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Supreme Court upholds Obamacare for a third time — here is what was at stake

The Supreme Court on Thursday released its highly anticipated decision on a challenge to the Affordable Care Act (ACA), also known as Obamacare. By a 7-2 vote, the court rejected the Republican-led challenge to the law.

Justice Stephen Breyer wrote the majority opinion saying that challengers — Texas, other Republican states, and two individuals — did not have legal standing to sue, meaning they couldn't show they were harmed by the law. He was joined by Chief Justice John Roberts as well as Justices Clarence Thomas, Sonia Sotomayor, Elena Kagan, Brett Kavanaugh, and Amy Coney Barrett.

The plaintiffs "do not have standing" to challenge the law's individual mandate, the decision read, "because they have not shown a past or future injury fairly traceable to defendants’ conduct enforcing the specific statutory provision they attack as unconstitutional."

Associate Justice Stephen Breyer poses during a group photo of the Justices at the Supreme Court in Washington, U.S., April 23, 2021. Erin Schaff/Pool via REUTERS
Associate Justice Stephen Breyer poses during a group photo of the Justices at the Supreme Court in Washington, U.S., April 23, 2021. Erin Schaff/Pool via REUTERS (POOL New / reuters)

Justices Samuel Alito and Neil Gorsuch dissented. In his dissent, Justice Alito called this case “the third installment in our epic Affordable Care Act trilogy” before lamenting that the court had “pulled off an improbable rescue.”

President Joe Biden and his allies immediately celebrated the ruling.

"The Affordable Care Act endures as a pillar of American health and economic security alongside Medicare, Medicaid and Social Security," House Speaker Nancy Pelosi said in a prepared statement after the decision.

In a statement, Maura Calsyn, the acting vice president of Health Policy at the left-leaning Center for American Progress, added that now it is “time for our leaders to work together to build on the law — not take it away.”

Over a decade of challenges

Thursday's decision capped off over a decade of challenges to President Barack Obama's signature legislative accomplishment, which was signed into law back on March 23, 2010.

WASHINGTON - MARCH 23:  U.S. President Barack Obama (L) is embraced by Vice President Joe Biden before signing the Affordable Health Care for America Act during a ceremony in the East Room of the White House March 23, 2010 in Washington, DC. Biden was heard on an open microphone during this exchange telling the president,
President Barack Obama is embraced by then-Vice President Joe Biden before signing the Affordable Care Act during a ceremony in 2010. (Chip Somodevilla/Getty Images) (Chip Somodevilla via Getty Images)

Striking down the law would have caused about 21 million people to become uninsured in the U.S., according to an October 2020 estimate from the Urban Institute.

The challenge this time around related to the constitutionality of the law’s so-called individual mandate that Americans buy health insurance. The case — which consolidated two cases, Texas v. California and California v. Texas — examined three major questions.

First, the justices looked at whether a coalition of 18 states, including Texas, and two individuals that brought the suit, had the “standing” to sue over the mandate — meaning they suffered an injury that can be redressed in court.

The more fundamental questions that the justices wrestled with concerned whether the individual mandate itself is constitutional and also whether the ACA can survive on its own without the mandate.

By focusing on the question of standing, Thursday's decision did not address those more fundamental questions and did not take a position on whether the remainder of the law could stand without the individual mandate provision, which had required most Americans to obtain insurance or pay a penalty.

This challenge came after two other major challenges to the law that previously reached the Supreme Court in previous years.

Back in 2012, the court upheld the individual mandate in a case called National Federation of Independent Business v. Sebelius. The reasoning at the time — in a decision written by Justice Roberts — was that the mandate was a constitutional exercise of Congress's power to levy taxes.

The law was again upheld in a 2015 decision known as King v. Burwell, which centered around another part of the legislation: the state-operated exchanges.

But then, in 2017, the issue of the individual mandate was reopened when President Trump’s $1.5 trillion Tax Cuts and Jobs Act tax effectively eliminated the mandate by lowering the penalty to zero. This allowed some Republican states, led by Texas, to open another legal fight to declare the mandate unconstitutional. Ken Paxton, Attorney General of Texas, has spearheaded the effort and told Yahoo Finance during an appearance last year that "what we hope to offer is more choice, more opportunity for the consumer."

Medicaid expansion states would be hit particularly hard. (Graphic: David Foster/Yahoo Finance)
Medicaid expansion states would be hit particularly hard. (Graphic: David Foster/Yahoo Finance)

In 2019, the stage was set for a third major Supreme Court decision on Obamacare when the 5th U.S. Circuit Court of Appeals in New Orleans ruled against the mandate but left open the key question of how much of the ACA must fall along with the mandate.

What the decision seemed to find was that — in the end — lowering the penalty was relevant to the standing question. "With the penalty zeroed out," the justices wrote, it led to a situation where there is "no possible Government action that is causally connected to the plaintiffs’ injury — the costs of purchasing health insurance."

A potential 'huge mess'

In interviews before the decision, experts echoed the far reaching consequences that could come with removing the individual mandate.

Striking down all or part of the law could create a “huge mess,” said Christen Linke Young, a health policy fellow at the Brookings Institution, in an interview last September.

“Either way, the consequences are pretty severe,” she added. Even “striking down only the guaranteed issue and community rating components of the ACA would throw individual insurance markets into total chaos, and just be completely unworkable in the middle of a pandemic.”

Some had sought to downplay the likely import of the decision but the participation of Justice Barrett — who was confirmed just days before hearing the case — had raised the temperature on both sides as to the consequences of the case. Before joining the court, Barrett has written critically of the chief justice’s majority 2012 decision to uphold the individual mandate.

In the end, Justice Barrett joined with the majority to uphold the law. She was joined by another of President Trump's appointees, Justice Kavanaugh.

A view of the U.S. Supreme Court in Washington, U.S., June 1, 2021. REUTERS/Erin Scott
A view of the U.S. Supreme Court in Washington, U.S., June 1, 2021. REUTERS/Erin Scott (Erin Scott / reuters)

Even before the decision, President Biden signaled the importance of the law's fate to his own presidency by appointing Neera Tanden, who was initially slated to lead the Office of Management and Budget, to be a senior adviser focused on health care issues.

Tanden was hired to prepare for "different contingencies that could arise from the Supreme Court’s consideration of Republican lawsuits seeking to undo the Affordable Care Act," the White House said in a statement.

Adriana Belmonte is a reporter and editor covering politics and health care policy for Yahoo Finance. Ben Werschkul is the DC producer for Yahoo Finance.


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