U.S. Supreme Court Upholds the Health Care Act as a Tax and Places a Cap on the Commerce Clause

U.S. Supreme Court Upholds the Health Care Act as a Tax and Places a Cap on the Commerce Clause

The United States Supreme Court has upheld the Patient Protection and Affordable Care Act, otherwise known as “Obamacare” as a tax, but not as a permissible federal power under the Commerce Clause of the Constitution. This means the federal government may use the Commerce Clause to regulate activity that affects interstate commerce, but not inactivity, or so-called “failures to act.” Nevertheless, because the federal government is afforded the power to levy taxes under the Constitution, the Affordable Care Act is now the law of the land. 

Beginning in 2014, companies with 50 or more employees must provide health insurance for their employees or pay penalties starting at $40,000. Individuals must also purchase insurance beginning in 2014 or pay a “phase-in” penalty of $95 or 1% of income, whichever is higher. In 2015, the penalty for individuals increases to $325 or 2% of income. After 2015, the penalty is 2.5% of income. These penalties will be assessed and managed by the Internal Revenue Service. Less expensive insurance is expected to be available through insurance exchanges created by the states. While many states are waiting until the November elections, Governor Snyder has stated his intent to begin creating an insurance exchange for the State of Michigan. 

Linda Davis Friedland is an attorney in our Livonia office where she concentrates her practice on Commercial Litigation, Employment and Labor Law, Corporate and Business Law, Estate Planning, Utilities Law and Municipal Law.  She can be reached at (734) 261-2400 or lfriedland@cmda-law.com.