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Marylanders rush to parse court health care ruling

The Supreme Court’s decision to uphold President Barack Obama’s health care overhaul, including the individual insurance requirement at the heart of the law, may have mixed results, with some people opting for the tax penalty rather than the insurance, a Baltimore lawyer said Thursday.

Supporters of President Barack Obama's health care law celebrate outside the Supreme Court in Washington on Thursday after the court's ruling was announced. AP Photo/David Goldman)

“The theory is it’s actually cheaper to not buy the insurance and pay the penalty,” said Barry F. Rosen, chairman and CEO of Gordon Feinblatt LLC and head of the firm’s health care practice group.

Though that “is not the goal of the law,” it may be particularly true for healthy young people, he said, adding that the situation could change if the penalty for not buying insurance begins to approximate the cost of buying insurance.

The Supreme Court’s ruling sent Maryland lawyers, professors, legislators and business people rushing to understand and respond to the implications of the decision, with some expressing surprise at which justice accounted for the deciding vote, and some lauding the potential for health care innovation as a result of the court’s action.

Lt. Gov. Anthony G. Brown, the O’Malley administration’s point person on health care policy, said there was still “a lot” of work to be done to fully implement the health care act in Maryland. He said the state was “making progress on the health benefits exchange” but still had to work out Medicaid details.

Brown brushed aside claims by detractors, who say the act will cause costs at the state level to balloon in the near future. He said health care premiums would have continued to increase without the tools created by the act.

“The cost of doing nothing is certainly not sustainable,” Brown said .About 13 percent, or 747,000, of Maryland residents are uninsured.

Although the law exempts select individuals from having to buy health insurance, there is a two-tier system of penalties for non-exempt individuals who do not buy insurance, said Jonathan Montgomery, an associate at Gordon Feinblatt.

The penalty for those earning less than about $40,000 will be phased in from $95 in 2014 to $695 in 2016. Those earning above that threshold will pay a penalty of 2.5 percent of income, with the amount capped at the cost of a low-cost premium, expected to be about $4,500 a year.

“I think everyone’s going to take a deep breath and not much will change between now and 2014, and after 2014 I think there will be some tinkering,” Rosen predicted.

Just like buying a house

He added that while people can argue the merits of the health care law, it had long been clear to him that it was constitutional.

“The mandate wasn’t any different than buying a house. You don’t have to buy a house, but if you do buy a house, the interest on your mortgage is deductible. In this situation … you did not have to buy health insurance … but if you don’t, you pay more in taxes,” he said.

Thursday’s Supreme Court decision means the historic overhaul will continue to go into effect over the next several years, affecting the way that countless Americans receive and pay for their personal medical care.

The ruling also handed Obama a campaign-season victory in rejecting arguments that Congress went too far in requiring most Americans to have health insurance or pay a penalty.

Chief Justice John Roberts announced the court’s judgment that allows the law to go forward with its aim of covering more than 30 million uninsured Americans.

Roberts explained at length the court’s view of the mandate as a valid exercise of Congress’ authority to “lay and collect taxes.” The administration estimates that roughly 4 million people will pay the penalty rather than buy insurance.

The court found problems with the law’s expansion of Medicaid, but even there it said the expansion could proceed as long as the federal government does not threaten to withhold states’ entire Medicaid allotment if they don’t take part in the law’s extension.

The court’s four liberal justices — Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan and Sonia Sotomayor — joined Roberts in the outcome.

Justices Samuel Alito, Anthony Kennedy, Antonin Scalia and Clarence Thomas dissented.

Focus shifts to states

The health care overhaul focus will now quickly shift from Washington to state capitals.

Only 14 states and the District of Columbia, have adopted plans to establish the new health insurance markets called for under the law. Called exchanges, these markets are supposed to be up and running on Jan. 1, 2014.

Maryland has passed legislation to create an exchange, establishing standards and regulations to run the program and building the framework for a marketplace where individuals and small businesses can purchase coverage.

Within hours of the Supreme Court’s ruling, Robert C. Harnett, vice president of Silberstein Insurance Group in Lutherville, received a phone call from a company wanting to know if there was a tool available to help determine the cost of not offering its employees health insurance.

“It’s a business decision. If they don’t offer health insurance to their employees, there’s a tax associated with that,” Harnett said.

Employers may now ask themselves, “Can I just put my employees into the exchange? Or should I offer benefits, and at what level should I offer benefits?” he said.

“Right now the tax that they would pay, the voucher they would give their employee to go get health insurance in the exchange, the value of that is significantly less than the cost of the insurance,” he said.

Del. Tom Hucker, D-Montgomery, said Maryland should serve as a model for other states as the act is implemented.

Chair of the legislature’s Joint Committee on Federal Relations, Hucker said the panel would meet soon to discuss the law’s implementation in Maryland and would likely make a trip to the White House this summer.

Moving court toward center?

Michael Greenberger, a professor at the University of Maryland Francis King Carey School of Law and the director of the school’s Center for Health and Homeland Security, said he expected the 5-4 ruling but not the way it occurred.

“I thought Kennedy would join the four progressives. I didn’t expect that the deciding vote would be Chief Justice Roberts, which was a very pleasant surprise,” he said.

The magnitude of Roberts’ decision should not be overlooked, said Leslie Meltzer Henry, assistant professor of law at the University of Maryland and associate faculty at the Johns Hopkins Berman Institute of Bioethics.

“He seemed to have deftly decided to take a step toward centering the court,” she said.

Under the Affordable Care Act, states can choose to opt into expanded Medicaid coverage starting in 2014, with those at 133 percent of the federal poverty line qualifying for coverage.

In 2011, the poverty guideline for a family of four was $22,350, according to the U.S. Department of Health and Human Services. That means that under expanded Medicaid coverage, families of four earning $29,726 or less in 2011 would have also been covered.

The expanded coverage is estimated to cost the federal government $100 billion, Henry said.

“That’s 40 percent higher than its current allotment to states under Medicaid,” she said.

Figuring out the costs

While the federal government will pay for the expanded coverage for the first two years, starting in 2017, states will have pay for some of the cost and by 2020, states will have to front 10 percent of the bill.

That’s not as big a burden as it may seem, said Jack Meyer, joint professor at the University of Maryland School of Public Policy and the School of Public Health.

“One, the state has five years to prepare for that and two, the state’s already spending a lot of money on those uninsured people, so there will be some new outlays five years out for the state to cover its share, but the state is already spending money on those people now,” he said. “In a way I look at it as not necessarily a huge increase in spending, but rather spending the funds more wisely.”

Meyer also lauded the act’s creation of a Center for Medicare and Medicaid Innovations, which he said provides grants for “hospitals and physicians who get together and demonstrate new approaches to getting people well and avoiding inappropriate care.”

“Had the law been thrown out, it would have thrown this baby out with the bath water,” he said.

Daily Record business reporter Alexander Pyles and The Associated Press contributed to this article