In what’s being hailed as the most significant decision since Bush v. Gore in 2000, the Supreme Court decided this morning to uphold President Obama’s controversial health care overhaul.

In an opinion written by Chief Justice John Roberts, the high court upheld the individual mandate as a tax, but ruled that part of the expansion of Medicaid was unconstitutional. As a result, states will now have some leeway to not expand their Medicaid programs without having to pay the penalties called for by the law.

As expected, the voting for the bill was tight. In a potentially unexpected twist, it was Chief Justice Roberts and not Justice Anthony Kennedy who joined Justices Ruth Bader Ginsburg, Stephen Breyer, Elena Kagan and Sonia Sotomayor in the majority. Justice Kennedy dissented along with Justices Samuel Alito, Clarence Thomas and Antonin Scalia.

The Patient Protection and Affordable Care Act (PPACA), which the president signed into law on March 23, 2010, was intended to radically redesign health care for millions of Americans. Republicans and the masses have reviled the law, which according to them is too intrusive and is an albatross for states, businesses and the individuals the president intended to help.

The high court had heard oral arguments on the case, National Federation of Independent Business v. Sebelius, in late March. During that time, the court heard arguments on whether the Anti-Injunction Act, which forbids a lawsuit to challenge a tax before the tax has been paid, precludes the court from considering the constitutionality of the PPACA until 2015, when individuals could first sue for a refund on fines imposed for failure to comply with the bill’s individual mandate.

The court also heard arguments on the constitutionality of the individual mandate and whether the rest of the law, or parts of it, could remain in place if the individual mandate was struck down.

In its decision, the high court divided the law into four parts:

Part 1: The Anti-Injunction Act

Chief Justice Roberts wrote that Congress didn’t intend for taxpayers’ assessment payments to be treated as a “tax” for the purposes of the Anti-Injunction Act. The PPACA pronounces the payments as a “penalty” and not a “tax”. Therefore, while the label cannot control whether payment is a tax for the purposes of the Constitution, it does determine whether the Anti-Injunction Act applies.

“The court’s decision upholding the Affordable Care Act as a tax demonstrates the power of law,” Cornell University Professor Michael Dorf said in a statement. “Although political and ideological factors invariably play a part in the decisions of Supreme Court justices, a cross-ideological majority ruled today that the signal legislative accomplishment of a president’s term should not stand or fall on whether Congress used the magic word ‘tax.’”

Part 2: The individual mandate

The court decided that the law’s requirement that most people purchase health insurance or pay a penalty was constitutional and preserved the mandate as a form of tax. However, other justices in the majority opined that they would have taken this a step further. The justices said they felt the mandate could have been upheld under the Commerce Clause.

Part 3: What would happen if the individual mandate fell?

This question did not need to be answered because the court upheld the mandate.

Part 4: Medicaid

This was the only part of the law that was changed. The high court decided that the expansion of Medicaid under the law is unconstitutional because it threatens states with the loss of funding if they do not comply with the expansion. However, its constitutionality can be validated by precluding the government from withdrawing existing Medicaid funds should states fail to comply with the expanded requirements.

“The Medicaid expansion decision does limit federal spending clause discretion in some significant ways,” Northeastern University School of Law Professor Martha Davis said in a statement.” However, the federal government can still use big carrots to promote state activities consistent with federal goals. I hope that will be enough to get states to expand Medicaid coverage, particularly given the impact on racial and ethnic minorities if such coverage is withheld.” New York Attorney General Eric Schneiderman issued a statement hailing the decision as a historic victory for the tens of millions more Americans who will be covered by health insurance.

“The law’s effects will be significant in our state, where over two million people are uninsured,” he said. “Over a million uninsured New Yorkers will soon have access to affordable coverage. This law will continue to provide a spectrum of key consumer protections including keeping young adults on their parents’ plans, ending pre-existing condition restrictions, and increasing consumer information about health care choices.”

Looking forward, Venable Partner John Cooney tells InsideCounsel that now that the Supreme Court has issued its ruling, the focus within the executive branch will shift to developing and implementing the law’s programs as quickly as possible.

“The demand for health care is about to explode as we Baby Boomers age and we get the point when we need intense care,” he says. “It will be critical for all parties involved in the health care system—providers, hospitals, insurers and the government—to innovate and develop methods for reducing costs so that we’ll be able to deliver quality health care at a level we can afford given the expansion of the coverage that the Supreme Court upheld today.”

From an employment perspective, Littler Mendelson Shareholder Ilyse Schuman tells InsideCounsel that employers will face a renewed urgency to analyze and implement the law’s requirements now that the PPACA’s constitutionality has been settled.

“As employers await additional regulatory guidance on key provisions, they must make important decisions about their health coverage and how best to control costs and improve the health and productivity of their workforce,” she says.

For additional coverage, read the New York Times and Wall Street Journal.

And for more from InsideCounsel on the health care law, read:

Supreme Court divided on second day of health care hearings

Supreme Court to finally hear ObamaCare arguments

Constitutional Controversy

Supreme Court will hear health care overhaul challenge

Supreme Court likely to hear health law

Court upholds federal health care law

PPACA Expands the Health Care Industry’s Liability Risk