The Supreme Court has Ruled on the Accountable Care Act –

Now What?

Tim Hartin

General Counsel

Shannon Medical Center

Supreme Court DecisionUpholds individual mandate as a tax, rather

than as a penalty under the Commerce Clause (a “penaltax”).

• 5 Justices opined that the law exceeded the Commerce Clause.

• 4 Justices would have struck entire law• Justice Roberts saved the mandate by concluding

that it would have been permissible as a tax• His reasoning was joined by no other Justice

Supreme Court DecisionAllows states to opt out of Medicaid expansion

• CMS argued that opting out of Medicaid expansion would cost all of the Medicaid match money – “all or nothing”

• Where the amount of federal funding is so large that it is a “gun to the head” of states, the federal government is limited in the conditions it can put on that funding

• Future challenges of other conditions imposed states?

Medicaid Opt-OutBudget Issues

• 1.2MM newly eligible Texas residents• Federal subsidy– 100% 2014 – 2016, 90% thereafter

(over first 10 years, $100 - $112BB)• Texas costs – estimated at $15 - $16BB over first ten

years• Opt-out costs are imposed on hospitals and health

care

Health Insurance ExchangeThe clearinghouse for uninsured individuals to

buy policies

• Currently, around 15 states are pushing forward with exchanges

• A federal exchange will be created for states without a state exchange

• Serious doubts about whether state, and especially the federal, exchange will be on-line by 01/01/14

Health Insurance ExchangeLow-Income Tax Credits?

• Statute provides that low-income individuals purchasing insurance may qualify for tax credits

• As drafted, it appears those credits are available only to persons who purchase through a state exchange

• IRS has published rules to extend credits to both state and federal exchanges

• Expect litigation on the IRS rules and the provision of credits through the federal exchange

Health Insurance ExchangeEmployer Penalties?

• Statute provides that certain employers who do not provide qualifying insurance to employees are subject to a penalty

• Penalties are triggered if an employee gets a tax credit

• Establishing a state exchange may expose state employers to penalties.