ObamaCare Upheld!

Following oral argument in the Supreme Court case on ObamaCare, I predicted that the statute would be ruled unconstitutional. As you no doubt know by now, that prediction turned out to be dead wrong. And my prediction was scuttled by none other than Chief Justice John Roberts. So much for my predictions.

And that raises two questions. Why did the Supreme Court uphold the law? And what does it mean for us?

The Supreme Court’s Decision on ObamaCare

ObamaCare requires individuals to buy health insurance. It’s called the individual mandate. If you don’t buy health insurance, the government will slap you with what the law calls a “shared responsibility payment” (I think George Orwell first coined that term).

This “penalty,” as the law later calls it, is relatively small at first–$285 per family of 4 or 1% of income, whichever is great. But it rises to $2,085 or 2.5% of income, whichever is great, by 2016. Given that the penalty is an annual payment, it’s a good deal less than what health insurance would actually cost. But it’s still a lot of money.

The Supreme Court first found that the federal government did not have the power to force Americans to buy health insurance. The analysis was under the Commerce Clause of the Constitution. The Commerce Clause has basically been used to justify all kinds of federal government action. Think of it as a rubber stamp on anything the federal government wants to do. So it was refreshing to see the Court actually impose some limits on the Commerce Clause.

But here is where thinks get really shaky. The Supreme Court concluded that the individual mandate was—drum roll please—not a mandate after all. It turns out that ObamaCare doesn’t force us to do anything. Instead, you have to pay a tax—not a penalty—if you don’t buy health insurance. So we have a “choice” after all.

And notice that the penalty has been magically transformed by the Court into a tax. That wasn’t by mistake. The Court upheld the individual mandate choice under the federal government’s power to tax. Welcome to the world of law.

You can read the entire ruling here (pdf).

So How Does the Decision Affect Us?

While I think the reasoning of the decision is suspect, the results are mixed. There are some good things in ObamaCare and some not so good things.

As noted above, the individual mandate remains in place. On the bad side, it takes away an individual’s choice not to buy health insurance. Technically speaking it doesn’t force you to buy insurance, but it hits you with a hefty penalty if you don’t. The Supreme Court may call that a choice, but let’s be honest, it ain’t a choice. You’re forced to pay something one way or another.

On the good side, requiring everybody to buy health insurance is the only way I know to spread risk and costs among the general population. It’s exactly what employers do. That’s why when you get a job at a company that offers health insurance, you have to opt in for the insurance unless you have insurance from another source, such as a spouse’s employer. The result is that younger, healthier employees pay more than they otherwise would to cover older, less healthy employees. But it spreads the risk, making insurance affordable for everybody.

Related to the individual mandate is the requirement for health insurance companies to cover preexisting conditions. At first glance this seems like a positive result. And it is to a point. The problem arises when you consider the penalty for not getting health insurance.

Because any prexisting conditions must be covered, it’s been predicted that many will pay the penalty instead of buying more expensive health insurance. And should they get sick, they’ll buy insurance then, secure in the knowledge that preexisting conditions will be covered.

Health insurance exchanges at the state level still remain in place. These exchanges are designed to make individual health insurance polices less expensive. We’ll see.

The decision also leaves in place an important provision affecting young adults. Young adults up to age 26 can remain on their parent’s health insurance policy. So far about 2.5 million have benefited from this provisions.

The decision does overturn one aspect of the law. ObamaCare ushered in a massive expansion of Medicaid benefits. The law offers some funding to states to assist them in paying for these expanded benefits. But the law went a step further. If states refused to expand Medicaid, the law not only took away the new funds, but it also took away federal aid the states are already receiving. The Court said that was a no-no.

One of the big concerns that still remains is costs. The heated debate rages on as to whether or not ObamaCare will lower health care costs. The promise of lower insurance premiums has already proven to be false. But perhaps there could be savings down the road. One significant risk is increased state taxes as states try to cope with the increased costs of Medicaid and state sponsored health insurance exchanges.

So now it’s your turn. What do you think about the Court’s decision?

Published or Updated: June 28, 2012
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. Ralph says:

    It is the same as no fault insurance, where the state requires you to have at least some car insurance. If you don’t you are in volation of the law. Regardless of whether it distributes cost across a wider expanse of the public is irrelevant when it comes to price. Insurers will undoubtedly raise rates because people will have no other choice but to pay. People will conclude that it’s cheaper to pay the fine than buy the insurance, which will be true for quite a number of people. Although those who are currently precluded from having insurance because they have a pre-existing condition may continue to be excluded simply by making the insurance unaffordable. This is a terrible time for this. First, the middle class is being rocked due to lack of jobs, falling wages, and higher prices. The price of gas, food, energy and healthcare will certainly ensure that the middle class dies a slow, agonizing death and the 1% win. Americans tend to pin all their hopes on elections and elected officials, when what they ought to do is take to the streets, like they do in the Europe and the Middle East to effect change that surely has to come before we middle class members are living in our cars.

    • mike says:

      I agree. The middle class is dying in the USA and Nationalized Wait Care that will surely be while being an opening to see MORE Government waste & abuse while companies in droves dumps off coverage to the Government will lead to less medical professionals who aren’t paid what they should be paid to be present to administer care, costs will rise by insurance companies who now know that all people have NO choice, funds will be misdirected like social security for guaranteed waste AND in essence as the American consumer has less in their pockets and little say to how a portion of their free earnings are spent we will ALL see the Feudal Fascist State in America emerge as a result. Innovation(s) in medical science and technology will drop, budgetary financial crisises will occur down the road and MORE will be paid to get LESS as always seen by Marxist influenced systems. As Europe is crumbling to near on fire, our geniuses in Washington DC are applying what we ALL clearly see in the USA as the end game to destroy our Constitution AND our inalienable rights. Next on deck should Oblamer win re election will be STEALING everyones guns AND diminishing American’s property rights as well as a EVER worsening economy made to be that way on purpose WHILE the Baghdad Bob’s on the propaganda stations pretends that one side is in favor and the other side opposes, BUT in all due actuality the political DATE RAPE on the American people will ONLY just continue till all Americans are poor and enslaved to the Feudalist Fascist top who would prefer to see us ALL that way.

  2. Daniel Wise says:

    Once again, what the American people want, are told they don’t know what they want and we are forced to take what those so called educated think what we want. Why is it if the American citizen says no, they think they know better and do what they want anyway.
    I am not forced to purchase a drivers license if I do not drive, so why should I be forced to have to pay for a health plan. Just don’t take care of those that don’t have some kind of a plan.

  3. Stephen says:

    The promise of lower health care costs is an illusion under this plan. This is simply the national government increasing their control on the states, w/o paying their fair share of the increas in costs to the states!

  4. Rick says:

    I agree with the court. All must participate to spread the risk and cost. Most countries have already come to this obvious conclusion. Even very capitalistic countries like Switzerland, which by the way has all private providers-not a central government controlled plan, have a mandate. The Republicans should not be trying to repeal this plan, but get on board to improve it. What I do not like about the current plan is that it has no teeth to reduce healthcare expenses. Both parties need to work together to make this happen.

  5. Mary says:

    Great decision! Glad it passed!

  6. Karla says:

    Hopefully if everyone is insured now, the costs of going to a clinic or hospital may be reduced. For all those people that walk into a hospital and do not pay on their way out, there is another group that has to make up those costs and in turn have to pay 450% of everything. By doing this the clinics and or hospitals may rest assure that they will have some sort of payment as opposed to $0. We hope…

  7. jim says:

    I think this is good. Yes the govenrment can tax citizens and a that is the penalty for not having insurance, a tax. They could have just raised taxes $x and given everyone with insurance a tax credit for $x and there would be NO constitutional challenge to that, so what they did is effectively equivalent. One might say the child tax credit is the government penalizing people for being childless and forcing everyone to have children. See how silly this sounds? Of course the government can tax people. Frankly I think its an awful idea to purposefully go without health insurance in the first place and I don’t want to pay your emergency room and hospital bills that you can’t afford after they drive you bankrupt.

    I don’t think anyone ever promised that healthcare reform would slash insurance costs. Insrance companies are more than willing to blame the government for their current price hikes, but that doesn’t mean reform caused prices to go up, just that the insurance companies claim so.
    There are some parts of the law aimed at trying to curb cost increases but thats a bigger problem and will require a lot of participation from the private health care industry. The law DOES cap the % of our premiums that insurance companies can waste on their massively ineffective and often belligerent paperpushing bureaucracy and pocket in profits.

    • Adam says:

      Of course the government can tax people. But, if this is a tax, what is it taxing? It’s a fine, plain and simple. We have rules about direct taxes and apportionment, after all.

      I also take issue with the constitutionality of the federal government requiring insurance to pay for medical care. Insurance is a product. Why can they force me to purchase a product in order to purchase another product?

      There are plenty of ways to deal with non-payment without requiring insurance to pay for health care. There are also plenty of ways to make insurance and healthcare less expensive, but weren’t even considered in this 2000+ page monstrosity. In fact, there are plenty of things in this bill that will guarantee higher costs, minimum insurance requirements are a prime example. This whole thing needs to go. I’m not entirely convinced that we need to replacement bill, but there are plenty of things that could be done that don’t fly in the face of individual choice and freedom.

  8. Mary says:

    The great thing about this is that finally SOMETHING is being done. The Clintons had tried and their plan was shot down and the Bush government hasn’t even made it a priority. I’m sure the way it stands isn’t perfect but it’s something to build upon.

    The health care business in the US is the only business I can think of where you go to get a service, you have no idea how much it costs (because no one knows until the EOB arrives, and customer service tells you that for what they tell you there is no guarantee that it’s actually correct information) and then you wait until the bill arrives to see how much you actually spent. That’s just crazy. It’s also the only business were you often have less benefits going through the insurance than paying cash. Have you asked your doctor lately for their cash rates? Yes, they may be lower than the negotiated rate with your insurance! The insurance wins again: now they got us paying for insurance and trying NOT to use it because paying cash is cheaper!

    The insurance industry has us all coming and going because us sappy consumers believe that there has to be integrity in health care, but there isn’t. We need an overseeing body to clean out the bull and the waste in order to lower prices. In fact, going to the doc has gotten worse than buying a used car, you’ll be milked at every opportunity. My latest disgust came from finding out that my doctor charged $169 for a chest x-ray (insurance negotiated rate), while the imaging place downstairs (!) charged $75 for the same service for cash – same billing code.

    I could go on and on, but universal healthcare will eventually rein in this craziness because there will be more transparency and oversight in pricing.

    • Adam says:

      You have to be kidding. When did government oversight EVER reduce the cost of anything? It will only add more bureaucracy to the system.

      Sometimes doing something can be worse than doing nothing at all.

      Of course you can’t know the bill in healthcare before you have at least diagnosed an illness, and even then, you may not know what costs will arise. It’s the nature of the industry. Take it up with the people who develop medical technology and your body. Healthcare is a unique service. Our bodies aren’t manufactured with the exacting tolerances of machines. We can’t be diagnosed with error codes with prescribed methods to fix those issues. Every person is different.

      If you want more transparency in pricing, enough people must demand this from our providers. Government isn’t going to do it for us. The more layers of bureaucracy the less transparent things become. This was probably the worst methods we could choose if lowering costs and ensuring the quality of the care we receive were the issues to covered.

      • Mary says:

        Government can only do so much I agree, but so far nothing has been done when it comes to healthcare, so let’s see what it actually can do. And yes you can know your bill in advance: it just takes someone to log into the health insurance’s website, key in intermediate or comprehensive visit, etc. billing code and off you go. A good doctor’s office will do it for you. They can check while you’re in the examination room how much a blood draw is for example, but yes you’re right, people have to request it. All this info can be had in an instant, yet some providers will have you intimidated you even asked because they don’t want to deal with it, plus it’s not good for business. If you knew this ‘just in case’ test will cost you an additional $1000, would you still get it?

        Of all the docs my family visits, my daughter’s pediatrician is actually the most progressive: they post a menu of services with cash prices in the waiting room (they prefer cash patients to dealing with insurance). If you do use your insurance they will look it up for you before you go in for your visit and will check on services pricing as needed. Now that makes sense! Technology makes it all possible.

  9. Chaz says:

    Adam,
    You are right on the money! These people that think it is a good idea haven’t read the law and don’t know what is going to happen to them. They will be dropped by employers from their current plans becasue the fine is cheaper than the cost of the health insurance that employers pay. Also, if the employers continue to keep paying for the workers’ plan, the employee with receive a 1099 at the end of year showing the cost the employer paid as income that wasn’t taxed and employees will have to claim that cost as income. Wake up people. Tort reform and insurance portability are the answers. Also, there will be new taxes on small businesses to pay for Obamacare, so many businesses will not be able to afford to hire new employees. Not gonna help the economy. These are some of the problems. Plus we are losing more freedoms. Government expands again!

  10. Mary says:

    Generally I’m for less government as well, but not when it comes to healthcare and education. People having to file for personal bankruptcy because of healthcare is just unacceptable. Healthcare is supposed to get you back on your feet, so you can be a productive member of society. But if you have a serious issue today you’re more likely to end up broke and being unable to make ends meet, possibly applying for government services and loosing your home over it. Look at all the fundraisers out there just for healthcare costs! Having the government involved won’t be perfect either, but they will put a stop to unscrupulous business practices. We’ve had the wild west of healthcare for a long time now, it’s time for some structure.

    • Adam says:

      Again, when has the government ever put a stop to “unscrupulous” business practices? Now, they just get to dip their finger in the pie, too. If we want structure, the people must demand it from their providers and insurance companies. We had a free market, you were free to choose your providers and insurance companies. We are not so free anymore. I can no longer go buy catastrophic illness or “major medical” insurance anymore. I must now buy government approved insurance. I must be covered for sterilization, maternity, abortion, etc. I don’t want or even need these things. But, I’ll have to pay for it, if I want to consume healthcare. And since there are no such things as preconditions now, I can just pay the fine, or not, since they can only collect it if I get a tax refund, and then just get insurance when I get sick. No problem. Of course that won’t raise costs for everybody else. This whole thing is crazy. There are plenty of solutions to lower costs. This is not even remotely one of them. I don’t think there’s one cost saving idea in the entire act.

      By the way, I’d much prefer the Wild West to what is coming. Atleast in the wild west of healthcare, there was no rationing, there was a decent level of care. The “Wild West” wasn’t really all that wild, except in the stories.

  11. Philip says:

    I’m obviously disappointed. But socialism is what people seem to want here. It saddens me to see people cheer becoming slaves to the state. But what can you do, the socialistic-leaning Republic elected the majority House and Senate, and a leftist President (who appointed 2 justices) that made this all possible. The whole collective shoved this down the pipe and now we’re stuck with it. European-style socialism is here. It’s what the people want. It saddens me that people want this vs personal liberty, but it’s where we are at.

  12. Phil says:

    The system is broke – but Obamacare sure ain’t gonna fix it. Obamacare was based on a blatant lie – that you could somehow cover 30M+ people for less than nothing. I have a high-deductible policy because I can’t afford full coverage. This won’t meet the requirements of Obamacare, so I will probably lose my coverage and have to pay the fine (sorry tax). So much for Obama’s hollow promise that you could keep your insurance. How can the supreme court decide that what Obama said categorically was not a tax can be redefined as a tax? Surely this is judicial activism at its worst – the sort of thing that Obama was protesting about, when it suited him.

    If you are covered and you need to see your PCP about anything, you have 18 months to do it. Those 30M people without coverage have been accumulating their ingrowing toenails and other minor complaints. Now you give them free healthcare, what do you think will happen?

    Bottom line is that we are effectively insolvent and the last thing we need is another unaffordable entitlement. Obama intends to run $1T+ deficits for evermore. You don’t have to be an economist to realize that we can’t go on printing money indefinitely – and whatever happens when we hit the wall ain’t gonna be pretty.

  13. Vicky says:

    It absolutely amazes me at the people that still back Obama. Amazing. Read the constitution. Some people don’t buy insurance because they can’t afford it. They go without. They make a choice to eat, live in a house or not, and have utilities. If they can’t afford insurance, how can they afford a tax or Lol a penalty. There are people that can’t find a job. Unemployment benefits were exhausted, No money coming in, Loosing their homes, businesses closing, companies laying off, and now they must buy insurance or pay a penalty. Give me a break. If you agree with this, you must be employed, thinking you are on easy street, not worrying where your next meal will come from.

    • ray williams says:

      i dam well agree

  14. ray williams says:

    every one dosnt make 100,000 a year we make like 20,000 if lucky. vote him out and everyone whit him

  15. Jane says:

    We have to insure metal, fiberglass and rubber. How come we don’t have to insure our heart, lungs and liver? I have been a nurse for 22 years and can’t tell you how many people are “private pay.” When I see that, which is often, I know every test, medication and care given, me and every working insured person is paying for it. It’s time to be accountable for our bodies. We know they deteriorate after time and need care, let’s do the simple thing and insure that KNOWN expectation. In the big picture, it’s the Insurance companies that are worried, Obamacare is now scrutinizing how they run their “profitible” business.

    • Adam says:

      How exactly can we “know” we will need healthcare? I private pay, and I do pay, for all my healthcare costs. I prefer it that way. I don’t need to diversify my risk, as I don’t have much risk. When I am older, this may change, but for now, it’s much cheaper for me to just pay these costs. But, even in the future, why should I have to be covered for every little sniffle? Why must I pay for coverage I don’t want and won’t use? One size fits all, never does fit all.

      And where has all this demonization of profit come from these days? At least before Obamacare, you had the choice to for go insurance if you didn’t want it. Now you are forced into the insurance system. You should know better than most what this bill will do to our healthcare system if you read it. The care we receive is generally the best in the world. Why would we want to “fix” that? Sure, we all want to lower costs. Are you volunteering for a pay cut? The costs have to come from somewhere. We can’t just magically insure all the people that don’t have insurance for nothing. The money will have to come from somewhere. Even if we don’t provide a single person with government provided or subsidized insurance, what were those people spending their money on before that they will now be required to use for insurance? This effects all other industries. Someone is going to have to take a pay cut. I vote it’s you.

      • Jane says:

        We already pay for medicare and medicaid. What were those people spending their money on before? Xbox games, Manicures, cell phone packages, ( I don’t even have a media package on my cell phone.) These patients are the “entitled generation” for the most, at least where I work and they make decisions about their money that is self gratifying, they want the working to pay for their health care, its not important to them. They come in for every stiffle and rash though. Working in labor and delivery, majority are females 18-30 yrs, coming in to have their babies and the baby daddy is also not working. I know Obamacare has many faults, haven’t read the full thousand some pages, but I do know we need to start being accountable for our own lives and actions. As far as you paying for services rendered, I get that. You have a minor cut, need a few stitches, $100.00 please and be on your way. On the other hand, you are driving to work, a young, uninsured person leaving a xbox party, ( do they have those?) and hits you head on. You are in the hospital for 40 days. You almost died, your bill is something you can never pay in a life time, you file bankruptcy. Never know what catastrophic illness or accident will happen. The bill is making the insurance co. accountable too. They cannot screen you before they decide to insure you. They have to make provsions to offer cheaper health care. I have crappy health care coverage and work for a health system that owns their own HMO! I won’t go to the doctors most times, because my deductible is outrageous. Irony…

        • Adam says:

          Yes, we were already subsidizing medicare and medicaid. And still there are people that aren’t paying their medical bills. I’d love to see a study done not on how many are uninsured, but on how many people don’t pay their medical bills. I think that’s a much more important number than how many people are uninsured.

          You talk about being accountable and responsible. Yes, we all must do that. There is too little responsibility these days. But, this bill will not make people more responsible. In fact, it’s exactly the opposite. People will discover they can now just get coverage when they get sick. People will still be going to the doctor every sniffle, since those people will have their care subsidized by us, anyways.

          By the way, my auto insurance and life insurance cover me for medical payments due to an accident. My life insurance has a dismemberment or serious accident policy attached. I have weighed my risk, and think I have myself covered. I don’t have the option to do that anymore, though.

          Again, if you haven’t read the bill, but only heard what’s in it, how do you know they are making the insurance companies more accountable? How are they making provisions for cheaper insurance? I don’t see anything about cheaper insurance in the bill. I do see alot of things that will make coverage more expensive. Sure, they have caps on rate hikes and what not, but, when the insurance companies can’t afford to provide it, what will we do then? This just limits our options, it doesn’t do anything to help opening our health care industry to more options or more affordable care.

  16. Dave says:

    The government is going to muck this up as usual. Judge Roberts gave the country a gift by saying the ACA penalty is a tax. This something that can be reduced or eliminated in future congresses. Don’t lose hope because it’s just one battle in a continual war.

  17. John Bailo says:

    I am someone who by and large has had a job with insurance, but there were long stretches where I did not or I was involved in some entrepreneurial activity. During those times I would purchase the cheapest Blue Shield state backed policy for about $200 a month.

    This basically would be about the same at $2085 per annum (for a single individual?).

  18. Nicole says:

    The government can’t run anything without bankrupting it. Take a look at Medicaid, SS and the post office. You want these fools running your healthcare???? Get serious

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