Michigan law professor Nicholas Bagley said in a recent webinar for the NIHCM Foundation, the Commonwealth Fund and the University of Southern California’s Center for Health Journalism.

Another possible scenario would be the court rules that, without the tax, the requirement to have health insurance is unconstitutional, but the rest of the law is not.

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What would make things more complicated, Kaiser reports, is if the court strikes down the mandate and the pieces of the law most closely related to it —the insurance protections for people with preexisting conditions. The two parts are connected because the original purpose of the mandate was to make sure enough healthy people sign up for insurance to offset the added costs insurers incur for sicker people.