From the moment President Barack Obama signed the Affordable Care Act in March of 2010, observers predicted the law’s fate would ultimately be determined by the Supreme Court. Now, almost two years later, the court is indeed preparing final arbitration of the most sweeping and controversial health law in a generation.

 As predictions go, foretelling the Supreme Court’s involvement was hardly a stretch. The law’s passage followed one of the most contentious partisan political brawls in American history — one that saw the measure pass without a single Republican vote in either Congressional chamber. It took just hours after passage for then-Florida Attorney General Bill McCollum, in conjunction with the attorneys general of a dozen other states, to file suit in federal court seeking the measure’s repeal. That suit now includes 26 states and the National Federation of Independent Business.

More than two dozen lawsuits soon followed, virtually all attacking the law’s mandate that almost every U.S. citizen purchase health insurance or pay a penalty. Many have been dismissed while others await lower court decisions. A handful moved far enough along in the process to seek the Supreme Court’s consideration. Last month, the court agreed to hear only one of them — the initial case, Florida et al. v. Department of Health and Human Services et al.

The court’s ruling, expected in June 2012, could go several ways:

• Justices could agree with an October 2010 ruling from a Michigan federal court upholding the law in its entirety. That would allow the ACA to move forward and leave any changes up to subsequent Congresses and presidents.

• The court could follow the lead of the Northern District of Florida, which ruled the law’s individual mandate to purchase health insurance violates the U.S. Constitution’s Commerce Clause, invalidating the law totally.

• Justices could invoke a different federal law that bars lawsuits seeking to prohibit the federal government from collecting a tax, such as the penalty for not purchasing health insurance. Doing so would allow them to postpone hearing the case until 2015.

• Or, the judges could agree with an August decision from the 11th U.S. Circuit Court of Appeals upholding the individual mandate ruling in the Florida v. HHS case but declining the law’s overturn.  

That last possibility has health insurers justifiably nervous. The ACA’s requirement that insurance companies take all applicants, regardless of health conditions and history, is predicated on having enough healthy, premium-paying people in the system to offset the high costs of those with serious health issues.

Dropping the individual mandate while maintaining both the “all-comers” requirement and another provision barring insurers from basing rates on an applicant’s health status could result in lots of people waiting to get sick before obtaining coverage. It’s a possibility the Obama administration admits could drive costs up across the board.

In a post on The White House blog on August 12th, then-Obama Senior Advisor Stephanie Cutter wrote that losing the mandate, “would lead to double-digit premiums increases — up to 20 percent — for everyone in the individual insurance market.”

That would be particularly hard on small businesses says John Arensmeyer, founder and CEO of Small Business Majority, a business advocacy group that supports the law. While saying he believes there is “very little chance of the entire law being overturned,” Arensmeyer questions how effective it could be without the mandate. 

“It’s the only way to address the cost issue,” he says. “Virtually every expert that has looked at this has said they can’t see how you get there without requiring everyone to be in the system.”

Faced with a potential fiscal disaster, insurers would likely have no choice but to push Congress to allow them out of either the all-comers mandate or the premium restrictions clause or both.

Barbara O’Connor, emeritus director of the Institute for the Study of Politics and Media at Sacramento State, believes insurers would not stop there. “If I were an insurance lobbyist, I would try to overturn the entire law,” she says. “Because the economics that made it work would be gone.”

Micah Weinberg, senior policy advisor with the Bay Area Council, another pro-business group that supports the ACA, says he also believes losing the mandate could be fatal to the ACA’s health.

“Losing the individual mandate would be, if not a mortal blow, then a pretty significant one,” he says.

The legal debate will be argued by constitutional lawyers, but there is no shortage of views on what the court might do. O’Connor believes justices will uphold the law, citing the example of Medicare, which requires citizens 65 or older to enroll in at least basic Medicare coverage when they obtain their Social Security benefits. Weinberg is more circumspect.

“The individual mandate is absolutely a debatable issue,” he says. “But it is certainly not the craziest thing we’ve ever done under the commerce clause.”

Even if the court upholds it, the ACA won’t be safe until at least after the 2012 elections. Every Republican presidential candidate has vowed to make its repeal a priority. But unless Republicans also take control of the Senate by a filibuster-proof majority, those vows are empty. Anything less would likely leave most of the law intact, although a GOP-dominated Congress could conceivably use parliamentary rules to force significant changes to portions of the statute, even if President Obama is re-elected.

The battle also continues far beyond Washington. The National Conference of State Legislatures reports at least 45 states since 2009 have considered legislation to limit adherence to the law. Most of the hundreds of measures introduced have called for nullifying the statute, barring state agencies from applying for federal grants or prohibiting them from using state funds to implement the law. Some also called for creating interstate “health compacts” that make it a crime to interfere with residents’ “health freedoms.” In all, 17 states have adopted measures opposing the ACA. Two, Arizona and Oklahoma, have codified these measures into their state constitutions. Five more have similar ballot measures pending.

While 22 states acting mostly in concert on any issue is significant, so is the fact that opposition measures failed or didn’t come up at all in just as many statehouses. Led by California, 14 states are moving forward with the health care insurance exchanges called for by the ACA. Five more plus the District of Columbia have pending health exchange legislation. And while much of the support and opposition to the law has fallen along red and blue lines, green has so far been the real player in state-level action: Every state but Oklahoma — including 16 that rejected health exchange bills this year — has accepted millions of dollars in federal funds to help create their exchanges.

All of this begs the question: If either the Supreme Court or a GOP wave similar to the last Congressional elections kills the ACA, would California work to establish its own version of the Affordable Care Act? California Secretary of Health and Human Services Diana Dooley, who also chairs the California Health Exchange Board, is ready for the possibility.

“I have repeatedly said it is my priority to take as much federal money appropriated for exchanges as fast as possible and to use it as wisely as possible to create a successful health benefit exchange for California, even if we don’t have the full promise of the ACA,” she says.

But that is only part of the equation. The stickier issue is mandating individuals to purchase health insurance. Legally, there is nothing to stop California lawmakers from imposing such a requirement. Whether the economic environment is right is more debatable.

Mike Johnson, Blue Shield of California’s director of public policy, says requiring people to buy insurance only works if there are government subsidies to help low-income residents pay for it.

“Without federal funding, California would have a very difficult time imposing its own mandate and providing subsidies on its own,” he says.

“The money to set up an exchange is pennies compared to the cost of the subsidies needed to enroll people in that exchange,” adds the Bay Area Council’s Weinberg. “Right now California doesn’t have two nickels to rub together.”

The debate is nothing new. California has long wrestled with the possibility of going it alone, with lawmakers passing multiple health reform bills, including single-payer measures, over the past 10 years. All were eventually vetoed or overturned by voters.  

As recently as 2007, then-Gov. Arnold Schwarzenegger and Assembly Speaker Fabian Núnez co-authored legislation strikingly similar to what became the ACA, including the individual mandate and subsidies for the poor. The Assembly approved the $14.9 billion proposal, but it died after the state Legislative Analyst’s Office said the system would potentially be broke within five years without major state subsidies.

The ACA made further efforts moot, but Anthony Wright, executive director of the consumer health care advocacy group Health Access, thinks that could change if the federal law is struck down. Wright says he believes the Supreme Court will uphold the law, but if not, California has no choice but to tackle health reform again on its own.

“What is the alternative?” he asks. “The health industry is in a death spiral. If the alternative is to just let things go as they are, that is unsustainable.”

Former state Assemblyman Roger Niello, who was there for the 2007 Schwarzenegger/Nunez legislation, doubts a similar effort would gain any better traction this time around. “I can’t see any reason the LAO would assess that bill or anything like it any differently today,” he says. “The economy was stronger than green garlic in 2007. That’s certainly not the case today.”

Senate President Pro Tem Darrell Steinberg was also there in 2007. He says it is “very feasible” that California could take another run at passing ACA-type legislation of its own if the federal bill goes down, but not without a better economy.

“For California to do it alone, you need economic recovery. We have to have a balanced budget,” he says.

For now, much of the chatter around the ACA is pure speculation, but there are some indisputable elements in California. In October, federal health regulators approved California’s plan to impose budget deficit-induced cuts to Medi-Cal reimbursements to doctors, pharmacists and optometrists by 10 percent. Fiscal realities have already forced the Obama administration to drop a portion of the law providing consumers inexpensive, basic, long-term care insurance. Other possibly significant changes may follow even if the law survives. In both cases, regardless of need, the money to pay for those services is simply absent.

The public’s perception of the law may also be changing. An October pool conducted by the Kaiser Family Foundation indicated that, for the first time since the law passed, a majority of Americans (51 percent) view the law unfavorably. Whether that portends the law’s demise remains to be seen. But killing it, while politically expedient for some, also comes with hazards.

Some elements of the law, such as allowing young adults to stay on their parents’ health insurance until age 26, have proven popular. Blue Shield’s Johnson believes consumers will also respond well to the law’s already-imposed “medical loss ratio” requiring insurers to spend 80 to 85 percent of premium revenues on health care or to rebate the difference to policyholders.

“We think it will have a big impact on people when the rebate checks start going out next spring,” he says.

Perhaps the biggest challenge to killing the ACA is the reality that even with reform, health care costs keep climbing. A recent report from the federal Office of the Actuary in the Offices of Medicaid and Medicare Services indicates that, even with the ACA expected to pay for itself and produce savings that would offset some growth in costs, national health spending is expected to grow from its current 17 percent of GDP to almost 20 percent by 2020.

It is a sobering figure, one ACA supporters say would only be made dramatically worse by sending more than 30 million Americans back into the ranks of the uninsured, where they will be forced to continue using highly expensive emergency rooms for their care. Most also will continue avoiding health care altogether until they are very sick or hurt, making theircare even more costly.

“It’s not like the uninsured didn’t exist before,” says Wright. “They’ve always been in the system, just in the most inefficient and expensive way possible.”

O’Connor, who is also on the national board of the AARP, has spent her professional life maneuvering the treacherous political waters in both California and D.C. In spite of all the contentious partisan bickering, she says she remains optimistic that a workable solution will be found.

“Everyone I know across party lines believes that treating people for basic care in the ER is flat-out stupid,” she says. “Without reform, the system is a house of cards.

“We’re smarter than that,” she adds. “We have to be. It’s too late in the game not to be.”