D.C. Circuit Declares Health Care Law Constitutional
Betsy Goldman | Bloomberg Law
On November 8, 2011, the U.S. Court of Appeals for the District of Columbia Circuit joined the Sixth Circuit in analyzing the constitutionality of the individual mandate in President Barack Obama’s health care overhaul and concluded that the provision was constitutional under the Commerce Clause of the U.S. Constitution.
Individual Mandate and Plaintiffs’ Claims
The individual mandate in the Patient Protection and Affordable Care Act (PPACA), 26 U.S.C. § 5000A, requires all “applicable individual[s]” to purchase and maintain “minimum essential coverage” in the form of a health care insurance plan or to pay a “penalty.” Four U.S. citizens and taxpayers filed suit, seeking a declaration that the individual mandate was unconstitutional and requesting an injunction to prevent its enforcement. They argued that the mandate exceeded Congress’s authority under the Commerce Clause and substantially burdened their religious exercise under the Religious Freedom Restoration Act, 42 U.S.C. § 2000bb.
The U.S. District Court for the District of Columbia determined that the individual mandate was constitutional under the Commerce Clause because it constituted a valid regulation of economic activity that substantially affected the health insurance and health care markets. The court also dismissed plaintiffs’ religious freedom claim. Plaintiffs appealed.
Anti-Injunction Act Did Not Preclude Court from Addressing Constitutional Claims
The D.C. Circuit first considered whether it had subject matter jurisdiction over plaintiffs’ claim in light of the prohibition in the Anti-Injunction Act (AIA), 26 U.S.C. § 7421(a), on lawsuits seeking to restrain the “assessment or collection of any tax.” It observed that the minimum coverage provisions in the PPACA did not include the term tax, noting that Congress “pointedly rejected proposals to designate the shared responsibility payment as a ‘tax,’ instead labeling it a ‘penalty.’” Because Congress called numerous other provisions in the Act “taxes,” the Court concluded that Congress’s decision to use the word “penalty” in the individual mandate was deliberate. It further determined that Congress did not intend for the term “any tax” in the AIA to “to include exactions unrelated to taxes that Congress labeled ‘penalties.’” Accordingly, the Court concluded that the individual mandate did not implicate the AIA and thus it had subject matter jurisdiction to determine plaintiffs’ constitutional challenge.
Individual Mandate Was Constitutional
Plaintiffs argued that the individual mandate exceeded Congress’s powers under the Commerce Clause because it compelled individuals with no connection to interstate commerce and no desire to purchase health insurance to enter commerce and purchase a product. They contended that Congress’s Commerce Clause power extended to existing commerce only and applied exclusively to individuals who took specific affirmative acts that brought them into or substantially affected an interstate market. Accordingly, Congress had no power to require individuals to purchase insurance.
The Government, however, argued that the individual mandate was within the bounds of Congress’s power because Congress could regulate economic behavior that, in the aggregate, substantially affected interstate commerce. It further contended that because every citizen will need health services at some point, no individual was inactive in the market.
The Court called plaintiffs’ argument concerning the mandate “novel,” explaining that no U.S. Supreme Court case has ever held or implied that the Commerce Clause applies only to individuals who are engaging in an activity. It observed that although several Supreme Court Commerce Clause cases used the word “activity” to refer to behavior that was regarded as within or outside of Congress’s authority, “those cases did not purport to limit Congress to reach only existingactivities.”
The Court next noted that the Supreme Court decision that most closely resembled the instant case was Wickard v. Filburn, 317 U.S. 111 (1942), in which a farmer exceeded federal wheat acreage limits by growing wheat for his own personal use. The Supreme Court held that the wheat acreage limits were constitutional because, even if the farmer’s wheat never reached the national market, it was nevertheless supplying a need of a farmer who would otherwise purchase wheat in the market. As such, the market was not being stimulated in the way it would be if the farmer and others like him adhered to the wheat acreage limits. The Supreme Court recognized that the wheat acreage limits could force some famers into the market, but nevertheless upheld the federal law.
The D.C. Circuit reasoned that “Wickard, therefore, comes very close to authorizing a mandate similar to ours, at least indirectly.” It explained that Congress had the authority to stimulate commerce in the same way that it had authority to prevent or prohibit certain behavior. Moreover, it was necessary to consider the aggregate effects of individuals’ inactivity upon the future of the market at issue. The Court observed that “Congress reasonably determined that as a class, the uninsured create market failures; thus, the lack of harm attributable to any particular uninsured individual, like their lack of overt participation in a market, is of no consequence.”
Finally, the D.C. Circuit explained that the health care industry is not a traditional state concern. It commented that “if Congress can regulate even instances of purely local conduct that were never intended for, or entered, an interstate market, we think Congress can also regulate instances of ostensible inactivity inside a state.” Accordingly, the Court affirmed the district court’s decision.
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