*By Patrick J. Hoban
On December 14, 2010, Judge Henry E. Hudson of the Federal District
Court for the Eastern District of Virginia granted summary judgment to
the Commonwealth of Virginia in an action against the U.S. Secretary of
Health and Human Services (“HHS”). In the lawsuit – Commonwealth of Virginia v. Sebelius
(Case No.: 3:10CV188-HEH) – the Commonwealth’s central claim was that
the Patient Protection and Affordable Care Act’s (“PPACA”) requirement
that every U.S. citizen, with limited exceptions, maintain a minimum
level of health insurance coverage after January 1, 2014 or pay a “fine”
was unconstitutional. Specifically, the Commonwealth contended that the
provision exceeded the power of the U.S. Congress under the Commerce
and General Welfare clauses of the U.S. Constitution. Judge Hudson
granted summary judgment for the Commonwealth after finding that
Congress has no authority to regulate economic “inactivity” regardless
of the reasons it has for such regulation. The Judge also held that,
contrary to HHS’s arguments, the fines levied by the provision were not
an exercise of Congress’s taxing authority but were a means to enforce a
regulatory mechanism that exceeded congressional powers. Notably, the
Judge determined that the unconstitutionality of the individual mandate
did not render PPACA itself unconstitutional.
Yesterday’s ruling is the third from federal district courts on
challenges to PPACA’s individual mandate provision since it was enacted
on March 23, 2010. Two prior rulings upheld the constitutionality of the
individual mandate. PPACA will prohibit insurers from denying health
insurance coverage for preexisting conditions, mandate minimum benefits,
and limit insurers ability to charge premiums based upon a covered
individual’s medical conditions. HHS contends that the individual
mandate is necessary to ensure that individuals cannot wait until they
develop a medical condition to seek health insurance and that the
provision will generate approximately $4 billion annually to offset
other costs of the legislation. Although HHS’s arguments prevailed in
the two prior rulings, this decision was the first in a challenge to
PPACA filed by a state. Another lawsuit filed by 20 states attorney
generals raising claims similar to those decided in favor of the
Commonwealth of Virginia yesterday is ongoing in a Florida district
court.
HHS is expected to appeal yesterday’s decision and the U.S. Supreme
Court is expected to render the ultimate decision as to the
constitutionality of PPACA’s individual mandate provision. Additionally,
the results of November’s congressional elections have increased the
likelihood for changes to or a repeal of PPACA during the next Congress.
Employers should keep abreast of these legal and political developments
as part of their overall strategies to adjust their employee health
insurance benefits to comply with PPACA.
*Patrick J. Hoban has tracked
PPACA’s effect on employers since the legislation was introduced in 2009
and has advised employers on strategies for complying with its various
employer-specific provisions. For more information about PPACA and its
potential effect on your operations, please contact Pat (pjh@zrlaw.com) at 216.696.4441.
