Mon., March 26, 2012 1:10pm EDT WASHINGTON (Reuters) — The U.S. Supreme Court on Monday appeared prepared to decide the fate of President Obama's sweeping health care law rather than delaying for years a review of the mandate that Americans buy insurance or pay a penalty.

During the first of three days of historic arguments, the justices voiced doubt that a U.S. tax law requiring that people pay first and litigate later should delay the legal challenge to the president's signature domestic legislative achievement.

At the core of the law, signed by Obama in 2010, is a requirement that people obtain health insurance by 2014 or pay a penalty. The question on Monday was whether people can challenge this so-called individual mandate before paying the penalty and seeking a refund.

The nine justices, five appointed by Republican presidents and four by Democratic presidents, plan to hear six hours of arguments over three days. They are expected to rule on the case by late June.

In Monday's arguments lasting nearly 90 minutes, several justices asked skeptical questions about whether the penalty was indeed a tax. If not deemed a tax, then the justices could move forward to decide the merits of whether the law was constitutional.

"Here, they did not use that word tax," liberal Justice Stephen Breyer said, referring both to lawmakers who crafted the legislation in Congress and to their intent.

Another liberal Democratic appointee to the high court, Justice Ruth Bader Ginsburg, also expressed skepticism. "This is not a revenue-raising measure," she said.

Conservative Justice Antonin Scalia was also among those justices who suggested by his questions that allowing the case to go forward would not broadly undercut federal tax policy.


"There will be no parade of horribles," he said, noting that lower court judges would be able to determine when to make exceptions to the usual rules governing general tax penalties and law.

The law, intended to transform health care for millions of people in the United States, has generated fierce political debate. Republican presidential hopefuls and their party colleagues in Congress have vowed to roll back the law, which they say will financially burden states, businesses and individuals.

The law has been viewed as the crowning achievement of Obama's domestic legislative agenda, but challengers, including 26 of the 50 U.S. states, say Congress exceeded its constitutional power to regulate commerce with the so-called individual mandate.

They argue that government should not meddle so deeply in people's lives and force them to pay for a product they have opted against. The Obama administration counters that virtually every person will need medical care and that those who shun insurance put a disproportionate burden on the system.

Underscoring how the issue has divided Americans, hundreds of supporters and opponents marched outside the white-marble Supreme Court building across from the U.S. Capitol. People lined up 72 hours in advance to try to get one of the few seats open to the public.

Supporters chanted "We love Obamacare," embracing a term opponents have used to try to deride the law. One protester against the law, Sally Oljar of Seattle, said: "The day hasn't come when the government can force me to buy a damn thing."

The courtroom, which holds about 400 people, was packed with lawmakers from across the street in Congress, prominent attorneys, top Obama administration officials and those who paid others or waited themselves over the weekend to get a seat in the public gallery.

Among those able to get one of the coveted tickets to witness the arguments were Health and Human Services Secretary Kathleen Sebelius, who is charged with implementing much of the law, and Republican Senator Jeff Sessions, an outspoken critic of the law.

Outside, Republican presidential hopeful Rick Santorum called a news conference to promise that if elected, he would get Congress to pass a law eliminating Obama's health care overhaul. Obama is seeking re-election on November 6.

In the United States, annual health care spending totals $2.6 trillion, about 18% of the annual gross domestic product, or $8,402 for every man, woman and child.

In the markets, the Morgan Stanley Healthcare Payor index of health insurers was up 2.6% in mid-day trading, outperforming a roughly 1% rise for the broader market.

Shares of large insurers, such as UnitedHealth Group and WellPoint, were up more than 2%, while shares of hospital chains HCA Holdings and Community Health Systems also rose more than 2%.

On its website the Supreme Court posted the audio of the oral argument as well as a transcript, here.

(Additional reporting by Jeremy Pelofsky, Ian Simpson and Lily Kuo in Washington and Lewis Krauskopf in New York; Editing by Howard Goller and Will Dunham)

© 2011 Thomson Reuters. Click for Restrictions.

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