Healthcare Reform Oral Arguments Day 1 – Tax or Penalty, or does it matter?

For each of the next three days, I will be giving the “ONRAD” reaction to the oral arguments and Supreme Court Justice questions debated in the Oral Arguments phase of the healthcare reform case that is currently being heard. The schedule of this phase of the case is as follows:

March 26, 2012 (today): Ripeness: Arguments were heard regarding the “ripeness” of this case, meaning, is there actually a case or controversy that exists right now that gives the courts jurisdiction to hear the case at all?

March 27, 2012: Constitutionality of the Individual Mandate: Arguments will be heard on the core issues of the case related to whether the federal government, through Congress, can pass a law that requires individual citizens to purchase health insurance or pay a penalty under the Commerce Clause and Necessary and Proper Clause of the US Constitution.

March 28, 2012: Severability: Arguments will be heard related to whether, if the individual health insurance mandate is found un-Constitutional, that the entire healthcare reform act will be thrown out as un-Constitutional.


Arguments from today can be heard, and transcripts and discussion found at the following site: American Health Lawyers Association Blog.

Today, the Court heard arguments on whether or not the individual mandate by the healthcare reform act that requires citizens to choose between paying a penalty and purchasing health insurance, which is set to go into effect in 2014, is a “ripe” issue. The federal courts have jurisdiction, as per Article III of the US Constitution, to hear “cases and controversies”. The Court, over the years, has grappled with what this requirement actually entails. If there is no “case or controversy” to decide, than the issue is considered not “ripe”, and would fall outside of the jurisdiction of the Supreme Court.

Arguments on this issue centered around whether or not the penalty that is mandated by the law in the event that someone chose not to purchase insurance is a tax. Under the Federal Anti Injunction Act, cases involving the requirement to pay a tax are not considered “ripe” until the tax actually has to be paid. As this part of the healthcare reform act does not go into effect until 2015, if the penalty was to be considered a tax, then the issue would not be ripe until 2015, and this case would go undecided until that time.

In this case, both sides actually want the case to be decided now in order to settle this issue and avoid an air of uncertainty surrounding the act for the next two years. In order to ensure all interests related to this issue were properly advocated for, in light of the adversarial nature of our legal system, the Court appointed amicus counsel, Robert Long, to argue that the penalty is a tax on behalf of the public.

During arguments, probing questions to Mr. Long from Justices Ginsberg and Kagan, along with the other Justices, seemed to indicate that the Court was leaning towards not finding the penalty a tax. Some of their questions even indicated that they might be willing to make an exception, as they have in some past extraordinary cases, that the case should be decided anyway. While we will likely not know how the Court holds on this issue until their decision comes down in June, it seems unlikely that they would rule the case not ripe.


With that said, what does  this mean to the healthcare industry, radiologists, and the population at large? If the case is not decided now, this issue will loom over all of us like a cloud. We have already seen health insurance companies react to this uncertainty. In the face of their current understanding of the law, rates have been rising and the level of benefit offered decreasing. Health insurance is becoming more expensive for most of us. Health care businesses, like ONRAD, are struggling with the fear that reimbursements will be dramatically slashed. It is difficult to make business decisions, such as extending capital for meaningful purchases, without understanding what the regulatory environment, and reimbursement environment will actually look like in the years to come. If the Court stays their decision for two years by finding this issue unripe now, we will all be kept under this cloud of uncertainty- health care costs will likely continue to rise, level of benefit decrease, and the possibility for meaningful business transactions will be restrained. It is in most of our best interests that the the Court decide this case now- one way or another.

I am interested in your response and reaction, too. Hope to hear from some of you soon. I will give my reaction to tomorrow’s arguments tomorrow evening, so stay tuned!

-Jesse Salen, CTO, ONRAD, Inc.

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