iStock_000016442205XSmall.jpgAs of 11:50 p.m. on November 1, 2011, the City and County of Denver Coordinated Election results were in.  By a margin of 66,719 votes (64.02%) against to 37,498 votes (35.98%) in favor, Ballot Initiative 300 – the Denver Paid Sick and Safe Time Ordinance, failed. 

I wrote about this proposed new legislation that would impact employers and workers in the City and County of Denver in my prior blog post: Proposed Denver Paid Sick and Safe Time Ordinance: Nothing to Sneeze At

As pointed out by the National Restaurant Association in a recent Huffington Post article, businesses on the whole are not opposed to providing sick leave for their workers, but are opposed to the poorly worded legislation that had unintended consequences.  It looks like Denver voters resoundingly agreed.

HealthCareReform2.jpgI previously blogged in March 2011 on the 1-year anniversary of health care reform.  At that time, the 5 principal cases challenging the constitutionality of the Affordable Care Act had moved from the district courts to the federal Courts of Appeals.  Currently, these cases are almost fully briefed, and 2 of them have been argued.

As we await these important decisions, I had an opportunity to talk about the cases with one of my colleagues, Tom Christina, who spoke about them in a conference in Chicago earlier this month. 

Tom also filed an Amicus Brief in State of Florida v. United States Department of Health & Human Services (PDF), which is pending before the Eleventh Circuit.  Here are some quick facts about the Florida case (PDF of decision below), which is very significant for the future of U.S. health care reform:

  • The case challenges the Constitutionality of the Affordable Care Act and was filed minutes after President Obama signed the new law.
  • It was brought by the Attorneys General and/or Governors of 26 states (Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, North Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington, Wisconsin, and Wyoming), 2 private citizens, and the National Federation of Independent Business.
  • The defendants are the United States Department of Health and Human Services, the Department of Treasury, the Department of Labor, and their secretaries.
  • In granting summary judgment in favor of the states and other plaintiffs, the U.S. District Court for the Northern District of Florida (Judge Vinson) held that Congress exceeded its powers under the Commerce Clause by requiring most individuals to have health insurance coverage beginning in 2014. 
  • The District Court also ruled that this “individual mandate” provision could not be severed from the remainder of the statute, causing the entire Affordable Care Act to be void. 
  • The Eleventh Circuit appeal was filed by the defendants (Department of Health & Human Services, Department of Treasury, Department of Labor, and their secretaries), seeking to overturn the district court ruling in favor of the states and other plaintiffs.

Below is a summary of my conversation with Tom about the issues in the Florida case and the oral arguments before the Fourth Circuit on May 10, 2011, in two other “Obamacare” cases —  Liberty University v. Geithner and Commonwealth of Virginia v. Sebelius.

JLG:  Tom, the Fourth Circuit heard oral argument in Liberty University v. Geithner and Commonwealth of Virginia v. Sebelius on May 10, 2011.  Having reviewed the audio files of the arguments, what issues seemed to interest the Fourth Circuit Judges most?

TMC:  In Commonwealth of Virginia, the panel seemed to zero in on whether a state can bring a lawsuit to declare that its citizens’ rights are violated by a federal statute. 

In Liberty University, there were two questions that I think were equally important to the Fourth Circuit panel.  First, they wanted the plaintiffs to clarify that their lawsuit was challenging only the individual mandate provision of the Affordable Care Act.  Second, they questioned whether Congress could regulate individuals’ decisions to purchase insurance coverage, even if that decision is not an activity affecting interstate commerce, as long as the individual mandate is part of a much larger regulatory statute aimed at regulating how Americans pay for health care. 

JLG:  What’s your read on how the argument went for each side? 

TMC:  The Judges seemed troubled by the idea that a state could bring a lawsuit challenging the individual mandate because the individual mandate falls on the state’s citizens, not on the state itself.  They also seemed receptive to the government’s argument regarding the scope of Congress’ power.  Neal Katyal, the Acting Solicitor General of the United States, argued both cases for the government, which is very unusual.  The SG ordinarily argues cases only before the U.S. Supreme Court.  He is a very polished advocate. 

JLG:  What is the focus of your Amicus Brief in State of Florida v. United States Department of Health & Human Services (PDF)?  Does it address the same questions that the Fourth Circuit focused on? 

TMC:  Our brief in the Florida case primarily addresses the “severability” issue.  We ask the Eleventh Circuit to affirm Judge Vinson’s ruling that the entire Act is void if any provision is unconstitutional, and we suggest a legal basis for that ruling that the courts might otherwise overlook. 

Specifically, the Act was passed under a very unusual rule adopted by the House of Representatives that required considering it only on an “all or nothing” basis, with no severability provision and no possibility of amendments.  The Senate version of healthcare was adopted on December 24, 2009, when the Democrats still had a filibuster-proof majority.  However, before the majority leadership of the House and Senate could reconcile their differences on healthcare reform, the Massachusetts special Senate election gave Republicans enough votes in the Senate to filibuster.  House leaders knew that if there were any amendments to the Senate version of the bill by the House, the entire bill would then have to go back to the Senate, where a filibuster would prevent it from being enacted.  To avoid that result, the House leadership brought the Senate version to the floor under a special rule that prohibited any amendments, so each Representative was required to vote for or against the Act as a “package deal,” with no severability clause.

JLG:  Does that argument help the states and other plaintiffs in the Florida case on the merits of their Constitutional claims? 

TMC:  We think so.  If the Eleventh Circuit accepts the principle that the entire Act is void if any provision is void, the states and the private plaintiffs in the Florida case can broaden their attack.   For example, they can explain that the individual mandate is an integral part of forcing the states to establish and pay for “Exchanges” where required coverage will be sold, which in turn dovetails with various other tax provisions in the Act, and so on.

JLG:  What happens next? 

TMC:  In the Florida case, the states will file a reply brief on May 25, 2011, and oral argument is scheduled for June 8, 2011.  Eventually, everyone expects these issues will make their way to the U.S. Supreme Court later this year.

UPDATE – On August 11, 2011, the Eleventh Circuit Court of Appeals issued its 207-page decision and 84-page dissent (PDF), affirming the district court’s (Judge Vinson’s) ruling that the health insurance mandate is unconstitutional.  However, the Court held that the other provisions of the law are “severable” from the individual mandate, and therefore, may be upheld.  Because the 11th Circuit decision is in contrast to the recent 6th Circuit decision upholding the constitutionality of the Act on June 29, 2011, all signs point to the U.S. Supreme Court as the next stop.

Healthcare Debate.jpgAs the first anniversary of the Patient Protection and Affordable Care Act approaches (it was signed into law March 23, 2010), 5 district courts across the nation have addressed the constitutionality of this controversial piece of legislation (U.S. District Court, Northern District of Florida (PDF)U.S. District Court, Eastern District of Michigan (PDF); U.S. District Court, District of New Jersey (PDF)U.S. District Court, Eastern District of Virginia (PDF); and U.S. District Court, Western District of Virginia (PDF)).  The score is 3-2 in the federal government’s favor, but all 5 cases are on appeal.  The principal issue in these cases is the constitutionality of the Act’s “individual mandate,” which requires most individuals to purchase health insurance beginning in 2014 or face a penalty of up to $2,085 per year.  

Does Congress Have Authority Under the Commerce Clause to Penalize Individuals for Not Having Health Insurance?

This is the question for the Courts of Appeals.  The Justice Department says YES, because the Commerce Clause gives Congress the authority “to regulate commerce . . . among the several States.”  This authority has been interpreted broadly over the years, and there is a consensus that the Commerce Clause allows Congress to regulate economic activities that substantially affect interstate commerce, even if the activities take place entirely within a single state. 

District Courts Split on Whether Being Uninsured Is An “Activity” or “Inactivity”

The district courts disagree as to whether being uninsured is an “activity” under the Commerce Clause, or merely “inactivity.”  For the “inactivity” argument, the reasoning is that being uninsured is the result of not buying insurance, which is a failure to act, and therefore, falls outside Congress’s Commerce Clause power.  Opponents of the act use the “inactivity” argument to show the Act is unconstitutional.  However, the 3 district courts that ruled in the federal government’s favor reached the opposite conclusion.  In their view, everyone will need medical care eventually, and therefore, failing to have health insurance is the product of a decision to pay for future medical treatment out of pocket instead of through insurance.  Those courts ruled that making that decision is an “activity” which affects interstate commerce. 

But, What About State Sovereignty?

As the Commerce Clause “activity versus inactivity” issue wends its way through the federal Courts of Appeals on its way to the United States Supreme Court, a colleague of mine, Tom Christina (shareholder in Ogletree Deakins’ Greenville, South Carolina office) explained to me that there are additional constitutional issues, beyond just the “individual mandate,” that courts should be considering:

  • Tom’s argument involves whether the Act offers States a meaningful choice about whether to establish “American Health Insurance Exchanges,” which will be the marketplaces for coverage being in 2014.  Section 1311 of the Act provides that each state “shall” establish such an Exchange, but Section 1322 of the Act allows the Department of Health and Human Services (HHS) to establish an Exchange in a state if the state fails or refuses to do so, or if it is not moving forward quickly enough.  By tracing through hundreds of pages of the Act, Tom noticed that there is an important difference between Exchanges established by the states under Section 1311 and those established by HHS under Section 1322.  Under the Act, a tax credit becomes available beginning in 2014 to help taxpayers pay for coverage, but the amount of the credit is zero unless the taxpayer buys insurance coverage from a Section 1311 Exchange.  Thus, taxpayers in states that failed or refused to establish an Exchange are punished by being ineligible for a federal tax credit available to voters in states that established Exchanges. 

Hadley Health of the Independent Women’s Forum blogged about the above alternative argument that State plaintiffs could make to go beyond the “individual mandate” question.  She noted that Tom developed this “sovereignty-based” argument at a presentation at the American Enterprise Institute in December 2010.  Hadley wrote

No external entity is allowed to influence a state’s political process.  And the federal government is external of the state.  The health reform law provides income tax credits to individuals in exchanges established by states, but not to individuals in exchanges established by the federal government (in non-electing states).  How will voters react to this, if understood correctly?  The choice of their state to establish or not to establish an exchange will impact the tax credits that citizens receive. 

The sovereignty of states is undermined, because the adoption of this law is hardly “voluntary.”  States have been put in a bad position, and I hope that the discussion of these health care exchanges will resurface in another case.

Tom’s experience as a former Associate Deputy Attorney General during the Reagan Administration enabled him to immediately recognize the potential federalism concerns raised by a statutory program that brings outside pressure to bear on a state’s decision to establish Exchanges.  Based on the different treatment of taxpayers in cooperating states compared with taxpayers in non-cooperating states, Tom advanced an argument for the unconstitutionality of the Act based on federal interference with state legislative and executive processes.

For those who are interested in the details of Tom’s argument, his PowerPoint Slides (PDF) lay out the statutory provisions in issue and U.S. Supreme Court cases involving federal-state relations that the states could rely on.  You also can see or hear the AEI presentation at AEI’s website (Tom’s portion of the panel discussion begins approximately 56 minutes into the program).