FACTBOX – Impact Of A Supreme Court Ruling On The Health Law

October 7, 2011

Oct 6 (Reuters) – President Barack Obama’s sweeping overhaul of the nation’s healthcare system will top the agenda in the new U.S. Supreme Court term that opened on Monday. [ID:nS1E78S1LY]

Legal challenges to the healthcare reform law have focused on whether Congress exceeded its powers by requiring Americans to buy insurance or face a penalty.

Here is what the law means for various players in the health world:


The court is likely to issue a ruling on the law by the end of June, in the midst of the presidential campaign in which Obama seeks another four-year term. A ruling striking down the law would be a huge blow for Obama months before the election, giving a boost to his Republican opponent.

A ruling upholding the law would represent a vindication for Obama, but might make healthcare an even bigger rallying cry for the Republican presidential candidates, all of whom oppose it as a costly and unnecessary government expansion.

If the court declines to rule on the law’s constitutionality, Republicans may still continue their strategy of chipping away at individual provisions in the law piece-by-piece.


The requirement that all Americans buy insurance, called the individual mandate, provides the industry with a large and steady pool of customers. If the mandate is repealed, but companies such as Cigna (CI.N) or Wellpoint (WLP.N) are still forced to cover all Americans, including those with pre-existing health conditions, insurance premiums would likely rise.


White House officials argue it is only by requiring healthy people to purchase insurance that they can help pay for reforms, including a provision that individuals with pre-existing medical conditions cannot be refused coverage.

Some consumer groups argue a repeal of the individual mandate would lead to higher insurance premiums for Americans as a whole, as those without coverage would continue to use the emergency room as their only healthcare, shifting costs onto the insured.

Higher premiums could also reduce the number of those choosing to purchase insurance, undoing the law’s promise to extend health insurance to the more than 30 million Americans currently without it.


Small businesses are eligible for tax credits to help provide insurance benefits to their workers. They can also have more choice in insurance coverage, since state exchanges must have at least two multi-state health plans.

However, businesses with more than 50 employees that do not offer health insurance by 2014, when universal coverage is set to kick in, will have to pay a fee per employee.

Small firms argue the law does not address underlying high insurance costs and instead forces new requirements and taxes on companies, raising the cost of doing business.


The healthcare law includes fines for larger businesses where some employees seek subsidized coverage on state insurance exchanges that are to be up and running by 2014. It also penalizes companies that fail to provide minimum health coverage levels that will be determined by the law’s essential benefits rule.

The U.S. Chamber of Commerce, corporate America’s biggest lobbying group, supports the repeal of the healthcare law, which it blames for burdensome regulation and additional penalties and taxes.


States are charged with carrying out the bulk of the reforms in the healthcare law and many of those suing are still setting up state-run exchanges for health insurance and other elements. They hope to exert enough control to limit the reach of the law and also have access to federal funding if the Supreme Court rules the law is valid.

Along with worrying whether the law usurps their rights, states are concerned they cannot afford to carry out all of the changes it requires as they are tightening their fiscal belts.


Those in the industry have generally been on board with the new legislation, which will give them millions more patients who need drugs, hospitals and doctors. Most industry representatives are also wary of further legal uncertainty over the law that complicates planning.

The pharmaceutical industry — including Pfizer Inc (PFE.N), Merck & Co Inc (MRK.N) and other drugmakers — have to pay more than $2 billion a year in taxes starting from next year to help pay for the healthcare overhaul. They have also committed to offering certain drug rebates and discounts, expecting to balance those out with a boost from newly insured people. The repeal of the individual mandate would skew that math.

Rather than working to repeal the whole thing, drugmakers and others in the health industry are contesting specific provisions in the law, including a Medicare advisory board aimed at cost-cutting and another body that will closely compare the effectiveness of medications as well as other treatments.


Similar to the drugmakers, medical device companies also face higher taxes starting in 2013 to help pay for the law. Companies such as Boston Scientific Corp (BSX.N) and Medtronic Inc (MDT.N) are vigorously working to repeal the 2.3 percent sales tax.


The healthcare law is expected to give hospitals a flood of revenue from newly insured patients. It also cuts the cost of emergency care for uninsured patients, which hospitals are legally bound to provide. Hospitals are banking on that offsetting the payment cuts they have already started taking under the law. Obama’s legislation increases payments to physicians, although hospitals get lower payments from Medicare and Medicaid. (Reporting by Anna Yukhananov in Washington, additional reporting by Lisa Lambert in Washington; editing by Bernard Orr)


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