News & Publications

U.S. Supreme Court Upholds Health Care Reform Law

Submitted By Firm: Michael Best & Friedrich LLP

Contact(s): Jose A. Olivieri, Scott C. Beightol


Charles P. Stevens, Kelli Toronyi Newman

Date Published: 7/3/2012

Article Type:

Share This:

On June 28, 2012, the U.S. Supreme Court issued its landmark decision substantially upholding the Patient Protection and Affordable Care Act (H.R. 3590) later referred to simply as the Affordable Care Act or ACA. A copy of the decision can be found here


Here are our Top Ten Take-Aways from the decision:
  1. The primary issue was the constitutionality of the so-called Individual Mandate, i.e,  whether Congress could impose a “shared responsibility payment” on individuals who do not comply with the requirement that all individuals must maintain coverage for “essential health benefits. The U.S. Supreme Court has determined that the penalty was not within Congress’s authority to impose under the Commerce Clause.  Nevertheless, when characterized as a tax, this piece of the legislation was within Congress’s authority. 

  1. Chief Justice Roberts joined the group of justices who are viewed to be more liberal and was the "cross-over" vote that sustained the law.  Justice Ginsberg issued a concurring opinion. Justices Scalia, Kennedy, Thomas and Alito, the more conservative members of the Court, dissented.

  1. Before reaching the constitutionality of the Individual Mandate, the Court was first required to determine whether or not the case was ripe for consideration. Under the Anti-Injunction Act, a challenge to a tax is not ripe until the tax is first paid and then suit brought for a refund. But the “tax penalty” associated with the Individual Mandate is not effective until 2014. The Court determined that the legislation describes the shared responsibility payment as a penalty, not a tax, and that this description controlled in determining that the Anti-Injunction Act did not apply and the case was ripe. Here, the label controlled, not the true nature of the tax “penalty.”

  2. The U.S. Constitution does limit the federal government in its ability to regulate the lives of individuals. The Court clearly held that the Commerce Clause is not so expansive as to mandate behavior. Congress has the power to regulate commerce, but does not have the power to compel it. Thus, citizens of the nation cannot be forced to purchase broccoli, at least under the Commerce Clause.

  3. The Court upheld the Individual Mandate on other grounds, however, as Congress has considerably more authority to tax than to regulate. The Affordable Care Act and its sponsors describe the consequence of not maintaining required insurance as a "penalty," and the Court itself determined that the shared responsibility payment was not a tax for purposes of the label applied by Congress (see #3, above). In spite of this, the Court determined that for purposes of analyzing the provision's constitutionality, the “shared responsibility payment” is, in fact, a tax for the following reasons:



  • The payment is established through an amendment to the Internal Revenue Code;
  • The payment is not so high that there is really no choice but to buy health insurance;
  • The payment is not limited to willful violations, as penalties for unlawful acts often are;
  • The payment is collected solely by the IRS through the normal means of taxation;
  • Neither the Affordable Care Act nor any other law attaches negative legal consequences to not buying health insurance other than requiring a payment to the IRS (the law expressly states that no criminal action or liens can be imposed on people who do not pay the fine).


  1. Going forward, the law should be read as imposing a tax on those who go without insurance such that a person has a choice: have coverage or pay more in taxes.  Thus, the tax penalty associated with the Individual Mandate is another example of Congress motivating desired behavior through the Tax Code, perhaps akin to the concept that people who do not give to charity pay more in taxes.  

  1. The Court also addressed whether Congress could impose a mandate on states to expand Medicaid coverage or face withdrawal of existing Medicaid funds. The Court described this as a gun to the head of the states. The Court's decision prohibits the Secretary of Health and Human Services from withdrawing funds from States for failure to comply with Medicaid's expansion.

  2. Notwithstanding the Court's decision, the Individual Mandate is not likely to be effective. The penalty does not apply to members of certain religions, Native Americans, the incarcerated, those that can not afford individual coverage, those that have incomes below specified thresholds, and those for whom requiring the purchase of coverage would impose a hardship. Clearly very few if any non-taxpayers will voluntarily pay the penalty. These exceptions eliminate a large portion of the uninsured. The Individual Mandate also provides a very low penalty for those to whom it does apply. In 2014, the penalty is only $95 per person for the entire year, gradually increasing to $695 or 2.5% of income, whichever is higher. Furthermore, the law expressly states that no criminal action or liens can be imposed on people who do not pay the fine. Finally, Congress now requires insurance carriers to accept all applicants regardless of health status. The result begs the question, does this motivate individuals to forgo coverage, pay, or choose not to pay, a small fine, and then apply for coverage when they get sick? We anticipate massive non-compliance.

  3. The Supreme Court case was a significant distraction due to the possibility that the entire law could have been overturned. Now that this is resolved, it may prove that there is not much real world difference in outcomes between today’s decision in which the Individual Mandate and most of the rest of the law are upheld and the scenario in which the Individual Mandate would have been struck down but the rest of the law permitted to remain. Because the Individual Mandate is unlikely to work anyway, it would appear to be a mistake for an insurance carrier or hospital to now change its business model to assume those in need of medical care will have coverage.

  4. Although many employers will want to wait until after the November election to see if repeal or amendment of the law could thereafter occur, this will mean non-compliance with upcoming deadlines. These include the requirement that a Summary of Benefits and Coverage (SBC) must be developed and distributed during the open enrollment period most employers provide in the late fall and limiting of flexible spending account annual amounts to $2,500, among others. Furthermore, large employers are now required to report the value of coverage received on the 2012 Form W-2 for employees. We anticipate that these requirements will be enforced.

In his opinion, Justice Roberts stated, “the Court does not express any opinion on the wisdom of the Affordable Care Act. Under the Constitution, that judgment is reserved to the people.” We anticipate further election-year discussion as to this point.


On July 17, 2012 at 12:00 p.m. (CDT), we will be providing a webinar, “Health Care Reform Update: Interpreting the Supreme Court’s Decision.”


For more information, please contact Charles P. Stevens at 414.225.8268,
or; or contact Kelli Toronyi Newman at 312.596.5811, or


Find an Employment Lawyer

View or print a complete ELA member list »

Client Successes

Altra Industrial Motion Inc.

Altra Industrial Motion Inc. has multiple locations in the U.S., as well as Central America, Europe, and Asia. The Employment Law Alliance has proved to be a great asset in assisting us in dealing with employment issues and matters in such diverse venues as Mexico, Australia, and Spain. We have obtained excellent results using the ELA network for matters ranging from a multi-state review of employment policies to assisting with individual employment issues in a variety of foreign jurisdictions.

In one instance, we were faced with an employment dispute with a former associate in Mexico that had the potential for substantial economic exposure. The matter had been pending for over a year, and we were not confident in the employment advice we had been receiving. I obtained a referral to the ELA counsel in Mexico, who was able to obtain a favorable resolution of the dispute in only a few days. Based on our experiences with the ELA, we would not hesitate to use its many resources for future employment law needs.

American University in Bulgaria

In my career I have been a practicing attorney, counsel to the Governor of Maine, and CEO of a major public utility. I have worked with many lawyers in many settings. When the American University in Bulgaria needed help with employment litigation in federal court in Syracuse, New York, we turned to Pierce Atwood, the ELA member we knew and trusted in Maine, for a referral. We were extremely pleased with the responsiveness and high quality of service we received from Bond Schoeneck & King, the ELA's firm in upstate New York. I would not hesitate to recommend the ELA to any employer.

David T. Flanagan
Member of Board of Trustees 

Arcata Associates

I really enjoyed the Conducting an Effective Internal Investigation in the United States webinar.  We are in the midst of a rather delicate employee relations issue in California right now and the discussion helped me tremendously.  It also reinforced things that you tend to forget if you don't do these investigations frequently.  So, many, many thanks to the Employment Law Alliance for putting that webinar together.  It was extremely beneficial.

Lynn Clayton
Vice President, Human Resources

Barrett Business Services, Inc.

I recently participated in the ELA-sponsored webinar on the Employee Free Choice Act.  I was most impressed with that presentation.  It was extremely helpful and very worthwhile.  I have also been utilizing the ELA's online Global Employer Handbook.  This compliance tool is absolutely terrific. 

I am familiar with several other products that purport to provide up-to- date employment law information and I believe that this resource is superior to other similar compliance manuals.  I am delighted that the ELA provides this free to its members' clients.

Boyd Coffee Company

Employment Law Alliance (ELA) has provided Boyd Coffee Company with a highly valued connection to resources, important information and learning. With complex operations and employees working in approximately 20 states, we are continually striving to keep abreast of specific state laws, many of which vary from state to state. We have participated in the ELA web seminars and have found the content very useful. We appreciate the ease, cost effectiveness and quality of the content and presenters offered by these web seminars.  The Global Employer Handbook has provided our company with a very helpful overview of legal issues in the various states in which we operate, and the network of attorneys has helped us manage issues that have arisen in states other than where our Roastery and corporate headquarters are located in Portland, Oregon.

Capgemini Outsourcing Services GmbH

As an international operating outsourcing and consulting supplier Capgemini has used firms of the Employment Law Alliance in Central Europe. We were always highly satisfied with the quality of employment law advice and the responsiveness. I can really recommend the ELA lawyers.

Hirschfeld Kraemer

As an employment lawyer based in San Francisco, I work closely with high tech clients with operations around the globe. Last year, one of my clients needed to implement a workforce reduction in a dozen countries simultaneously. And they gave me 48 hours to accomplish this. I don't know how I could have pulled this off without the resources of the ELA. I don't know of any single law firm that could have made this happen. My client received all of the help they needed in a timely fashion and on a cost effective basis.

Stephen J. Hirschfeld

Hollywood Entertainment Corporation

As the Vice President for Litigation & Associate General Counsel for my company, I need to ensure that we have a team of top-notch employment lawyers in place in every jurisdiction where we do business. And I want to be confident that those lawyers know our business so they don't have to reinvent the wheel when a new legal matter arises. With more than 3400 stores and 35,000 employees operating in all 50 U.S. states and across Canada, we rely on the ELA to partner with us to help accomplish our objectives. I have been delighted with the consistent high quality of the work performed by ELA lawyers. I encourage other in-house counsel to use their services, as well.

Ingram Micro

Ingram Micro is the world's largest technology distributor, providing sales, marketing, and logistics services for the IT industry around the globe. With over 13,000 employees working throughout the U.S. and in 35 international countries, we need employment lawyers who we can count on to ensure global legal compliance. Our experience with many multi-state and multi-national law firms is that their employment law services are not always a high priority for them, and many do not have experts in many of their offices. The ELA has assembled an excellent team of highly skilled employment lawyers, wherever and whenever I need them, and they have proven to be an invaluable resource to our company.

Konami Gaming

Our company, Konami Gaming, Inc., is growing rapidly in a very diverse and highly regulated industry. We are aggressively entering new markets outside the domestic U.S., including Canada and South America. I have had the recent opportunity to utilize the services provided by the ELA. The legal advice was both responsive and professional. Most of all, the entire process was seamless since our Nevada attorney coordinated the services and legal advice requested. I look forward to working with the ELA in the future, as it serves as a great resource to the legal community.

Jennifer Martinez
Vice President, Human Resources

Nikkiso Cryo, Inc.

Until recently, I was unaware of the ELA's existence. We have subsidiaries and affiliates throughout the United States, as well as in Asia, the Middle East and Europe. When a recent legal issue arose in Texas, our long-time Nevada counsel, who is a member of the ELA, suggested that this matter be handled by his ELA colleague in Dallas. We are very pleased with the quality and timeliness of services provided by that firm, and we are excited to now have the ELA as an important asset to help us address employment law issues worldwide.

Palm, Inc.

The ELA network has been immensely important to our company in helping us address an array of human resources challenges around the world. I strongly encourage H.R. executives who have employees located in many different jurisdictions to utilize the ELA's unparalleled expertise and geographic coverage.

Stacy Murphy
Former Senior Director of Human Resources

Rich Products

As the General Counsel for a company with 6,500 employees operating across the U.S. and in eight countries, it is critical that I have top quality lawyers on the ground where we do business. The ELA is an indispensable resource. It has taken the guesswork out of finding the best employment counsel wherever we have a problem.

Jill K. Bond
Senior Vice President/General Counsel, Shared Services and Benefits

Ricoh Americas Corporation

We have direct sales and service offices all over the U.S., but have not necessarily had the need in the past for assistance with legal work in every state where we have a business presence. From time to time, we suddenly find ourselves facing a legal issue in a state where we have no outside counsel relationship. It has been a real benefit to know that the ELA has assembled such an impressive team of experts throughout the U.S. and overseas.

A few years ago, we faced a very tough discrimination lawsuit in Mississippi. We had never had to retain a lawyer there before. I was absolutely delighted with the Mississippi ELA firm. We received an excellent result. They will no doubt handle all of our employment law matters in Mississippi in the future. I have also obtained the assistance of several other ELA firms around the U.S. and have received the same outstanding service. The ELA is a tremendous resource for our company.

Roberts-Gordon LLC

Our affiliated companies have used the Employment Law Alliance in connection with numerous acquisitions, and have always been extremely pleased with our ability to obtain the highest quality legal advice on due diligence issues from jurisdiction to jurisdiction. We have found the Employment Law Alliance firms to be not only first rate with respect to their legal advice but also responsive and timely in assisting us with federal and state law issues critical to our due diligence efforts. We consider the Employment Law Alliance to be an important part of our team.

Rockwell Collins, Inc.

We have partnered with many ELA firms on the development and execution of case management strategies with very positive results. We have been very pleased with the legal advice and counsel provided by the law firms we have utilized who are affiliated with the Employment Law Alliance. The ELA firms we have worked with are customer focused, responsive, and thorough in their approach to handling labor and employment law matters.

Elizabeth Daly
Assistant General Counsel


Sanmina-SCI has facilities strategically located in key regions throughout the world. Our customers expect that we will provide them with the highest quality and most sophisticated services in the marketplace. We have that same expectation for the lawyers with whom we do business. With operations in 17 countries, we need to be certain that we have a team of lawyers working together to address our employment law needs worldwide. The ELA has delivered exactly what it promised-- seamless and consistent high quality services delivered in each locale around the globe. It has quickly become a key asset for our human resources department.


We own, manage, and franchise hotels throughout the U.S. and in more than 90 countries. With more than 145,000 employees worldwide, ensuring that we comply with the complex web of local labor and employment laws in every one of these jurisdictions is a daunting task. The Employment Law Alliance has served as an important resource for us and we have benefited greatly from its expertise and long reach. When a legal dispute or issue has arisen in some far-flung place, Employment Law Alliance lawyers have always provided responsive, practical, and cost-effective assistance.

Wilmington Trust Corporation

Wilmington Trust has used the ELA to locate firms in California, Washington State, Georgia, and Europe. Our experience with the ELA lawyers with whom we have worked has always been one of complete satisfaction and prompt, practical advice.

Michael A. DiGregorio
General Counsel