*By Pat Hoban
On June 29, 2011, a three-judge panel of the Sixth Circuit Court of
Appeals held that the Patient Protection and Affordable Care Act’s
(“PPACA”) requirement that every individual have minimum health
insurance coverage or pay a fine was within congressional power under
the Commerce Clause of the U.S. Constitution. The Federal Government
contends that the “individual mandate” is a necessary part of PPACA’s
overall attempt to reduce health insurance costs and increase
affordable coverage.
The mandate’s cost-control mechanisms are founded on the
premise that by requiring every individual to pay for health insurance,
insurers will increase premium collections without an associated
increase in payouts for benefits. Additionally, the Federal Government
contends that a significant driver of health insurance cost increases
is the provision of benefits to uncovered individuals. Thus, mandating
health insurance coverage for all individuals (with only limited
exceptions) is an essential element of PPACA’s expansion of health
insurance coverage through a combination of government subsidies and
private insurance. Notably, other provisions of PPACA – guaranteed
coverage, prohibition of pre-existing condition exclusions and
significant restrictions on an insurer’s ability to rescind coverage -
increase the incentive for individuals to wait to obtain health
insurance coverage until they develop a medical condition.
In Thomas More Law Center v. Obama, 2011 U.S. App.
LEXIS 13265 (June 29, 2011), a public interest law firm and three
individual plaintiffs contended that the individual mandate “facially”
violated the limited powers of the U.S. Congress set forth in the
Commerce Clause. A statute may be deemed facially unconstitutional if
there are no set of circumstances under which it may be enforced in
accordance with the Constitution. Plaintiffs argued that the
requirement impermissibly regulated economic “inactivity” by penalizing
an individual’s decision not to obtain health insurance. Two of the
three judges on the panel disagreed and upheld the district court’s
determination that the provision was within Congress’ Commerce Clause
powers. However, although two of the three judges found the provision
constitutional, they relied on significantly different rationales.
Judge Martin concluded that because every individual will seek
medical care at some point, a decision not to obtain health insurance
is essentially a decision to “self-insure.” As a result, because the
Federal Government already regulates health insurance and PPACA
establishes a comprehensive scheme to further regulate access to
affordable health care and minimum insurance benefits, a decision to
self-insure was economic activity subject to congressional regulation.
By contrast, Judge Sutton, although he also affirmed the district
court’s decision, relied on U.S. Supreme Court precedent to conclude
that while the individual mandate was not “facially” unconstitutional,
there may be circumstances under which its application would violate
the Commerce Clause. Judge Sutton specifically noted that lower court
judges were not freed from “the duty to respect the language and
direction of the [Supreme] Court’s precedents, particularly in view of
the reality that this law has the purpose and effect of regulating
commerce and in view of the save-before-destroy imperatives of
reviewing facial challenges.” Judge Graham, the third member of the
panel, in dissent, concluded that by regulating a decision not to
engage in economic activity, PPACA’s individual mandate violated the
commerce clause. Notably, each judge rejected the Government’s
argument that the individual mandate “fine” was a tax and that the
provision was a constitutional exercise of congressional taxing power.
The decision is the first by a federal appellate court to rule
on the issue of whether the individual mandate passes constitutional
muster. The provision’s constitutionality has been challenged in
numerous lawsuits across the country. In February 2011, the District
Court for the Circuit Court of Appeals for the District of Columbia
Circuit granted the Federal Government’s motion to dismiss a similar
action challenging the individual mandate under PPACA (Mead v. Holder,
2011 U.S. Dist. LEXIS 18592 (February 22, 2011). However, district
courts in both the Fourth and Eleventh Circuits have found the
provision in violation of the Commerce Clause (Commonwealth of Virginia v. Sebelius, 728 F.Supp. 2d 768 (E.D. VA, December 13, 2010) (State of Florida v. U.S. Dept. of Health and Human Services,
2011 U.S. Dist. LEXIS 22464 (N.D. FL March 3, 2011). The Fourth and
Eleventh Circuits are expected to rule on appeals from these two
decisions over the summer.
Notwithstanding the Sixth Circuit’s decision last week, it is
clear that the final determination as to the constitutionality of the
individual mandate will be determined by the U.S. Supreme Court,
perhaps as early as next year. Based upon the Federal Government’s
repeated contentions that PPACA’s overall regulatory scheme cannot
succeed without the provision, PPACA’s ultimate fate may rest with the
Supreme Court’s decision on this specific issue.
*Patrick J. Hoban,
an OSBA Certified Specialist in Labor and Employment Law, represents
clients in labor and employment matters including preparation for and
compliance with PPACA. For more information about PPACA or recent
court decisions concerning it, please contact Pat (pjh@zrlaw.com) at 216.696.4441.
