Eleventh Circuit Strikes Down Patient Protection and Affordable Care Act's Requirement That Individuals Purchase Healthcare Insurance
The U.S. Court of Appeals for the Eleventh Circuit held that the Patient Protection and Affordable Care Act’s (PPACA) “individual mandate” requiring uninsured U.S. citizens to purchase minimum healthcare insurance or pay a penalty was unconstitutional. The majority opinion concluded that the individual mandate exceeded congressional authority because it was not enacted pursuant to Congress’s tax power and exceeded Congress’s power under the Commerce Clause of the Constitution. Further, the Court concluded that the individual mandate was severable from the remainder of the PPACA, including those provisions affecting employers. The Court also held that the PPACA’s expansion of Medicaid was constitutional. Thus, the Court affirmed summary judgment in favor of the plaintiffs —26 states, a business federation, and two individuals — on the PPACA’s individual mandate, but reversed the district court’s holding that the Medicaid provisions and the PPACA in its entirety were unconstitutional.
Constitutionality of the Individual Mandate
The Court held that, despite the “pressing public needs to deal with the problems of the uninsured[,] . . . [t]he federal government’s assertion of power, under the Commerce Clause, to issue an economic mandate for Americans to purchase insurance from a private company for the entire duration of their lives is unprecedented, lacks cognizable limits, and imperils our federalist structure.” Further, relying on the plain language of the statute and its legislative history, the Court concluded that the penalty the PPACA imposed on individuals who failed to obtain healthcare insurance was not a tax, as the government contended, but was a regulatory penalty. Notably, during the debate prior to the PPACA’s enactment, the President and other supporters of the legislation had argued emphatically that the mandate did not constitute a tax. Therefore, the Court held that the individual mandate was not enacted pursuant to Congress’s power to tax.
Finally, because of the strong presumption of severability and the fact that the PPACA’s other provisions could stand alone after the unconstitutional individual mandate was stricken from the Act, the Court rejected the district court’s “wholesale invalidation of the Act.” In this regard, the Court declined to strike down the PPACA’s requirements that employers with at least 50 full-time employees offer insurance or pay a penalty, 26 U.S.C. § 4980H, and that employers with more than 200 full-time employees automatically enroll new and current employees in an employer-sponsored plan unless the employee opts out. 29 U.S.C. § 218A.
The dissenting judge maintained that all the challenged provisions were constitutional. In the dissent’s view, the “individual mandate was designed and intended to regulate quintessentially economic conduct in order to ameliorate two large, national problems: first, the substantial cost shifting that occurs when uninsured individuals consume health care services . . . for which they cannot pay; and, second, the unavailability of health insurance for those who need it most — those with pre-existing conditions and lengthy medical histories.” According to the dissent, the consumption of health care services by the uninsured has a very substantial impact on interstate commerce — the shifting of substantial costs from those who do not pay to those who do and to the providers who offer care. Thus, the dissent concluded that the individual mandate clearly fell within Congress’s powers under the Commerce Clause.
The Court’s holding regarding the individual mandate conflicted with the Sixth Circuit’s recent decision upholding the provision in Thomas More Law Center v. Obama, No. 10-CV-2388, 2011 BL 170453 (6th Cir. June 29, 2011), discussed in Bloomberg Law Reports, Labor & Employment Law, Vol. 5, No. 29 (July 11, 2011). As a result, the circuit split on this issue has now moved this matter closer to its inevitable, final resolution by the Supreme Court. The only other circuit court to address the constitutionality of the PPACA’s individual mandate held that the plaintiffs lacked standing and therefore did not address the merits of the case. New Jersey Physicians Inc. v. President of the U.S., 10-4600, 2011 BL 201152 (3d Cir. Aug. 03, 2011), discussed in Bloomberg Law Reports, Labor & Employment Law, Vol. 5, No. 34 (August 11, 2011).
For additional information about the Eleventh Circuit’s opinion, see Bloomberg Law Reports, Litigation, “Eleventh Circuit Declares Individual Mandate in Health Care Overhaul Unconstitutional,” Vol. 1, No. 8 (Aug. 22, 2011).
Employment Related Provisions
To date, the only court to address the employment-related provisions of the PPACA held that the requirements set forth in 26 U.S.C. § 4980H were constitutional. See Liberty University, Inc. v. Geithner, 753 F. Supp. 2d 611 (W.D. Va. 2010). Section 1513 provides that, effective January 1, 2014, if an “applicable large employer . . . fails to offer to its full-time employees (and their dependents) the opportunity to enroll in minimum essential coverage under an eligible employer-sponsored plan . . . for any month,” and at least one full-time employee receives a “premium tax credit or cost-sharing reduction” through a health benefit exchange, then a civil fine will be imposed on the employer. An “applicable large employer” is one who employs 50 or more full-time employees on average over a calendar year. The district court noted that it is well established that Congress has the power, under the Commerce Clause, to regulate the terms and conditions of employment. The court then found that the Section 1513 requirement resembled the requirement that the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq., imposes on employers to offer a minimum wage, a requirement that the Supreme Court upheld in United States v. Darby, 312 U.S. 100 (1941). Thus, the court concluded that a rational basis existed for Congress to determine that the terms of health coverage offered by employers to their employees have substantial effects cumulatively on interstate commerce. Accordingly, the court held that the PPACA’s employer coverage provision was a lawful exercise of Congress’ Commerce Clause power. The Court also determined that the PPACA’s requirement that individuals obtain healthcare insurance was constitutional.
Plaintiffs’ appeal of the district court’s order in that case is currently pending in the Fourth Circuit, Liberty University, Inc. v. Geithner, No. 10-2347 (4th Cir. Dec. 3, 2011), along with an appeal from another district court opinion, which held that the individual mandate was unconstitutional. Virginia v. Sebelius, 702 F. Supp.2d. 598 (E.D. Va. 2010). After hearing oral argument of both appeals on May 10, 2011, the Court requested that the parties file supplemental briefs on the issue of whether plaintiffs’ claims were barred by the Anti-Injunction Act (AIA), which provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.” 26 U.S.C. § 7421(a). Contrary to the position it had taken in prior cases, the government’s supplemental brief agreed with all courts that have addressed the issue that the AIA was not applicable to the PPACA.
PPACA’s Impact on Group Healthcare Plans
For an overview of the PPACA’s impact on employer-sponsored group healthcare plans, see Bloomberg Law Reports, New Health Care Reform Legislation and Its Impact on Employer-Sponsored Group Health Plans (Apr. 26, 2010).
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