Supreme Court upholds healthcare reform law

UPDATED at 12:30 p.m. ET: The U.S. Supreme Court ruled that the insurance provisions of the Patient Protection and Affordable Care Act are constitutional, handing President Barack Obama a major election-year victory and shunning 26 states that had sought to overturn the reform law.

The court ruled that Congress has the power to compel individuals to purchase insurance as a tax on people who do not have health insurance.

In a complex 193-page opinion and dissent (PDF), the court ruled that Congress has the power to compel individuals to purchase insurance as a tax on people who do not have health insurance.

"The individual mandate cannot be upheld as an exercise of Congress power under the Commerce Clause," Chief Justice John Roberts wrote in the majority opinion. "In this case however, it is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income but choose to go without health insurance. Such legislation is within Congress' power to tax."

Contrary to some predictions, Roberts joined the court's politically liberal wing as a swing vote, while Justice Anthony Kennedy joined the court's conservative majority, which sought to strike down the insurance mandate.

“Whatever may be the conceptual limits upon the Commerce Clause and upon the power to tax and spend, they cannot be such as will enable the federal government to regulate all private conduct and to compel the states to function as administrators of federal programs,” the minority dissent says. “That clear principle carries the day here.”

The landmark decisions end two years of legal uncertainty and clear the way for full implementation of the 906-page law. Doing so includes establishing insurance exchanges in each state, prohibiting insurance companies from discriminating against the sick, and requiring nearly all Americans to prove on their income taxes that they carry health insurance starting in 2014.

"Today's historic decision lifts a heavy burden from millions of Americans who need access to health coverage. The promise of coverage can now become a reality,” said American Hospital Association President and CEO Richard Umbdenstock in a statement. “The decision means that hospitals now have much-needed clarity to continue on their path toward transformation.”

The insurance industry's national interest group, America's Health Insurance Plans, released a statement reiterating its position that “universal coverage” was essential to avoiding significant increases in cost and decreases in choices for health insurance.

“The law expands coverage to millions of Americans, a goal health plans have long supported,” AHIP President and CEO Karen Ignagni said in a statement, “but major provisions, such as the premium tax, will have the unintended consequences of raising costs and disrupting coverage unless they are addressed.”

The court, however, did strike down part of the reform law's mandated expansion of Medicaid. Congress had aimed to expand the insurance program for the poor by at least 16 million people, but the court ruled that Congress did not have the power to cut off Medicaid funding for states that refused to comply with the law's eligibility rules.

The law said that states "must either accept a basic change in the nature of Medicaid or risk losing all Medicaid funding," Roberts wrote. "The remedy for that constitutional violation is to preclude the federal government from imposing such a sanction … As a practical matter that means states may now choose to reject the expansion; that is the whole point. But that doesn't mean all or even any will.”