Big stakes in health care challenge

By Kimberly Atkins Dolan Media Newswires BOSTON, MA--If the complex legal issues arising from the constitutional challenge to the federal health care law weren't enough, lawyers are bracing for the practical impact the U.S. Supreme Court's decision in the case will have on their clients. During the week of March 26 the justices are scheduled to hear an extraordinary five-and-a-half hours of oral arguments in cases challenging the federal health care law and its related mandates. The lengthy debate is warranted, given the plethora of highly technical issues the Court must tackle. Lawyers are keeping an eye on the cases due to possible implications for their clients, including employers dropping health care coverage altogether, discriminatory health care policies, the loss of small business tax credits and a potential flurry of federal regulations. "The Supreme Court's decision on the constitutionality of the health reform law will have far-reaching policy implications," said Alson R. Martin, a partner in the Overland Park, Kan., office of Lathrop & Gage. Individual mandate and Medicaid expansion At the heart of the challenge to the federal health care law is a provision requiring individuals to purchase health care coverage or face a penalty. Those challenging the provision say the measure exceeded Congress' authority under the Commerce Clause. They argue that the constitutional provision allows lawmakers to regulate interstate activity and that the failure to purchase health insurance is not "activity" within the Constitution's meaning. Proponents of the health care law say that it falls squarely within the government's power to regulate an industry such as health care, since its impact on the economy is so strong. "If Congress can't regulate an industry with such a huge impact on the U.S. economy, is there any limit on a judge's ability to undermine federal stewardship of equally pressing issues?" asked Caroline Fredrickson, president of the American Constitution Society of Law and Politics. But opponents say the law imposes burdens, particularly on businesses, that will lead to unintended negative consequences. At the same time, they say, it probably won't solve the problem it seeks to address. "There is a penalty for not getting insured, but it's not that large of a penalty, [so young, healthy] people may choose not to get insured," said Hans Bader, counsel for special projects at the Competitive Enterprise Institute, which filed a joint amicus brief in the case with the Cato Institute. Bader said the challenge illustrates a problem with the way the law was enacted--caused in part by a polarized political atmosphere that made it impossible for a compromise measure to be worked out. The law, he noted, "was passed by a narrow margin," with an up-or-down vote format that prevented anyone from making changes. But Emily Martin, vice president and general counsel at the National Women's Law Center, said that the law is based on the same authority Congress has used to pass countless pieces of legislation. "Just like Congress can pass laws saying, for instance, that a hotel owner can't decide not to rent a room to someone because of his race, or that an employer can't decide not to consider someone for a particular job because she's a woman, so can Congress can pass a law saying that you can't decide just not to get health insurance and to place the risk you will have for catastrophic health care costs onto the greater society," she said. But the sleeper issue in the case could be the challenge to the law's Medicaid expansion. A number of states challenging the law argue that the federal government lacks the authority to require states to expand the Medicaid program as the health care law requires. "That was not a major issue in the lower courts," said Lathrop & Gage's Martin, noting that some were surprised the Supreme Court decided to grant certiorari on the issue. "Some people think that may be the issue that the Court is most likely to focus on," she added. "Who knows?" But the NWLC's Martin said that the federal government clearly has the right to implement measures that prevent people from facing Medicaid discrimination. "By 2014, over 8 million women will have Medicaid coverage for the first time as a result of the new law," she said. Knocking down the entire law A major issue in the case, should the mandate be ruled unconstitutional, is whether that provision is severable from the rest of the law, or if it will lead to the measure being struck down in its entirety. Invalidation of the entire measure would have an impact far beyond the mandate, lawyers say. Such a scenario will mean the end of a number of provisions that affect employers, particularly small businesses, such as the health care tax credit. Important nondiscrimination requirements would also be invalidated, as well as a provision that prohibits insurers from denying coverage based on a pre-existing condition. However, if the law is upheld in its entirety, a number of unforeseen consequences could occur as well. For example, many employers could choose to drop health care coverage altogether. "Employers may be more inclined to drop coverage and let people go to the exchanges" to buy their own coverage individually, Lathrop & Gage's Martin said. Health care exchanges are state-based entities that offer individuals a choice of plans, options and prices. This effect could be seen more frequently with small- to medium-sized employers who are covered under the law, since many large corporations tout health insurance as part of their overall compensation package. "Especially [for employers] with lower-paid employees, they can in many cases come out ahead if they take the money they would have spent on health insurance and pay it to the employees and tell employees to go" buy their own coverage, Lathrop & Gage's Martin said. Let's put the whole thing off? There is another potential twist that could arise: the justices could decide that they can't consider the challenge at all until at least 2015. The Court must decide whether the Internal Revenue Code's Anti-Injunction Act applies. That Act, in short, prohibits courts from invalidating a tax that has yet to be collected. Since the new law won't begin to be rolled out until next year, with most associated levies not taking place until 2015, the Court may find that it has to wait until then to chime in. But then again, maybe it won't. "I'm not sure that argument will prevail here because the issue is so important," Lathrop & Gage's Martin said. He noted that not only must individuals and companies prepare for the upcoming implementation of the law, but states must set up health care exchanges. "That will require a lot of work," he said. Bader noted that there are also a host of regulations that are set to go into effect before the law is fully implemented. "If they don't hear the challenge now, there will certainly be a lot of disorder and increased burden" on businesses and the health care industry, Bader said. Entire contents copyrighted © 2012 by The Dolan Company. All rights reserved. Reproduction in whole or in part without written permission is expressly forbidden. Published: Thu, Mar 22, 2012