Friday, September 30, 2011

U.S. asks Supreme Court to review Eleventh Circuit health reform case

The Department of Justice (DOJ) has filed a petition for certiorari in HHS v. Florida. You may recall that the Eleventh Circuit ruled on that case in August, finding that the individual mandate (also called the minimum coverage provision) of the Patient Protection and Affordable Care Act (ACA) is unconstitutional.

“The Department has consistently and successfully defended this law in several courts of appeals, and only the 11th Circuit Court of Appeals has ruled it unconstitutional. We believe the question is appropriate for review by the Supreme Court,” according to a statement posted on the DOJ’s website.

“Throughout history, there have been similar challenges to other landmark legislation such as the Social Security Act, the Civil Rights Act, and the Voting Rights Act, and all of those challenges failed. We believe the challenges to Affordable Care Act — like the one in the 11th Circuit — will also ultimately fail and that the Supreme Court will uphold the law,” according to the DOJ statement.

Appellate court ruling. The Eleventh Circuit upheld the district court’s ruling that the mandate exceeded Congress’ power under the Commerce Clause, but reversed the finding that the provision is not severable from the remainder of ACA, thus keeping the law’s other provisions intact. The court also found the individual mandate was enacted as a regulatory penalty, not a revenue-raising tax, and, as such, is outside Congress’ power under the Taxing and Spending Clause.

Questions presented. The question presented in the petition is "[w]hether Congress had the power under Article I of the Constitution to enact the minimum coverage provision."

The DOJ also suggests that the Court direct the parties to address the following question: "[w]hether the suit brought by respondents to challenge the minimum coverage provision of the [ACA] is barred by the Anti-Injunction Act, 26 U.S.C. 7421(a)."

Commerce power. The DOJ argues the minimum coverage provision is a valid exercise of Congress’ Commerce Power because it sets forth a rule that governs how individuals finance their participation in the health care market. This rule targets the main vehicle of such financing -- insurance. The petition indicates that the economic conduct of the uninsured and the resulting cost-shifting have direct and well-documented effects on interstate commerce.

In addition, the DOJ opposes the respondents’ argument that the minimum coverage provision regulates “inactivity.” “No court of appeals has accepted that proposition, which lacks any foundation in the Constitution’s text or this Court’s precedents,” the petition states.

Further, the DOJ argues that the Eleventh Circuit failed to defer to Congress’ policy judgments regarding its objective of reducing cost-shifting. Instead, the court inappropriately applied a “strict scrutiny” level of review to a commerce case and made its own independent judgment about whether the minimum coverage provision would accomplish that objective. “Based on an extensive legislative record, Congress reasonably concluded that the minimum coverage provision will mitigate the problem of cost-shifting in the health care market. Indeed, the CBO has estimated that, without the minimum coverage provision, there would be 16 million more people without insurance in 2019,” the petition states.

Taxing power. The DOJ also argues that Congress’ taxing power provides independent authority for enactment of the minimum coverage provision. The DOJ concedes that the practical operation of the minimum coverage provision is as a tax. The provision amends the Internal Revenue Code and will generate some revenue. In addition, the provision is part of the ACA’s larger statutory scheme to expand insurance coverage through various Code amendments, including tax penalties for large employers that adequate coverage to full-time employees. As such, the minimum coverage provision is “the mirror image of statutory provisions of the sort that have long been regarded as within Congress’s broad discretion to determine the amount of tax owed, and falls equally within Congress’s broad taxing power.”

Anti-Injunction Act. Note that the Eleventh Circuit did not address the Anti-Injunction Act (AIA) question, but two other circuits did and they reached conflicting results. The Sixth Circuit in Thomas More v. Obama found the AIA did not bar the challenge to the individual mandate because the ACA penalty is not a tax, while the Fourth Circuit in Liberty University v. Timothy Geithner, found the AIA prohibits a suit seeking to bar the collection of a tax.

The DOJ contends the AIA does not bar challenges to the minimum coverage provision and asks the Court to consider the applicability of the AIA along with the Constitutional issues. By including this question in its petition, the DOJ has seemingly provided the Court with an opportunity to sidestep the Constitutional questions. And yet, a ruling on this issue could have far-reaching consequences for non-health reform-related cases in the future.

Other petitions in Eleventh Circuit case. The 26 states involved in the case and the other challengers, including the National Federation of Independent Business (NFIB), had filed their own petitions for certiorari in the case prior to the government’s filing. The states ask the court to address, among other issues, whether the mandate exceeds Congress’ powers and, if so, to what extent the mandate can be severed from the remainder of the ACA. The other challengers’ question presented is “whether the ACA must be invalidated in its entirety because it is nonseverable from the individual mandate that exceeds Congress’ limited and enumerated powers under the Constitution.”

“The Eleventh Circuit ruling confirmed NFIB’s view that the individual mandate in the health-care law is unconstitutional. It is now imperative that the Supreme Court rule on whether the entire law can stand without the mandate,” said Karen Harned, executive director of NFIB’s Small Business Legal Center. “The sooner the Court takes up this case, the sooner small businesses and individuals will know whether they will have to bear the full weight, financially and economically, of this bad law.”

“While the survival of the new health-care law remains an open question, small businesses and individuals will continue to face uncertainty and trepidation, hesitant to hire or expand,” Harned said. “In filing our petition today, we are attempting to impress upon the Court the urgency of this issue.”

Petition from Sixth Circuit. The DOJ also has responded to the petition for certiorari (filed on July 26, 2011) in the Thomas More Law Center v. Obama case arising out of the Sixth Circuit. In that case, the Sixth Circuit ruled that the ACA and its individual mandate are constitutional. The individual mandate is "a valid exercise of legislative power by Congress under the Commerce Clause," the court held.

The Sixth Circuit noted that the Supreme Court has previously held that Congress may regulate economic activity, even if wholly intrastate, as long as it substantially affects interstate commerce, and that Congress also may regulate even non-economic intrastate activity if doing so is essential to a larger scheme that regulates economic activity.

Next steps. The DOJ has asked the Court to hold the petition in the Thomas More case pending the disposition of its petition in the Florida case.

It is now widely expected that the Court will agree to hear one of these appeals by the end of 2011 and likely make a decision in the summer of 2012.


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