WASHINGTON, March 13 (Reuters) – The U.S. Supreme Court has scheduled three days of historic arguments over President Barack Obama’s sweeping healthcare overhaul law. Each day features a different legal issue:
At issue: Whether the legal challenge to the law’s centerpiece requirement that Americans obtain health insurance or pay a penalty must wait until after that provision, known as the “individual mandate,” has taken effect in 2014.
At the core of the oral argument will be the Anti-Injunction Act, which dates back to 1867, and whether taxpayers must actually begin paying the penalty for not purchasing insurance before objections to the mandate can be raised in court.
The Anti-Injunction Act generally bars any challenges to a tax law until it has taken effect because such lawsuits can stop the federal government’s Internal Revenue Service from collecting tax revenues.
Before Congress approved the legislation, Obama insisted the penalty for failing to obtain insurance was not a tax. The legislation used the word “penalty” rather than “tax.” The law requires that the penalty is due when Americans pay their annual taxes.
But a U.S. appeals court based in Virginia and a dissenting judge on a U.S. appeals court in Washington, D.C., have held it would amount to a tax and the lawsuits therefore were barred until the money was paid, not expected until after 2014.
The Obama administration, which is defending the healthcare law, and the 26 states and the independent business group that are challenging the law, have agreed the challenges to the insurance mandate can be decided now.
But the Supreme Court accepted the administration’s recommendation that it consider the tax issue. To obtain another point of view, it appointed a private-practicing attorney, Robert Long, to argue the challenges were barred because of the tax law.
He argued in a written brief the Anti-Injunction Act applied because Congress specified the penalty shall be assessed and collected in the same manner as taxes by the IRS. The penalties are estimated to bring in at least $4 billion a year.
First issue: Whether the entire law must fall if the insurance mandate was found to be unconstitutional or if other parts can survive.
When Congress adopts legislation, sometimes it includes what is known as a severability clause that allows other provisions to stand in case the courts strike down another part. No such clause was included in the healthcare law.
Those challenging the law argued in written briefs that the mandate was at the heart of the law and so critical to its operation that the entire law must be invalidated without the requirement to buy health insurance.
The Obama administration disagreed. It said Congress wanted the bulk of the law’s provisions to operate independently of the mandate and many provisions are already in effect, including the requirement that insurers provide family coverage for adult children until age 26.
The administration said only two provisions would have to fall if the mandate were struck down. Those provisions bar insurers from refusing to cover a person because of a pre-existing medical condition or from charging higher premiums due to a person’s medical history.
Second issue: Whether Congress had the authority under its power to spend money to require that states expand the number of people eligible for assistance from the states for the Medicaid healthcare program for the poor and disabled.
The law will extend eligibility to certain individuals with income up to 133 percent of the federal poverty level, beginning in 2014. Previously, states did not have to observe a baseline income level for eligibility.
The expansion could assure coverage for an estimated 17 million uninsured Americans by 2021, according to the Obama administration.
The states argued that Congress unconstitutionally coerced them into expanding their Medicaid programs by threatening a loss of federal funds. They said the expansion was unprecedented and will impose a significant financial burden on the states.
The administration defended that part of the law, arguing that Congress clearly has the power to set the terms under which it will disburse funds to the states.
It said the federal government in the first two years will pay all of the costs associated with the expanded eligibility, with the amount paid declining to 90 percent in 2020 and staying at that level in future years.
The states say they have no alternative but to keep participating in the Medicaid program, but the administration said the states were free to turn down the federal funds if they viewed the program conditions as too burdensome or contrary to their interests.
The Supreme Court cases are National Federation of Independent Business v. Sebelius, No. 11-393; U.S. Department of Health and Human Services v. Florida, No. 11-398; and Florida v. Department of Health and Human Services, No. 11-400.
(Reporting by James Vicini; Additional reporting by Jeremy Pelofsky)