Home/Articles/Understanding the latest Affordable Care Act challenge in the Supreme Court
On November 10, the Supreme Court heard arguments in California v. Texas, a case that challenges the constitutionality of the Affordable Care Act (ACA).
What is the basis of the challenge?
The individual mandate is a provision of the ACA that requires people to have health insurance or else pay a penalty when filing federal taxes. California v. Texas raises two questions for the court: Is the individual mandate constitutional? If not, is it severable from the rest of the Affordable Care Act?
The Supreme Court first heard a challenge to the mandate in National Federation of Independent Business (NFIB) v. Sebelius. In the 2012 case, challengers argued that the individual mandate was unconstitutional based on the claim that Congress does not have authority to require Americans to participate in commerce and, therefore, to buy health insurance.
A majority of the court agreed with that claim, so the final decision in the case hinged on whether the individual mandate could reasonably be viewed as a tax, rather than a command to buy insurance. Since the individual mandate had the essential features of a tax — namely, it raised money for the government — the court ruled that the individual mandate was constitutional in a 5-4 decision.
The most recent challenge to the individual mandate emerged in response to changes to the tax code that took place after the 2012 ruling. Specifically, the 2017 Tax Cuts and Jobs Act reduced the tax penalty associated with the individual to $0, meaning that Americans without health insurance no longer face a penalty for being uninsured, though the individual mandate provision remains written in federal law.
This time, the challengers argue that the individual mandate is unconstitutional since it no longer has the essential features of a tax, like the ability to generate government revenue.
The concept of severability is why the new case is a challenge to the entire ACA, and not just the individual mandate provision. If the individual mandate is found unconstitutional and not severable from the rest of the law, the entire ACA could be overturned. If the mandate is found to be severable from the law, then the rest of the ACA’s provisions may stand even if the individual mandate is found unconstitutional.
How has health insurance coverage changed since the Affordable Care Act became law?
According to a report from the Congressional Research Service, the aim of the ACA is to increase access to affordable health insurance for uninsured Americans and to make it more affordable for those already insured. The law passed in 2010, but many of the ACA’s major provisions went into effect in 2014, including the establishment of state and federal health insurance exchanges, Medicaid expansion in participating states, and the implementation of the individual mandate.
In 2010, approximately 15.5% of the population — or 47 million people — did not have health insurance, according to data from the Census Bureau’s American Community Survey. The uninsured rate hit a low of 8.6% in 2016. It rose slightly each year to 9.2% in 2019, when an estimated 30 million people lacked health insurance at the time of survey. This amounts to a 37% decrease in the uninsured population between 2010 and 2019, with close to 18 million fewer people reporting a lack of health insurance at the end of the time period.
The ACA mandates that insurance companies cannot deny coverage or raise premiums for people with pre-existing conditions. According to a 2017 report from the Department of Health and Human Services, between 23% and 51% of non-elderly Americans have pre-existing conditions, the most common being high blood pressure and behavioral health disorders.
As was the case at the start of the decade, employer-based health insurance was the most common source of health insurance in 2019, followed by Medicaid and Medicare, then direct-purchase healthcare. However, the 2019 data is from before the coronavirus pandemic: It’s likely that the historic job loss during the pandemic has also threatened access to employer-sponsored health insurance for many Americans.
In 2014, almost 8.1 million people, or 5.4% of those who filed tax returns, faced the penalty, according to data from the Internal Revenue Service. That year, the minimum annual penalty for going uninsured was $95. The following year, the share of taxpayers who faced the penalty fell to 4.4%, as almost 1.4 million fewer taxpayers faced the penalty for being uninsured.
The share of taxpayers who paid the penalty declined in the following years. By 2018, the last year the penalty was in effect, 3.7 million people, or 2.4% of all taxpayers, paid the individual shared responsibility payment. By then, the penalty had increased from the original $95 to an annual minimum of $695.
It’s important to note that the number of taxpayers that made the payment in a given year is not equivalent to the uninsured population, as it does not include those who filed exemptions from the tax penalty or those who filed joint tax returns and faced a combined penalty.
Health Insurance Coverage for Americans with Pre-Existing Conditions: The Impact of the Affordable Care Act
The Census Bureau collects data on US health insurance coverage through two surveys — the Current Population Survey (CPS) and the American Community Survey (ACS). Though the two surveys show similar findings, the Bureau recommends using the CPS for national statistics and the ACS for statistics covering smaller geographies and populations. And since CPS methodology has changed in recent years, the ACS offers more reliable comparisons over time, according to the Bureau. For this reason, ACS estimates used in this article may be different than national CPS statistics used elsewhere by USAFacts.
The range in the percentage of Americans with pre-existing conditions results from using two different levels of criteria — one narrow and one broad definition — to define which pre-existing conditions may have resulted in denied coverage or higher premiums before the ACA went into effect.