Ask a Lawyer: The Affordable Care Act Survives—What Now?
When President Obama signed the Patient Protection and Affordable Care Act (ACA) into law, nearly 30% of HIV-positive Americans had no health insurance. They fell outside the eligibility requirements for Medicaid and Medicare, the country’s two government-funded health care access programs, and either could not afford or were denied private insurance. This coverage gap is not only an economic and public health crisis, but also a legal one: Americans with HIV have been systematically discriminated against in the health insurance market. This discrimination was one of the myriad problems the ACA was designed to solve, and it is at the heart of a compelling legal argument that the ACA is constitutional.
That, of course, is now a moot point. Last month, a sharply divided Supreme Court blessed the bulk of President Obama’s signature legislative achievement; the ACA’s requirement that most Americans buy health insurance or pay a penalty is constitutional under Congress’s power to tax. Since this portion of the ACA survives, then the health care reforms most Americans want—an end to pre-existing condition discrimination, insurance protection for children post-graduation, an end to annual and lifetime benefit limits, expanded coverage, and lower costs—survive, as well.
For many, this is good news, rescuing them from the possibility of bankruptcy after they get sick; for the HIV-positive community, it is salvation.
And yet, the decision in the case, captioned, National Federation of Independent Business v. Sebelius, was not an unequivocal victory for the HIV-positive community. Although it upheld the ACA as a legitimate exercise of Congressional power, the court narrowed Congress’s authority to address social and economic problems on a national scale. What’s more, the ruling gutted the ACA’s Medicaid expansion plan, turning it into an optional program that could leave thousands of Americans with HIV still without insurance. And Chief Justice John Roberts, the conservative jurist who sided with his liberal colleagues, may have saved the ACA to win the greater legal war for the conservatives. This admittedly imperfect victory should not obscure the one inarguable reality of the court’s decision: Millions of Americans who need health insurance will have it.
What is the ACA?
There are few markets as dysfunctional as the health care insurance market. It’s anti-competitive, expensive, and inefficient. If you have insurance through your employer, your premiums (the amount you pay for insurance coverage) may be going up, but you are reasonably well covered. If you are unemployed or your employer does not provide health insurance, you are forced into the bloated costs and unreliable service of the individual, or “non-group,” insurance market. If you do manage to become insured, you can pay thousands of dollars a year in premiums and then get dumped from your insurance plan when you get sick. Even those in the enviable position of having employer-provided health insurance are out of luck if they lose their jobs.
One way to solve these problems is to simply outlaw discrimination by insurers, like pre-existing conditions exclusions (which deny coverage to people who already have health problems when they apply for insurance) and charging sicker individuals higher prices. Some states tried that in the 1990s, with disastrous results. Health insurance plans function by spreading their own risk throughout large groups of people: The larger the group, the more likely there will be lots of healthy people paying premiums and the easier it is to spread the company’s risk and costs associated with treating the sick. But in a world where insurance companies have to cover all applicants and only the sick are applying, the companies’ risk and costs will increase.
Into this quagmire stepped the individual mandate, first developed by the conservative Hoover Institute, proposed by Republican politicians, and implemented by then-Governor Mitt Romney of Massachusetts. The individual mandate ensures that there will be a large pool of healthier individuals greasing the gears of the insurance market.
The ACA is a massive piece of federal legislation that, among other things, requires nearly everyone to buy health insurance. If you already have insurance through your employer or through a government-sponsored program like Medicare, Medicaid, or Tricare, the law leaves your health insurance habits unchanged. Those without insurance must purchase at least minimal coverage or pay a penalty. The penalty is progressive; that is, the fine is higher for higher earners and lower for those with lower incomes. And, to make insurance plans affordable, the ACA regulates the insurance industry to keep costs down and subsidizes plans for those who could otherwise not afford private plans.
Other than the individual mandate, the major provisions of the ACA are as follows: Insurance companies cannot deny coverage to those with pre-existing conditions (“guaranteed issue”) or charge two similar applicants for the same plan a different price based on where they live or what illnesses they have or had (“community rating”). They can still charge different rates to applicants of different ages, among other differences, but the most common forms of price discrimination are erased. Insurers cannot impose annual or lifetime coverage caps in their plans. Nor can they drop policyholders once they become sick.
The ACA also expanded Medicaid to include all those with incomes up to 133% of the federal poverty level. It requires states to establish health insurance “exchanges” or markets where individuals and businesses can shop for and compare their insurance options. Dependents (a legalese word for “children”) can remain on their parents’ health care plan until the age of 26. People whose incomes are above the eligibility level for Medicaid and between 133% and 400% of the federal poverty level will receive federal subsidies on a sliding scale if they choose to purchase insurance via an exchange. And, by August of this year, all plans must cover preventive services like mammograms and colonoscopies without charging a co-pay, deductible, or co-insurance.
What the ACA Means to the HIV-Positive Community
The pre-ACA health insurance market largely failed the nearly 1.2 million Americans with HIV. Free to charge whatever they wanted, insurance companies extorted huge premiums out of applicants with HIV. Free to deny coverage to those with pre-existing conditions, many companies simply said no to HIV-positive Americans. And free to cap benefits, insurance providers stopped paying for life-saving procedures and drugs when the costs got high.
What’s more, the “patchwork of public programs,” according to Lambda Legal’s HIV Project Director Scott Schoettes, creates a woefully inadequate safety net, leaving approximately 30% of the HIV-positive population uninsured. For example, HIV-positive adults without children are excluded from Medicaid unless they become disabled by active symptoms. And in many states, you must be diagnosed with AIDS before you can be considered “disabled” and eligible for Medicaid. As Mr. Schoettes explains, that puts low-income HIV-positive persons in a devastating catch-22: “Only once their HIV progresses to AIDS do they become eligible for the [antiretroviral medications] that would have prevented AIDS from developing, at which point treatment is more difficult and expensive.” And Medicare is simply insufficient; because of the costs associated with HIV treatment, HIV-positive individuals on Medicare still need private supplemental insurance. But those plans usually have high deductibles, cover a small percentage of drugs costs, have annual benefit caps, and are impossibly expensive for many low- and middle-income Medicare beneficiaries.
Guaranteed health insurance coverage and other ACA reforms are supposed to solve these problems by, among other things, offering HIV-positive Americans guaranteed coverage and lower costs. The ACA means an end to the health insurance industry’s discrimination against people with HIV, an end to annual and lifetime caps, the opportunity for early detection and early access to antiretroviral treatment, and a reprieve from the often-devastating financial burden associated with HIV care.
The Constitutionality of the ACA
But policies that we like are not necessarily constitutional. A Senator John Cornyn (R-Texas) called the ACA a classic case of “overreach by the federal government,” a view at the heart of the case brought by 26 Republican state attorneys-general against the ACA.
The principle questions the Supreme Court addressed are as follows: Does it violate the Constitution for Congress to require virtually all Americans to obtain health insurance or pay a penalty? And, can Congress require the states to comply with the ACA’s new requirements for Medicaid eligibility or risk losing all of their funding for Medicaid? The answer to both questions is no. Although Congress could justify the penalty under its Taxing Power in Article I of the Constitution, the federal government could not require the states to follow its Medicaid reforms by threatening to withhold all Medicaid funding.
The discrimination faced by the HIV-positive community did not factor into the decision, but it should have. Activists, advocates, judges, and others who study law were mostly concerned with esoteric legal concepts like the federal government’s power to regulate interstate commerce, the legal difference between a tax and a penalty, and whether the individual mandate could be severed from the rest of the ACA. And yet, as Mr. Schoettes and his colleagues at Lambda Legal argued before the Supreme Court, the ACA was a lawful exercise of Congress’s constitutional powers to help end the unique discrimination faced by HIV-positive individuals in the health insurance market.
The Power to Regulate Interstate Commerce or the Power to Tax
Some supporters of the ACA have long been confused by the suit challenging the individual mandate. After all, no one complains that states can require us to buy health insurance or car insurance, so the fracas over the federal government requiring us to do the same seems incongruous. The difference is the nature of the federal system. State governments possess a general grant of authority—called the “police power”—to pass laws to protect the health, welfare, and safety of their citizens. The federal government, however, has limited reach: Anything Congress does has to be justified by a specific power named in Article I of the Constitution.
To that end, the Obama Administration offered two sources of Congressional power to pass the ACA’s individual mandate: the Commerce Clause or the Tax and Spend Clause.
The Commerce Clause. The Government argued that Congress can require Americans to buy health insurance under the Commerce Clause (Art. I, § 8, cl. 3), which gives Congress the power to regulate commerce (the buying and selling of goods and services) between the states. According to Supreme Court precedent, the activity Congress seeks to regulate must have a substantial effect on interstate commerce, and the regulation must have a reasonable connection to the problem it seeks to solve.
The Obama Administration, along with hundreds of amicus curiae (“friends of the court” who have a strong interest but no direct say in a court case), argued that individuals’ refusal to buy insurance has a significant impact on interstate commerce. Since federal, state, and professional rules require hospital emergency rooms to treat everyone whether or not they have insurance, refusing to be insured increases the price of insurance and medical care for everyone else. As Justice Ruth Bader Ginsburg stated in her opinion in the ACA case, this situation pushes “private insurers [to] increase their premiums, shifting the cost of the elevated bills from providers onto those who carry insurance. The net result: Those with health insurance subsidize the medical care of those without it. As economists would describe what happens, the uninsured ‘free ride’ on those who pay for health insurance.”
And their impact on interstate commerce does not end there: The uninsured use billions of dollars’ worth of medical goods and services each year. Those goods and services, Justice Ginsburg reminded us, “are produced, sold, and delivered largely by national and regional companies who routinely transact business across state lines. The uninsured also cross state lines to receive care. Some have medical emergencies while away from home. Others, when sick, go to a neighboring state that provides better care for those who have not prepaid for care.” The Commerce Clause was meant to give Congress the power to address just this sort of problem—one that has a substantial impact on economic activity between the states and one that could not be solved by the individual states acting alone.
Chief Justice John Roberts, along with the conservative wing of the court (Associate Justices Anthony Kennedy, Antonin Scalia, Clarence Thomas, and Samuel Alito), rejected this argument and balked at what they saw as a gross expansion of the federal commerce power: The ACA was not regulating economic activity, it was creating it where none existed before. The Chief Justice argued that not buying health insurance cannot be economic activity, much like not buying a car or not buying a mattress cannot be considered economic activity. It is inactivity (at least in the period between when you buy your first and second cars or mattresses). And the Commerce Clause presupposes existing economic activity before it can be regulated.
This argument strikes me as misleading and incomplete for three reasons. First, the need for medical care is inevitable, unpredictable, and guaranteed: We all will, at some point, need a doctor or hospital or medicine, we have no idea when that might be, and when we show up at a hospital, we have to be admitted. This trinity of factors is nonexistent in other markets. Second, if I avoid the traditional insurance market, I am not declining to insure; rather, I am simply choosing alternate insurance—for example, my income, my savings, the equity in my house, my generous family members, all of which could be seen as “insuring” me against costs associated with medical care. And third, the uninsured are still active in the insurance market by the increases in costs they shift to the insured. As such, the uninsured are engaged in economic activity, with significant effects on the mainline insurance and health care markets.
What’s more, the Supreme Court has blessed congressional regulation in a similar context before. During the Great Depression, Congress tried to increase the price of wheat by limiting supply, or limiting the amount of wheat a farmer could grow. In Wickard v. Filburn (1942), a farmer wanted to and grow extra wheat for his personal consumption. Using the Commerce Clause, the Supreme Court affirmed Congress’s power to stop him: If wheat farmers collectively could exceed the production limit and avoid participating in the wheat market, the entire market would collapse. To address the economic crisis and avoid this market failure, Congress had the authority to compel participation in the market for wheat. Similarly, Congress’s power to regulate interstate commerce could compel participation in the health insurance market to lower prices and avoid the “free rider” problem.
The Limiting Principle. These arguments did not move the Supreme Court’s conservative justices. Even if they had, the justices were also concerned that accepting the individual mandate would lead to unlimited Congressional power. If Congress can order us to buy insurance, the argument goes, perhaps it can order us to buy broccoli, gym memberships, or banana hammocks. After all, eating more vegetables, working out more, and getting sufficient rest could improve our collective health and reduce health care costs.
Justice Ginsburg dealt with this argument, as well. There is no free riding in the market for vegetables, gyms, or cars, she observed. If you want broccoli, you have to pay for it at check-out; the supermarket is not obligated to satisfy your healthy craving for free. Plus, the court already limited Congress’s power under the Commerce Clause when it held that Congress could not regulate noneconomic conduct that has only a weak connection to interstate commerce, like bringing a gun to school (United States v. Lopez (1995)). And, as for the specter of “green vegetable mandates,” Justice Ginsburg noted the difference between the effect of broccoli and the effect of health insurance on our general health: “The court would have to believe that individuals forced to buy vegetables would then eat them (instead of throwing or giving them away), would prepare the vegetables in a healthy way (steamed or raw, not deep-fried), would cut back on unhealthy foods, and would not allow other factors (such as lack of exercise or little sleep) to trump the improved diet.” Such a weak and speculative connection would never satisfy the Commerce Clause’s “reasonableness” requirement.
The HIV-Specific Argument for Constitutionality
Lambda Legal’s Scott Schoettes wrote a highly regarded amicus brief (a court document filed by amicus curiae) in the Sebelius case in which he argued that the individual mandate is constitutional because it is a “necessary and proper” move to ensure nondiscriminatory access to health care. Mr. Schoettes reminded us that people living with HIV have been “systematically excluded from the health care insurance and health care markets.” More than 67% of the population as a whole has private health insurance, but only 17% of HIV-positive individuals do. The remainder falls under Medicare, Medicaid, and the Veteran’s Administration, with nearly 30% going under-insured or uninsured. This means that, on average, people with HIV go longer without care, suffer complications, and die at too high rates, with all these devastating effects more pronounced in traditionally marginalized groups, including lesbian, gay, bisexual, and transgender (LGBT) persons, those living in poverty, and African-American communities.
The only way under-insured HIV-positive individuals can get sufficient insurance is through a regime that prohibits insurance companies from denying coverage to people with pre-existing conditions—which, as discussed above, only works with an individual mandate. Therefore, Mr. Schoettes argued, the mandate is a necessary and proper exercise of Congress’s Commerce Clause power not because consuming health care and buying insurance affect the price of both, but rather because Congress can use its power to fix an interstate market that discriminates.
Why this reasoning did not factor into the court’s analysis has more to do with politics and the role of amici than the legitimacy of the argument. Congress can mandate nondiscriminatory provision of public accommodations—hotels, restaurants, and other businesses—thanks to its power to regulate interstate commerce. So, too, should it be able to mandate the purchase of health insurance to make sure traditionally unpopular or disadvantaged groups are not victimized by discrimination.
Exacting a Penalty under the Taxing Power
Neither Mr. Schoettes nor Justice Ginsburg found the necessary five votes for their Commerce Clause analyses, but although that matters at One First Street, it doesn’t matter on Main Street. Justice Ginsburg, the Chief Justice, and Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan accepted the government’s alternative argument that the Tax and Spend Power allows Congress to require us to buy health insurance or pay a penalty. In a way, then, the Commerce Clause rationale discussed above may not matter; it could be what lawyers call “dicta,” or nonbinding statements of opinion.
The individual mandate is a two-sided coin. On one side, it is a command to buy health insurance; on the other side, it offers the uninsured an option to buy insurance or pay a penalty. The court said that reading the mandate as a command violates the Constitution: We are allowed to avoid requirements under the Commerce Clause if we abstain from the particular activity that Congress is trying to regulate. But reading the individual mandate as creating a condition (not owning health insurance) that triggers a tax (the penalty to the IRS) is a valid exercise of Congress’s power to “lay and collect taxes … [to] provide for … the general Welfare of the United States” (Art. I, § 8, cl. 1). Unlike the Commerce Clause, the Tax and Spend Clause does not have an inactivity escape clause. This alternative holding saved the ACA.
The Medicaid Carrot and Stick
The penalty is not the only thing that is optional: By a 7–2 vote, the ACA’s Medicaid expansion is also optional for the states. As one of the most effective ways of reducing the numbers of uninsured Americans, Medicaid’s growth to include all those up to 133% of the poverty line is essential to the goal of insuring almost every American by 2014. If all states followed the ACA’s Medicaid changes, thousands of low-income Americans with HIV would have access to life-saving drugs and essential regular medical care. It is no wonder that Congress included a “carrot and stick” to ensure maximum state compliance with the ACA’s new Medicaid rules. The carrot: The federal government would pay 100% of the additional cost in the first two years and 90% after that. The stick: If states do not comply with the new, expanded Medicaid guidelines, they lose all federal Medicaid funding. The court’s decision in Sebelius kept the carrot but blunted the stick, risking keeping millions of low-income Americans—and thousands of those with HIV—uninsured.
Medicaid is a federal program that provides health care to low-income persons and those with disabilities. It is run by the states and funded jointly by the states and the federal government. States receive federal matching funds if they comply with federal guidelines on whom to cover, how to cover them, and what medical procedures to cover. Currently, Medicaid requires states to cover only a few discrete groups—pregnant women, children, families in need, the blind, the elderly, and the disabled. States need not cover childless adults, and only a handful do. According to the Kaiser Commission on Medicaid and the Uninsured, states cover only those unemployed parents who make less than 37% of the federal poverty level, and only those employed parents who make less than 63% of the poverty level. By contrast, the ACA requires states to expand Medicaid to cover all individuals under the age of 65 with incomes below 133% of the federal poverty line and establishes a minimum coverage package, changes that would add upward of $100 billion in federal Medicaid spending per year.
Chief Justice Roberts put a dent in the ACA’s Medicaid expansion plans. The threat of withholding all Medicaid funding if states did not comply with the expansion rules exceeded Congress’s power under the Spending Clause: “Congress may use its spending power to create incentives for States to act in accordance with federal policies. But when ‘pressure turns into compulsion,’ the legislation runs contrary to our system of federalism.” In other words, the stick was too harsh. Justice Ginsburg challenged this analysis on several fronts, most notably with a short history showing that the expansion of Medicaid since 1965 has been accomplished in much the same way. In any event, the threatened withholding being too coercive, the court turned Medicaid expansion into an optional program: If states decline to follow the ACA’s reforms, they will not receive the new federal monies, but will retain the pre-ACA Medicaid block grant.
Implications for the HIV-Positive Community
Even the most ideological and inflexible partisan must admit that the Supreme Court’s decision finding the individual mandate constitutional is a victory for President Obama. But it is really a victory for the more than 30 million Americans that will have health insurance by 2014. Unfortunately, many low-income Americans with HIV will be left uninsured if states opt out of the Medicaid expansion. Let’s consider a couple of the more important effects the court’s decision in Sebelius will have on those with HIV.
Don’t Worry about the Medicaid Holding
I am optimistic that ACA’s Medicaid expansion will be a reality. Undoubtedly, some states will put ideology and politics first and opt out of the Medicaid changes; notably, Florida, Texas, and South Carolina, three states dominated by conservative Tea Party governors and Republican legislatures, have already decided to decline. But it is hard to believe this stubbornness will last. The ACA’s Medicaid carrot is too sweet: The federal government will pay 100% of the extra cost for the first two years, and then 90% after that. Turning down a deal like that is almost irrational. And besides, a similar thing happened when President Lyndon Johnson introduced Medicaid as part of his Great Society reforms. Ultimately, all states came around.
The Commerce Clause is Shrinking
For 80 years, Congress has been addressing national problems like discrimination, gender inequality, poverty, and a dysfunctional health care system by passing laws pursuant to its power to regulate interstate commerce. (The Ryan White Care Act falls under this umbrella.) That authority had always been there, but the national and global economic and political changes brought by the Industrial Revolution—which dramatically increased interstate and international commerce—made it necessary. It needs to be there still if Congress is ever going to address the needs of the HIV-positive community again.
Conservative lawyers, of course, have been fighting this expansion since 1936. “Originalists,” or those who believe the Constitution should be interpreted as if it is still 1789, seek a return to a small federal government. The easiest path to that right-wing Eden is through an anemic Commerce Clause. So, since the 1980s, conservative majorities on the Supreme Court have been narrowing what it means to “regulate interstate commerce,” and in so doing, invalidated the Gun Free School Zones Act (Lopez) and part of the Violence Against Women Act (United States v. Morrison (1999)). When Chief Justice Roberts upheld the individual mandate under Congress’s Taxing Power but rejected the interstate commerce rationale, he let progressives win a battle while helping conservatives win the war on the Commerce Clause.
The HIV-positive community scored a victory with the survival of the ACA. Those with HIV will be among the millions who can now obtain affordable and adequate insurance and medical care, an incredible feat in itself.
But this victory was not without its casualties. The gutted Medicaid expansion will leave thousands of HIV-positive individuals without insurance even though they are just scraping by as it is. The weakened Commerce Clause bodes ill for Congress passing national solutions to national problems. And, in an era when even the most settled law is up for debate anew, judicial appointments, Senate elections, and control of the White House take on special new meaning. It is, therefore, essential that the HIV-positive community and its allies take crash courses in constitutional law and public advocacy. Our salvation lies in our own hands, except, of course, when it lies with nine justices in Washington, D.C.
Ari Ezra Waldman is a graduate of Harvard Law School and Harvard College. He now teaches at Brooklyn Law School and is Ph.D. candidate at Columbia University. Professor Waldman writes a weekly LGBT Law column at www.towleroad.com.
National Independent Business Association v. Sebelius, __ S. Ct. __ (June 26, 2012).
United States v. Lopez, 514 U.S. 549 (1999).
United States v. Morrison, 529 U.S. 598 (2000).
Wickard v. Fillburn, 317 U.S. 111 (1942).
Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010).
Amicus Brief of Lambda Legal Defense and Education Fund, Inc. Department of Health and Human Services v. Florida. No. 11-398, at 11-12.
Gruber, J. Why the individual mandate is effective and efficient. The Daily Beast. March 26, 2012.
Klein, E. The unpopular mandate: Why do politicians reverse their positions? The New Yorker. June 25, 2012.
Speech by Senator John Cornyn (R-TX). June, 29, 2012.
Waldman, A. Exceptions: The criminal law’s illogical approach to HIV-related aggravated assaults. Virginia Journal of Social Policy and the Law 18(3). Spring 2011.