In one of the most anticipated high-court rulings in a generation, a divided Supreme Court (5-4) largely upheld the constitutionality of the Obama administration's health-care law.
It upheld the mandate as a tax, in an opinion by Chief Justice John Roberts. The justices also found fault with part of the health-care law's expansion of Medicaid, a joint federal-state insurance program for the poor. The justices made some changes to the Medicaid portion of the law.
The court said Congress was acting within its powers under the Constitution when it required most Americans to carry health insurance or pay a penalty—the provision at the center of the two-year legal battle.
The ruling is a victory for Democrats and President Barack Obama, who had passed the biggest reworking to the health system since the creation of Medicare in the 1960s and faced the prospect of the court nullifying their effort. It also averts disruption for hospitals, doctors and employers who have spent more than two years preparing for changes in the law.
The states filed suit the day Mr. Obama signed the Patient Protection and Affordable Care Act in March 2010, and a cloud of uncertainty had hung over the law ever since. Lower courts issued conflicting rulings on whether the law's insurance mandate was constitutional.
Even as the law's fate was in doubt, the administration moved ahead with implementing its provisions. It has been negotiating with states to set up exchanges where consumers can buy subsidized insurance policies and sign up millions of lower-income Americans for Medicaid. Some states, including Florida and Texas, refused to cooperate because they expected the law to be overturned.
The exchanges are set to open in 2014, the same year insurers will have to accept all customers regardless of their medical histories. The insurance mandate will also take effect that year. People must show when they file tax returns for 2014 that they had coverage during that year or pay a tax penalty. The size of the penalty will rise over time and eventually reach a maximum of several thousand dollars a year.
Also starting in 2014, companies with more than 50 workers will have to pay penalties starting at $2,000 per employee if they didn't offer a set level of health benefits.
The law's challengers argued the federal government didn't have the constitutional power to compel Americans to obtain health insurance. They urged the Supreme Court to strike down the insurance requirement and void the rest of the health law along with it.
Although the law survived the court challenge, it faces an uncertain future. Republican presidential candidate Mitt Romney and GOP congressional leaders have pledged to repeal the law if they take control of Congress and the White House in November elections.
The court's decision, while a relief to Democrats, could further energize voters who dislike the law to back Republicans in November. And it forces the Obama administration to continue defending the unpopular insurance mandate.
On the other hand, the court's blessing could itself shape public opinion of the law, particularly among independents and undecided voters who view the justices as relatively free of the partisan agendas of the government's elected branches. Polls consistently show that the public places greater confidence in the Supreme Court than either Congress or the presidency, although the justices' approval ratings have slipped somewhat over the past year.
The Supreme Court reached its decision in the final week of its 2011-12 term, following an extraordinary three days of oral argument in late March at which conservative justices sharply questioned the mandate. Justice Antonin Scalia suggested that under the government's logic, Congress could require the purchase of any product and "you can make people buy broccoli."
Justice Anthony Kennedy, often the court's deciding vote, said the government faced a "heavy burden" but also suggested there might be justification for requiring people to carry health coverage so they wouldn't affect health costs for others.
The court's four liberal justices made clear they saw the health law as squarely within congressional authority over interstate commerce, and the nation had been in suspense for three months as the justices in their customary secrecy deliberated and drafted the opinion.
Implementation of the law has been uneven to date. Some changes—such as allowing young people up to age 26 to remain on their parents' plans—have taken effect smoothly and are popular with consumers. Insurers are also already covering preventive services without out-of-pocket costs, a proposal that is generally well-liked but has sparked a fight between the administration and the Catholic church over the inclusion of birth control in the benefits.
The administration has struggled with other early elements of the law, such as high-risk insurance pools designed to cover people with medical conditions until 2014. Thousands of companies have sought temporary waivers to the part of the law that prevents them from capping annual benefit payouts, saying that they would drop coverage otherwise.
The Obama administration and state agencies face considerable challenges to get the rest of the law in place within the next 18 months. Despite support for the consumer-friendly provisions, more Americans oppose the law than favor it, according to recent polls.
Mr. Obama is expected to emphasize the consumer provisions in his re-election effort. Republicans are likely to step up their attacks and stress that after the Supreme Court's decision, the only way to eliminate the unpopular individual mandate is to elect Republicans to the presidency and Congress.