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    The Employment Lawyer Blog by John F. Buckley IV

    Challenges to the Individual Mandate Under the New Health-Care Law

    Posted by Gale Burns on Tue, May 15, 2012 @ 11:05 AM

    May 15, 2012

    John F. Buckley IV—Senior Attorney, National Legal Research Group

    On March 23, 2010, President Obama signed into law a sweeping health-care reform measure entitled the "Patient Protection and Affordable Care Act" ("PPACA"), Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010).  The Act was modified by the Health Care and Education Affordability Reconciliation Act, Pub. L. No. 111-152, 124 Stat. 1029, signed on March 30, 2010.  The PPACA as modified contains extensive health-care reform provisions, including a mandate that will require all individuals to obtain a minimum level of health insurance coverage by January 1, 2014.  The Act also imposes many requirements that will impact employers regardless of whether they provide health insurance to employees.  It is the individual coverage requirement, however, that has generated the most controversy and given rise to the greatest number of legal challenges.  The most frequently asserted claim is that Congress lacks the power under the Constitution to require individuals to purchase private insurance.

    The challenges to the PPACA have been received with mixed results by the courts.  In November 2010, a federal district court in Virginia held that the employer and individual coverage provisions of the Act are lawful under the Constitution.  Declaring that the provisions "are a regulation of interstate commerce authorized by the Commerce Clause," the court dismissed the lawsuit brought by an employer and several individual plaintiffs.  Liberty Univ., Inc. v. Geithner, No. 6:10-cv-00015-nkm, 2010 WL 4860299 (W.D. Va. Nov. 30, 2010).  An appeal to the U.S. Court of Appeals for the Fourth Circuit is expected.

    The U.S. District Court for the Eastern District of Virginia found that Congress’s imposition of the individual requirement to purchase private insurance exceeded congressional power under the Commerce Clause and that the Necessary and Proper Clause did not save the measure.  Further, the requirement could not survive as a tax because it was intended to penalize individuals who fail to obtain insurance, not to raise revenue. However, because the mandate could be severed from the rest of the PPACA, the court declined to strike down the entire Act.  Virginia ex rel. Cuccinelli v. Sebelius, CA No. 3:10CV188-HEH, 2010 WL 5059718 (E.D. Va. Dec. 13, 2010).  The federal government has indicated its intention to appeal this ruling.  http://blogs.usdoj.gov/blog/archives/1106.

    Two federal appellate courts have now ruled on constitutional challenges to the Act. The U.S. Court of Appeals for the Sixth Circuit upheld the Act in a 2-1 decision. Thomas More Law Center v. Obama, ___ F.3d ___, 2011 WL 2556039 (6th Cir.Jun. 29, 2011).   The court held that the Act’s individual coverage requirement was a lawful exercise of Congress's power under the Commerce Clause. Asserting that Congress has the power under the Commerce Clause to regulate the interstate markets in health care delivery and health insurance, the court determined that Congress, in enacting the PPACA, had a rational basis for concluding that the individual coverage requirement was essential to the Act’s broader reforms to the interstate markets.  Thus, the court held that the individual coverage requirement was facially constitutional under the Commerce Clause. The court also ruled, however, that the requirement could not survive as a tax because the penalty imposed for an individual’s failure to obtain insurance was intended as a regulatory penalty and not a revenue-raising measure. The plaintiff in the case, a public interest law firm, has filed a petition for review of the Sixth Circuit’s decision by the Supreme Court.

    In a suit brought by twenty-six states, private individuals, and an organization of independent businesses, the Eleventh Circuit court of appeals upheld by a 2-1 majority the ruling of a federal district court that the individual mandate exceeded the boundaries of Congress's enumerated power under Commerce Clause.  Florida ex rel. Atty. Gen. v. U.S. Dept. of Health and Human Services, 2011 WL 3519178 (11th Cir. 2011).   Furthermore, the court ruled that the individual mandate operated as a civil regulatory penalty, not a tax, and therefore could not be authorized pursuant to the Taxing and Spending Clause.  The court reversed one part of the district court’s opinion, however, holding that the unconstitutional individual mandate could be severed from the remainder of the Act's reforms.  Although this part of the court’s ruling would allow the continued enforcement of provisions of the Act currently in effect, the central provisions of the Act designed to reform the health care insurance system are unlikely to be effective without the individual mandate.  As one analyst has observed, “Take away the mandate, and what you’re left with is an insurance market that really wouldn’t work.”  The court’s ruling makes the individual mandate unenforceable in Alabama, Florida and Georgia.

    The Supreme Court granted a petition for review from the Eleventh Circuit decision, and heard oral argument in the case on March 28, 2012.  The Court is set to review the following issues: 1) The constitutionality of the individual mandate requirement; 2) Whether some or all of the overall law must fail if the mandate is struck down; 3) Whether the Anti-Injunction Act bars some or all of the challenges to the insurance mandate; and 4) The constitutionality of the expansion of the Medicaid program for the poor and disabled.  The questions and comments from the Justices have led some Court-watchers to conclude that the Supreme Court may strike down the individual mandate.  Predicting the outcome of a decision based on what is said in oral argument, however, is always a difficult proposition.  The fact that the Court granted an unusually large amount of time for oral argument—five and one-half hours—indicates that the Justices view the decision as a close one.

    Topics: legal research, John Buckley, Commerce Clause, PPACA, individual mandate, health-care reform constitutional, health care reform constitutionality

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