Wednesday, July 6, 2011

Appellate Court Validation Of Health Reform Strikes Down “Inactivity” Argument

We all know that the Supreme Court eventually will rule on the constitutionality of the Patient Protection and Affordable Care Act (ACA), but the first appellate court ruling on the ACA does give a boost to the Obama Administration.

In affirming a district court ruling that the is constitutional, the Sixth Circuit U.S. Court of Appeals stated that the ACA’s minimum coverage provision “is a valid exercise of Congress’s authority under the Constitution’s Commerce Clause. The minimum coverage provision is in IRC Sec. 5000A, as added by the ACA.

The 2-1 decision (Thomas More Law Center, Jann Demars; John Ceci; Steven Hyder; And Salina Hyder, v. Barack Hussein Obama, et al., No. 10-2388), is the first reached at the appellate court level and also is the first of more than a dozen ACA cases in which a judge appointed by a Republican President has affirmed the ACA’s constitutionality.

Judges Boyce Martin Jr., appointed by President Jimmy Carter, and Jeffrey Sutton, appointed by President George W. Bush, voted to uphold the ACA. Dissenting was Judge James Graham, appointed by President Ronald Reagan

Two Reasons ACA Succeeds Under Commerce Clause

The Sixth Circuit found two reasons why the ACA is “facially constitutional” under the Commerce Clause: “First, the provision regulates economic activity that Congress had a rational basis to believe has substantial effects on interstate commerce. In addition, Congress had a rational basis to believe that the provision was essential to its larger economic scheme reforming the interstate markets in health care and health insurance.”

The court noted that “by requiring individuals to maintain a certain level of coverage, the minimum coverage provision regulates the financing of health care services, and specifically the practice of self-insuring for the cost of care. The activity of foregoing health insurance and attempting to cover the cost of health care needs by self-insuring is no less economic than the activity of purchasing an insurance plan. Thus, the financing of health care services, and specifically the practice of self-insuring, is economic activity.

The court also noted that “even if self-insuring for the cost of health care were not economic activity with a substantial effect on interstate commerce, Congress could still properly regulate the practice because the failure to do so would undercut its regulation of the larger interstate markets in health care delivery and health insurance. ….Congress had a rational basis for concluding that the minimum coverage requirement is essential to its broader reforms to the national markets in health care delivery and health insurance. Therefore, the minimum coverage provision is a valid exercise of the Commerce Clause power.”

Activity Vs. Inactivity

The Thomas More decision emphasizes that the oft-repeated “inactivity” argument (that the minimum coverage provision exceeds Congress’s power under the Commerce Clause because it regulates inactivity rather than activity) is invalid. Even dissenting Judge Graham dismissed this argument.

According to the court, “The text of the Commerce Clause does not acknowledge a constitutional distinction between activity and inactivity, and neither does the Supreme Court. Furthermore, far from regulating inactivity, the provision regulates active participation in the health care market. The vast majority of individuals are active in the market for health care delivery because of two unique characteristics of this market: (1) virtually everyone requires health care services at some unpredictable point; and (2) individuals receive health care services regardless of ability to pay.

“…Thus, although there is no firm, constitutional bar that prohibits Congress from placing regulations on what could be described as inactivity, even if there were it would not impact this case due to the unique aspects of health care that make all individuals active in this market.”

Also At Appellate Courts

We are still waiting for several additional ACA decisions at the appellate court level::

The Fourth Circuit U.S. Court of Appeals heard oral arguments on May 10 in two cases: Commonwealth of Virginia v. Kathleen Sebelius, in which the ACA’s individual mandate was declared unconstitutional; and Liberty University v. U.S., which upheld the ACA.

The Eleventh Circuit U. S. Court of Appeals heard oral arguments on June 8 in State of Florida v. U.S. Dept. of HHS (11-11021-HH), in which the district court declared the entire ACA unconstitutional.

The D.C. Circuit U.S. Court of Appeals is scheduled to hear oral arguments on September 23 in Margaret Peggy Lee Mead, et al., v. Eric H. Holder, Jr., et al., in which  the individual mandate in the ACA was upheld.

The Ninth Circuit U.S. Court of Appeals will hear arguments on July 13 in Baldwin v. Sebelius, a case dismissed by a district court. The plaintiff, Steve Baldwin, filed an appeal directly to Supreme Court, which sent the case back to Ninth Circuit,

For a comprehensive analysis of the Patient Protection and Affordable Care Act, including the full text of the law and additional information on health reform implementation and other recent developments in employee benefits, just click here.


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