NSI News

Supreme Court Rules Individual Mandate is Constitutional

Posted by William Smith, Healthcare Practice Group, Managing Director, NSI

The U.S. Supreme Court, in a 5-4 decision, has upheld the constitutionality of the individual health insurance mandate. Justice Roberts, writing the majority opinion, stated that the individual mandate is within Congress’s authority under its taxing powers. That is, Congress has the power to tax individuals more that choose NOT to buy health insurance. However, Congress does not have the power to force a health insurance mandate under the Commerce clause.

In addition to representing a broad victory for the Obama Administration, this ruling is also a significant victory for the health insurance and hospital sectors.

While insurance companies will surely face challenges under the new law, such as potential adverse selection from healthy patients who opt to pay a tax penalty instead of acquiring health insurance, the survival of the individual mandate means that insurers will have the certainty of a potentially large market of new, healthy patients who will be coming onto their rolls and offsetting the costs of providing care to those with pre-existing conditions.

Hospitals are also winners under today’s ruling.With the expansion of coverage in both the health insurance exchanges and Medicaid, patients entering the nation’s hospitals will be much more likely to be carrying an insurance card.

For the biotechnology industry, the ruling has mixed results.While the industry is required to pay new taxes and offer deeper discounts under the law, it also secured favorable language to solve the issue of “follow-on” biologics.Notwithstanding the revenue drains on the industry, the survival of that provision is a significant win.
For the pharmaceutical industry, today’s ruling also carries a mixed result. The industry provided $80 billion in taxes and pricing discounts under the current law, and these revenue hits will stay in place.However, the industry now finds itself fighting to prevent deeper discounts in the Medicare Part D law as the White House has abandoned their original industry concessions, and now supports $135 billion in discounts in the Part D program as a means of deficit reduction.The industry is hoping that the revenue loss from these discounts will be offset by the millions of patients who will now obtain coverage for their pharmaceuticals.

The biggest loser in today’s ruling is the medical device industry. The ACA imposed a 2.3 percent tax on medical device companies and the industry has launched a sweeping campaign to repeal the tax.Because ACA health care programs will now be moving forward and millions of patients will soon be eligible for insurance subsidies, it will become more difficult for Congress to forgo revenue from these types of taxes.In short, the lobbying fight for the medical device industry just became much more challenging.

For America’s business community, there will be some disappointment in today’s ruling as many employers will now be forced to decide whether to provide insurance coverage or pay an employer penalty.

While today’s ruling is a great victory for the President, the only certainty of today’s ruling is that it raises the stakes for the November elections, as the ACA’s fate is far more likely to be determined by the results of November’s elections for both the White House and the U.S. Senate.

William (Bill) Smith serves as Managing Director of NSI’s Healthcare practice group. NSI and kglobal are sister companies of the Interpoint Group. Most recently, Bill served as Vice President of U.S. Public Affairs and Policy for the world’s largest pharmaceutical company, Pfizer Inc., where he led the policy, government relations, alliance development, medical advocacy and public affairs team to support the company’s $23 billion U.S. commercial business. Before working for Pfizer, he held various positions throughout government, including Assistant Chief of Staff for two Massachusetts governors. At the federal level, he served as Chief of Staff, Deputy Chief of Staff and Director of Public Affairs for the Office of National Drug Control Policy where he was closely involved in developing the President’s National Drug Control Strategy and communications plan. He also served as a leadership and committee staffer for Republicans in the U.S. House of Representatives.