What You Need to Know About Friday’s Court Ruling

Late Friday evening, a judge in Texas handed down his ruling in the latest Obamacare lawsuit. Here’s what you need to know about the ruling (if interested, you can read the opinion here), and what might happen next:

What Did the Judge Decide?

The opinion contained analyzed two different issues—the constitutionality of the individual mandate, and whether the rest of Obamacare could survive without the individual mandate (i.e., severability). In the first half of his opinion, Judge Reed O’Connor ruled the mandate unconstitutional.

Wait—Haven’t Courts Ruled on the Individual Mandate Before?

Yes—and no. In 2012, the Supreme Court ruled the individual mandate constitutional. In his majority opinion for the Court, Chief Justice John Roberts (in)famously concluded that, even though Obamacare’s authors proclaimed the mandate was not a tax—and said as much in the law—the mandate had the characteristics of a tax. Even though Roberts concluded that the mandate exceeded Congress’ constitutional authority under the Commerce Clause, he upheld it as a constitutional exercise of Congress’ power to tax.

However, in the tax bill last year Congress set the mandate penalty to zero, beginning on January 1, 2019. The plaintiffs argued that, because the mandate will no longer bring in revenue for the federal government, it no longer qualifies as a tax. Because the mandate will not function as a tax, and violates Congress’ authority under the Commerce Clause, the plaintiffs argued that the court should declare the mandate unconstitutional. In his opinion, Judge O’Connor agreed with this logic, and struck down the mandate.

What Impact Would Striking Down the Mandate Have?

Not much, seeing as how the penalty falls to zero in two weeks’ time. Striking the mandate from the statute books officially, as opposed to merely setting the penalty at zero, would only affect those individuals who feel an obligation to follow the law, even without a penalty for violating that law. In setting their premiums for 2019, most insurers have already assumed the mandate goes away.

Then Why Is This Ruling Front Page News?

If the court case hinged solely on whether or not the (already-defanged) mandate should get stricken entirely, few would care—indeed, the plaintiffs may not have brought it in the first place. Instead, the main question in this case focuses on severability—the question of whether, and how much, of the law can be severed from the mandate, if the mandate is declared unconstitutional.

What Happened on Severability?

Judge O’Connor quoted heavily from opinions in the prior 2012 Supreme Court case, particularly the joint dissent by Justices Anthony Kennedy, Samuel Alito, Antonin Scalia, and Clarence Thomas. He ruled that the justices viewed the mandate as an “essential” part of Obamacare, that the main pillars of the law were inseparable from the mandate.

The judge also noted that some of the lesser elements of Obamacare (e.g., calorie counts on restaurant menus, etc.) hitched a ride on a “moving target,” that he could not—and should not—attempt to determine which would have passed on their own. Therefore, he ruled that the entire law must be stricken.

Haven’t Things Changed Since the 2012 Ruling?

Last year, Congress famously couldn’t agree on how to “repeal-and-replace” Obamacare—but then voted to set the mandate penalty to zero. A bipartisan group of legal scholars argued in this case that, because Congress eliminated the mandate penalty but left the rest of the law intact, courts should defer to Congress’ more recent judgment. Judge O’Connor disagreed.

What Happens Now?

Good question. Judge O’Connor did NOT issue an injunction with his ruling, so the law remains in effect. The White House released a statement saying as much—that it would continue to enforce the law as written pending likely appeals.

On the appeal front, a group of Democratic state attorneys general who intervened in the suit will likely request a hearing from the Fifth Circuit Court of Appeals in New Orleans. From there the Supreme Court could decide to rule on the case.

Will Appellate Courts Agree with This Ruling and Strike Down Obamacare?

As the saying goes, past performance is no predictor of future results. However, it is worth noting two important facts:

1.      The five justice majority that upheld most of the law—John Roberts, Stephen Breyer, Ruth Bader Ginsburg, Elena Kagan, and Sonia Sotamayor—all remain on the Supreme Court.
2.      As noted above, Chief Justice Roberts went through what many conservatives attacked as a bout of legal sophistry—calling the mandate a tax, even though Congress expressly said it wasn’t—to uphold the law, more than a year before its main provisions took effect.

What About Pre-Existing Conditions?

On Friday evening, President Trump asked for Congress to pass a measure that “protects pre-existing conditions.”

I have outlined other alternatives to Obamacare’s treatment of pre-existing conditions. However, as I have explained at length over the past 18 months, if Republicans want to retain—or in this case reinstate—Obamacare’s treatment of pre-existing conditions, then they are failing in their promise to repeal the law.

The Absurdity of the Justice Department’s Obamacare Lawsuit Intervention

Last summer, I wrote about how President Trump had created the worst of all possible outcomes regarding one Obamacare program. In threatening to cancel cost-sharing reduction payments to insurers, but not actually doing so, the administration forced insurers into raising premiums, while not complying with the rule of law by cutting off the payments outright.

Eventually, the administration finally did cut off the payments in October, but for several months, the uncertainty represented a self-inflicted wound. So too a brief filed by the Department of Justice (DOJ) late last week regarding an Obamacare lawsuit several states brought in February, which asked the court to strike down both Obamacare’s individual mandate and the most important of its federally imposed insurance regulations.

It takes a very unique set of circumstances to arrive at this level of opposition. Herewith the policy, legal, and political implications of DOJ’s actions.

Let’s Talk Policy First

Strictly as a policy matter, I agree with the general tenor of the Justice Department’s proposals. Last April, I analyzed Obamacare’s four major federally imposed insurance regulations:

  1. Guaranteed issue—accepting all applicants, regardless of health status;
  2. Community rating—charging all applicants the same premiums, regardless of health status;
  3. Essential health benefits—requiring plans to cover certain types of services; and
  4. Actuarial value—requiring plans to cover a certain percentage of each service.

I concluded that these four regulations represented a binary choice for policymakers: Either Congress should repeal them all, and allow insurers to price individuals’ health risk accordingly, or leave them all in place. Picking and choosing would likely result in unintended consequences.

The Justice Department’s brief asks the federal court to strike down the first two federal regulations, but not the last two. This outcome could have some unintended consequences, as a New York Times analysis notes.

But repealing the guaranteed issue and community rating regulations would remove the prime driver of premium increases under Obamacare. Those two regulations led rates for individual coverage to more than double from 2013 to 2017, necessitating the requirement for individuals to purchase, and employers to offer, health coverage, the subsidies to make coverage more “affordable,” and the tax increases and Medicare reductions used to fund them.

I noted last April that Republicans have a choice: They can either keep the status quo on pre-existing conditions or they can fulfill their promise to repeal Obamacare. They cannot do both. The DOJ brief acknowledges this dilemma, and that the regulations represent the heart of the Obamacare scheme.

Legal Question 1: Constitutionality

Roberts held that, while the federal government did not have the power to compel individuals to purchase health coverage under the Constitution’s Commerce Clause, Congress did have the power to impose a tax penalty on the non-purchase of coverage, and upheld the individual mandate on that basis.

But late last year, Congress set the mandate penalty to zero, with the provision taking effect next January. Both the plaintiff states and DOJ argue that, because the mandate will not generate revenue for the federal government beyond 2019, it can no longer function as a tax, and should be struck down as unconstitutional.

Ironically, if Congress took an unconstitutional act in setting the mandate penalty to zero, few seem to have spent little time arguing as much prior to the tax bill’s enactment last December. I opposed Congress’ action at the time, because I thought Congress needed to repeal more of Obamacare—i.e., the regulations discussed above. But few raised any concerns that setting the mandate penalty to zero represented an unconstitutional act:

  • While one school of thought suggests presidents should not sign unconstitutional legislation, President Trump signed the tax bill into law.
  • Likewise, President Trump did not issue a signing statement about the tax bill, seemingly indicating that the Trump administration had no concerns about the bill, constitutional or otherwise.
  • While in 2009 the Senate took a separate vote on the constitutionality of Obamacare, no one raised such a point of order during the Senate’s debate on the tax bill.
  • I used to work for one of the plaintiffs in the states’ lawsuit, the Texas Public Policy Foundation. TPPF put out no statement challenging the constitutionality of Congress’ move in the tax bill.

Legal Question 2: Severability

As others have noted, a court decision striking down the individual mandate as unconstitutional would by itself have few practical ramifications, given that Congress already set the mandate penalty to zero, beginning in January. The major fight lies in severability—either striking down the entire law, as the states request, or striking down the two major federal insurance regulations, as the Justice Department suggested last week.

The DOJ brief and the states’ original complaint both cite Section 1501(a) of Obamacare in making their claims to strike down more than just the mandate. DOJ cited that section—which called the mandate “essential to creating effective health insurance markets”—13 times in a 21-page brief, while the states cited that section 18 times in a 33-page complaint.

But that claim fails, for several reasons. First, the list of findings in Section 1501(a)(2) of the law discusses the mandate’s “effects on the national economy and interstate commerce.” In other words, this section of findings attempted to defend the individual mandate as a constitutional exercise of Congress’ power under the Commerce Clause—an argument Roberts struck down in the NFIB v. Sebelius ruling six years ago.

Second, the plaintiffs and the Justice Department briefs focus more on what a Congress eight years ago said—i.e., their non-binding findings to defend the individual mandate under the Commerce Clause—than what the current Congress did when it set the mandate penalty to zero, but left the rest of Obamacare intact. The Justice Department tried to retain a fig leaf of consistency by taking the same position regarding severability that the Obama administration did before the Supreme Court in 2012: that if the mandate falls, the guaranteed issue and community rating provisions (and only those provisions) should as well.

However, the Justice Department’s brief all but ignores Congress’s intervention last year. In a letter to Speaker of the House Paul Ryan (R-WI) regarding the lawsuit, Attorney General Jeff Sessions noted that “We presume that Congress legislates with knowledge of the [Supreme] Court’s findings.” A corollary to that maxim should find that the administration takes decisions with knowledge of Congress’ actions.

But rather than observing how this Congress zeroed out the mandate penalty while leaving the rest of Obamacare intact, DOJ claimed that the 2010 findings should control, because Congress did not repeal them. (Due to procedural concerns surrounding budget reconciliation, Senate Republicans arguably could not have repealed them in last year’s tax bill even if they wanted to.)

Third, as the brief by a series of Democratic state attorneys general—who received permission to intervene in the case—makes plain, Republican members of Congress said repeatedly during the tax bill debate last year that they were not changing any other part of the law. For instance, during the Senate Finance Committee markup of the tax bill, the committee’s chairman, Orrin Hatch (R-UT), said the following:

Let us be clear, repealing the [mandate] tax does not take anyone’s health insurance away. No one would lose access to coverage or subsidies that help them pay for coverage unless they chose not to enroll in health coverage once the penalty for doing so is no longer in effect. No one would be kicked off of Medicare. No one would lose insurance they are currently getting from insurance carriers. Nothing—nothing—in the modified mark impacts Obamacare policies like coverage for preexisting conditions or restrictions against lifetime limits on coverage….

The bill does nothing to alter Title 1 of Obamacare, which includes all of the insurance mandates and requirements related to preexisting conditions and essential health benefits.

As noted above, I want Congress to repeal more of Obamacare—all of it, in fact. But what I want to happen and what Congress did are two different things. When Congress explicitly set the mandate penalty to zero but left the rest of the law intact, I should not (and will not) go running to an activist judge trying to get him or her to ignore the will of Congress and strike all of it down regardless. That’s what liberals do.

Too Cute by Half Problem 1: Legal Outcomes

The brief the Democratic attorneys general filed suggested another possible outcome—one that would not please the plaintiffs in the lawsuit. While the attorneys general attempted to defend the mandate’s constitutionality despite the impending loss of the tax penalty, they offered another solution should the court find the revised mandate unconstitutional:

Under long-standing principles of statutory construction, when a legislature purports to amend an existing statute in a way that would render the statute (or part of the statute) unconstitutional, the amendment is void, and the statute continues to operate as it did before the invalid amendment was enacted.

It remains to be seen whether the courts will find this argument credible. But if they do, a lawsuit seeking to strike down all of Obamacare could actually restore part of it, by getting the court to reinstate the tax penalties associated with the mandate.

This scenario could get worse. In 2015, the Senate parliamentarian offered guidance that Congress could set the mandate penalty to zero, but not repeal it outright, as part of a budget reconciliation bill. Republicans used this precedent to zero-out the mandate in last year’s tax bill. But a court ruling stating that Congress cannot constitutionally set the mandate penalty to zero, and must instead repeal it outright, means Senate Republicans would have to muster 60 votes to do so—an outcome meaning the mandate might never get repealed.

In June 2015, the Supreme Court issued a ruling in the case of King v. Burwell. In its opinion, the court ruled that individuals in states that did not establish their own exchanges (and used the federally run healthcare.gov instead) could qualify for health insurance subsidies. By codifying an ambiguity in the Obamacare statute in favor of the subsidies, the court’s ruling prevented the Trump administration from later taking executive action to block those subsidies.

In King v. Burwell, litigating over uncertainty in Obamacare ended up precluding a future administration from taking action to dismantle it. The same thing could happen with this newest lawsuit.

Too Cute by Half Problem 2: Legislative Action

Sooner or later, someone will recognize an easy solution exists that would solve both the problem of constitutionality and severability: Congress passing legislation to repeal the mandate outright, after the tax bill set the penalty to zero. But this scenario could lead to all sorts of inconsistent, yet politically convenient, outcomes:

  • Democrats attacking Republicans over last week’s DOJ brief might oppose repealing a (now-defanged) individual mandate, because it would remove what they view as a powerful political issue heading into November’s midterm elections;
  • Republicans afraid of Democrats’ political attacks might say they repealed a part of Obamacare (i.e., the individual mandate) outright to “protect” the rest of Obamacare (i.e., the federal regulations and other assorted components of the law) from being struck down by an activist judge; and
  • Some on the Right might oppose Congress taking action to repeal “just” the individual mandate, because they want the courts to strike down the entire law—even though such a job rightly lies within Congress’ purview.

As others have noted, these contortionistic, “Through the Looking Glass” scenarios speak volumes about the tortured basis for this lawsuit. The Trump administration should spend less time writing briefs that support legislating from the bench by unelected judges, and more time working with Congress to do its job and repeal the law itself.

This post was originally published at The Federalist.

The Troubling Premise Behind the Latest Obamacare Lawsuit

On Thursday, a group of Democratic attorneys general received permission to intervene in a lawsuit filed by Texas Attorney General Ken Paxton and other Republican officials. That lawsuit, originally filed in February, seeks to strike down all of Obamacare.

The lawsuit forces me to distinguish between policy preferences and the rule of law. Strictly on the policy, I want to repeal Obamacare as much as the next conservative does. However, in this case, striking down the law through legal fiat would represent judicial activism at its worst—asking unelected judges to do what elected members of Congress took great pains to avoid.

John Roberts’ Logic

Last December, Congress set the individual mandate penalty to zero beginning in January 2019. As others previously argued, the action eliminated the basis on which the Supreme Court found the mandate constitutional. Thus, the lawsuit alleges, the court should strike down the individual mandate—and, consistent with the reasoning of four dissenting justices (Antonin Scalia, Anthony Kennedy, Clarence Thomas, and Samuel Alito) in the 2012 NFIB v. Sebelius case—all of Obamacare with it.

Congress Has Spoken

There’s one major flaw with the lawsuit’s logic: While Obamacare did not contain a severability clause, Congress in its infinite wisdom last year chose to eliminate the mandate penalty—and only the mandate penalty. Severability tests the court established work to determine first and foremost “whether the provisions will work as Congress intended,” as the dissenters noted back in 2012.

Because Congress, in the time since Obamacare passed, quite clearly eliminated only the mandate penalty, it demonstrated its intent. Regardless of whether federal courts strike down the mandate—now an edict in law unenforceable by any penalty—as unconstitutional, they cannot, and should not, strike down any other portion of the law.

Anti-Democratic Principle

In essence, the lawsuit asks the federal courts to do what Congress decided last year not to do: repeal all of Obamacare. Rather than working to persuade Congress to go back, consider health care anew, and pass the full repeal lawmakers ran on for four straight election cycles, the litigants instead hope to nullify Obamacare through a deus ex machina intervention of five of nine justices on the Supreme Court.

As a matter of law, the court should do no such thing. Substituting the judgment of unelected judges for popularly elected members of Congress would further erode the institutions supporting the rule of law. The protests on both the left and right regarding last year’s health-care legislation would pale in comparison to any demonstration should five unelected judges now decide to strike down all of Obamacare, and with good reason.

Moreover, this apparent application of situational ethics—“conservatives” supporting judicial activism when it furthers their policy objectives—will only undermine future attempts to constrain legislating from the bench. When it comes to asking courts to strike down massive pieces of legislation, conservatives should be careful what they wish for, because they just might get it—not on Obamacare, but on other major bills they do support.

This post was originally published at The Federalist.

Obamacare’s “Out-of-Control Activism”

Writing in the New Yorker, author Ryan Lizza’s latest article examines what a re-elected Barack Obama might attempt to accomplish in a second term as President.  The piece discusses immigration, fiscal policy, and energy, but also includes an interesting passage on health care, and how the Administration might respond should the Supreme Court strike down Obamacare’s individual mandate, but leave the rest of the law in place:

Obama would face a choice: replace the mandate with a new policy or remove the remaining market reforms.  One option for replacing the mandate is to push the uninsured into the new system by requiring them to sign up for insurance when applying for other government services, such as food stamps or school loans.  But the prospects for this sort of legislation are bleak.  “We looked at this,” a former Obama aide said.  “We thought it was less constitutional than the mandate.  Among the moderate Democrats, the idea that you would pass a bill like this is unimaginable.”

Whether the Supreme Court overturns the law in part or in full, the White House will need to respond publicly.  “The strategy is to just go on the offensive and say, ‘Look at Citizens United, look at the health-care decision, look at Bush v. Gore,” the former aide said.  “We have an out-of-control activist court….That’s Plan A.  Plan B is nothing.”

This passage includes two incredible statements.  First, the Obama Administration has examined the idea of forcing individuals to prove they purchased government-approved health insurance every time they interact with public officials – a step not far removed from a “Show Me Your Papers” requirement on every American citizen.  The fact that the former Administration official quoted in the piece dismissed such a policy largely on grounds of political expediency – moderate Democrats in Congress would never vote to enact these requirements – speaks volumes to how far the Administration may go to compel individuals to obey its commands.

Yet the liberals who would require individuals to purchase government-approved health insurance – and use the full coercive power of the state to enforce such a requirement – are the same individuals who are prepared to criticize conservatives for “out of control activis[m]” if the Supreme Court strikes down some or all of Obamacare.  Imposing an unprecedented mandate to purchase a government-defined product certainly qualifies as activism.  And the Obama Administration’s idea of forcing citizens to comply with a new “Show Me Your Papers” regime to enforce government-defined health insurance is out-of-control by any reasonable definition.  That’s why it’s so critical for the Supreme Court to strike down the individual mandate, and all of Obamacare – not as a measure of judicial activism, but as a way to impose constitutional restraints on an out-of-control Congress and executive.

Obamacare and Judicial Activism

Writing in the Wall Street Journal this morning, columnist Alan Blinder repeated familiar Democrat talking points about the Supreme Court and judicial activism.  Discussing the interplay between Obamacare’s individual mandate and the insurance “reforms” included in the law, Blinder asked “what happens if the justices void the mandate but leave the insurance reforms in place?  The answer is: We get incoherence.  Which, of course, is why you don’t want judges making economic policy.”

On this point, Blinder is half-right at least.  Judges should NOT make economic policy.  But the “solution” to the problem of judges not making economic policy should not involve blithe acceptance of a new and unprecedented mandate for individuals to buy a product as a condition of their existence, merely because Congress said the mandate was “essential” to make the law’s otherwise unsustainable new regulations work.

Rather, the position that does not involve judges making economic policy was one adopted by Republican senators in an amicus brief to the Court – namely, that if the Court strikes down the individual mandate, all of Obamacare must necessarily fall.  In the absence of such a ruling from the Court, the alternatives have ranged from the speculative – i.e., what parts of the law would be fiscally sustainable without the mandate? – to the seemingly absurd – Justice Breyer’s self-described “pipe dream” attempting to have lawyers argue what parts of Obamacare’s 2700-page Humpty Dumpty could be put back together again. (Because really, do we need MORE backroom deals involving Obamacare…?)

To Democrats mortified at the prospect of the Court striking down all of Obamacare, we can offer three helpful hints:

  1. If you want portions of the law to be severed if struck down, include a severability clause.  Democrats had every chance to do so – the House version of Obamacare included such language – but didn’t.  Liberals have absolutely no right to blame the Supreme Court if the Court decides to strike down the entire law, rather than trying to pick and choose which provisions to keep, in what would likely be a futile attempt to try and “fix” the mess Democrats themselves created.
  2. Read the bill.  While judges should in no event make economic policy, it’s somewhat difficult to argue that Congress is better placed to do so when multiple Members state publicly that reading the bill is a waste of time, because “we have to make judgments very fast,” and because “we hire experts” to read the bill instead.  Reading the bill is also helpful in ascertaining prior to passage whether a severability clause may be needed.  (See point #1 above.)
  3. If you ever again get tempted to pass a 2700-page bill the American people don’t support, just.  Don’t.  Thankfully, some Members of Congress may have already learned that lesson – the hard way.

More on Friday’s Court Ruling

As previously reported, on Friday afternoon the 11th Circuit Court of Appeals in Atlanta issued a ruling striking down Obamacare’s individual mandate, but preserving the rest of the law.  Below are some key points and excerpts from the 304-page ruling and accompanying dissent.

The Issue:  “Properly formulated, we perceive the question before us to be whether the federal government can issue a mandate that Americans purchase and maintain health insurance from a private company for the entirety of their lives.” (Page 112)

Unprecedented Nature of the Mandate:  The opinion walks through the history of the national flood insurance program’s pitfalls, to make the following point: “Despite the unpredictability of flooding, the inevitability that floods will strike flood plains, and the cost shifting inherent in uninsured property owners seeking disaster relief funds, Congress has never taken the obvious and expedient step of invoking the power the government now argues it has and forcing all property owners in flood plains to purchase insurance” (Page 119)

Intrusive Scope of the Mandate:  Discussing the case of Wickard v. Filburn, a 1930s Supreme Court case in which a farmer was penalized for growing wheat on his own farm for self-consumption, the majority wrote that “Although Wickard represents the zenith of Congress’s powers under the Commerce Clause, the wheat regulation therein is remarkably less intrusive than the individual mandate….The wheat-acreage regulation imposed by Congress, even though it lies at the outer bounds of the commerce power, was a limitation—not a mandate—and left Filburn with a choice.  The Act’s economic mandate to purchase insurance, on the contrary, leaves no choice and is more far-reaching….Individuals subjected to this economic mandate have not made a voluntary choice to enter the stream of commerce, but instead are having that choice imposed upon them by the federal government.” (Pages 122-23)

“From a doctrinal standpoint, we see no way to cabin the government’s theory only to decisions not to purchase health insurance….We are unable to conceive of any product whose purchase Congress could not mandate under this line of argument.” (Page 125)

Broad Scope of the Mandate:  “In sum, the individual mandate is breathtaking in its expansive scope.  It regulates those who have not entered the health care market at all.  It regulates those who have entered the health care market, but have not entered the insurance market (and have no intention of doing so).  It is overinclusive in when it regulates: it conflates those who presently consume health care with those who will not consume health care for many years into the future.  The government’s position amounts to an argument that the mere fact of an individual’s existence substantially affects interstate commerce, and therefore Congress may regulate them at every point of their life.  This theory affords no limiting principles in which to confine Congress’s enumerated power.” (Pages 130-31)

No Limiting Principles – aka Health Care is NOT “Unique”:  “The first problem with the government’s proposed limiting factors is their lack of constitutional relevance.  These five factual criteria comprising the government’s “uniqueness” argument are not limiting principles rooted in any constitutional understanding of the commerce power.  Rather, they are ad hoc factors that—fortuitously—happen to apply to the health insurance and health care industries.  They speak more to the complexity of the problem being regulated than the regulated decision’s relation to interstate commerce.  They are not limiting principles, but limiting circumstances.” (Page 132)

Were we to adopt the “limiting principles” proffered by the government, courts would sit in judgment over every economic mandate issued by Congress, determining whether the level of participation in the underlying market, the amount of cost-shifting, the unpredictability of need, or the strength of the moral imperative were enough to justify the mandate.” (Page 134)

“Ultimately, the government’s struggle to articulate cognizable, judicially administrable limiting principles only reiterates the conclusion we reach today: there are none.” (Page 137)

Federal Mandate Overrides State Sovereignty:  “We recognize the argument that, if states can issue economic mandates, Congress should be able to do so as well.  Yes, some states have exercised their general police power to require their citizens to buy certain products—most pertinently, for our purposes, health insurance itself.  But if anything, this gives us greater constitutional concern, not less.  Indeed, if the federal government possesses the asserted power to compel individuals to purchase insurance from a private company forever, it may impose such a mandate on individuals in states that have elected not to employ their police power in this manner.  After all, if and when Congress actually operates within its enumerated commerce power, Congress, by virtue of the Supremacy Clause, may ultimately supplant the states.  When this occurs, a state is no longer permitted to tailor its policymaking goals to the specific needs of its citizenry.  This is precisely why it is critical that courts preserve constitutional boundaries and ensure that Congress only operates within the proper scope of its enumerated commerce power.

“In sum, the fact that Congress has enacted this insurance mandate in an area of traditional state concern is a factor that strengthens the inference of a constitutional violation.  When this federalism factor is added to the numerous indicia of constitutional infirmity delineated above, we must conclude that the individual mandate cannot be sustained as a valid exercise of Congress’s power to regulate activities that substantially affect interstate commerce.” (Pages 155-57)

Mandate Is Neither Necessary Nor Proper:  “The mere placement of a particular regulation in a broader regulatory scheme does not, ipso facto, somehow render that regulation essential to that scheme.  It would be nonsensical to suggest that, in announcing its “larger regulatory scheme” doctrine, the Supreme Court gave Congress carte blanche to enact unconstitutional regulations so long as such enactments were part of a broader, comprehensive regulatory scheme.  We do not construe the Supreme Court’s “larger regulatory scheme” doctrine as a magic words test, where Congress’s statement that a regulation is “essential” thereby immunizes its enactment from constitutional inquiry.  Such a reading would eviscerate the Constitution’s enumeration of powers and vest Congress with a general police power” (Pages 162-63)

The individual mandate does not remove an obstacle to Congress’s regulation of insurance companies.  An individual’s uninsured status in no way interferes with Congress’s ability to regulate insurance companies.  The uninsured and the individual mandate also do not prevent insurance companies’ regulatory compliance with the Act’s insurance reforms.  At best, the individual mandate is designed not to enable the execution of the Act’s regulations, but to counteract the significant regulatory costs on insurance companies and adverse consequences stemming from the fully executed reforms.  That may be a relevant political consideration, but it does not convert an unconstitutional regulation (of an individual’s decision to forego purchasing an expensive product) into a constitutional means to ameliorate adverse cost consequences on private insurance companies engendered by Congress’s broader regulatory reform of their health insurance products.” (Pages 164-65)

Individual Mandate is NOT a Tax:  “It is not surprising to us that all of the federal courts, which have otherwise reached sharply divergent conclusions on the constitutionality of the individual mandate, have spoken on this issue with clarion uniformity.  Beginning with the district court in this case, all have found, without exception, that the individual mandate operates as a regulatory penalty, not a tax. (Page 173)  Note that the position that the mandate is not a tax was also upheld in the opinion’s dissent.

Severability:  The multiple features of the individual mandate all serve to weaken the mandate’s practical influence on the two insurance product reforms [i.e., guaranteed issue and community rating].  They also weaken our ability to say that Congress considered the individual mandate’s existence to be a sine qua non for passage of these two reforms.  There is tension, at least, in the proposition that a mandate engineered to be so porous and toothless is such a linchpin of the Act’s insurance product reforms that they were clearly not intended to exist in its absence. (Page 202)

“We are not persuaded that it is evident (as opposed to possible or reasonable) that Congress would not have enacted the two reforms in the absence of the individual mandate.” (Page 204)

Dissent:  The dissenting opinion alleges that the majority “has ignored the undeniable fact that Congress’ commerce power has grown exponentially over the past two centuries, and is now generally accepted as having afforded Congress the authority to create rules regulating large areas of our national economy.” (Pages 208-09)  It further discusses the “expansive powers” granted Congress under the commerce clause, noting that “Creating an artificial doctrinal distinction between activity and inactivity is thus novel and unprecedented, resembling the categorical limits on Congress’ commerce power the Supreme Court swept away long ago.” (Page 231)  Despite this self-described expansive power, the dissent then attempts to argue that upholding the mandate would not raise questions about the limits of federal power, because future courts would address that issue (in ways not expressed in the ruling): “I have little doubt that the federal courts will be fully capable of addressing future problems raised in future cases in the fullness of time.” (Page 261)

Even though the dissent alleges that “the majority would presume to sit as a superlegislature” by scrutinizing Congressional findings regarding the commerce clause (Page 243), it goes on to argue that, if the mandate must be stricken as unconstitutional, “the guaranteed issue and community rating provisions necessarily rise and fall with the individual mandate,” and thus should have been stricken with the mandate itself. (Page 268n)  Some may argue that, rather than determining which provisions of the statute “necessarily rise and fall” with the mandate, as the dissent implies, the majority should have stricken the entire statute, as the trial court did.  Regardless, it is worth noting that the same dissent that criticizes the majority for acting as a superlegislature likewise criticized the majority for not attempting to divine other portions of the statute that needed to be stricken with the mandate itself.

Aetna CEO Says Individual Mandate To Be Ruled Unconstitutional

In case you haven’t seen, Kaiser Health News has an interview with Aetna CEO Mark Bertolini in which he discusses the individual mandate in the health care law.  When asked whether the law can work without a mandate, the Aetna CEO opined that “it’s pretty likely that [the mandate] won’t survive the constitutional challenge,” at which point “we’ll have a whole different ballgame” because “there isn’t anyone who thinks [the law] can stand without the individual mandate.”

Remember, these comments come from the CEO of one of the biggest beneficiaries of the law – insurance companies that collectively stand to gain about 30 million new customers thanks to the law’s coverage expansions.  The comments raise the important question: If even an insurance company CEO can’t defend the unprecedented government mandate for all Americans to purchase a product as constitutional, who can?

More Double-Talk on Health Care Lawsuits

The Administration on Friday filed with the Eleventh Circuit Court of Appeals its appellate brief in the multi-state lawsuit.  Of particular note is the section appealing Judge Vinson’s ruling that the entire bill should be stricken; the brief argues that this element of the ruling was misguided “because Congress legislated against the background presumption of severability.”

The Justice Department makes this statement despite the fact that the individual mandate in the law was subject to multiple constitutional points of order in the Senate, and despite the fact that the House-passed health reform bill (H.R. 3962) included very clear language (Section 255) on severability.  When this specific provision was clearly under Constitutional challenge, when many of the bill’s advocates insisted the provision was key to the operation of Obamacare, and when Congress specifically considered – and rejected – a severability clause, it is hardly appropriate to follow a presumption in favor of severability.  An unelected judge, acting on his own to insert severability in a case like this, would amount to judicial activism.

The Justice Department brief comes after the Administration changed its stance to argue that the mandate penalty is in fact a tax; all five justices ruling on the merits of the mandate to date have dismissed the notion that Democrats could “absolutely reject” the notion that the individual mandate was a tax before the bill passed – as President Obama claimed in his September 2009 interview with George Stephanopoulos – only for the Justice Department later to defend the provision as a constitutional tax.  On a separate front, Judge Kessler in a ruling upholding the mandate argued that the distinction between “mental activity” and “physical activity” was essentially meaningless. (Left unanswered by her ruling: Does the lack of an arbitrary distinction between mental and physical activity mean that Congress can regulate, or prohibit, this mental activity, on the grounds that it could affect economic activity in the aggregate?)

Previous generations have seen liberal justices define “penumbras” and “emanations” as rationales for activist court rulings.  Given the track record thus far of those supporting the individual mandate – “mental activity,” “background presumptions of severability,” and the “Alice-in-Wonderland” position that a tax can be retroactively declared as such after its passage – some may think the health care lawsuit would represent new standards of judicial activism, in which courts would use this torturous logic to force Americans to buy a product for the first time ever.

Three Health Care Quick Takes

  1. Double (Counting) Talk:  Also this morning at the House Energy and Commerce Committee, Rep. Shimkus asked Secretary Sebelius about the Medicare savings in the law: “Is [the law] using it [the savings] to save Medicare, or are you using it to fund health care reform?  Which one?”  Secretary Sebelius’ response: “Both.”  (See the full exchange here.)  This statement contradicts the non-partisan Medicare actuary, who has previously noted that the Medicare spending reductions in the law “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund, despite the appearance of this result from the respective accounting conventions.”
  2. Vinson Issues a Rebuke – And a Stay:  Also this afternoon, Judge Vinson in Florida ruled on the motion to “clarify” sought by the government in the multi-state lawsuit.  The first 10 pages or so of the ruling summarize his prior ruling declaring the entire health care law unconstitutional (and are a good précis of same, if you hadn’t yet had a chance to read the longer ruling).  On page 14, Vinson removed any ambiguity in his earlier ruling:

So to “clarify” my order and judgment: The individual mandate was declared unconstitutional.  Because that “essential” provision was unseverable from the rest of the Act, the entire legislation was void.  This declaratory judgment was expected to be treated as the “practical” and “functional equivalent of an injunction” with respect to the parties to the litigation.  This expectation was based on the “longstanding presumption” that the defendants themselves identified and agreed to be bound by, which provides that a declaratory judgment against federal officials is a de facto injunction.  To the extent that the defendants were unable (or believed that they were unable) to comply, it was expected that they would immediately seek a stay of the ruling, and at that point in time present their arguments for why such a stay is necessary, which is the usual and standard procedure.  It was not expected that they would effectively ignore the order and declaratory judgment for two and one-half weeks, continue to implement the Act, and only then file a belated motion to “clarify.”

Vinson also rebuked the government for telling the press that “implementation will proceed apace” within hours of his order, even as it took weeks to request “clarity” from the court as to the ruling’s import.  However, Vinson did grant a stay of his ruling, “conditioned upon the defendants filing their notice of appeal within seven calendar days of this order and seeking an expedited appellate review.”

  1. 1099 in the House:  This afternoon the other body passed by a 314-112 vote legislation that would repeal the health care law’s onerous 1099 paperwork reporting requirement.  More than half of all Democrats opposed the legislation, attacking the pay-for – a re-capture of unwarranted health insurance subsidies received by individuals – as a tax increase, despite the fact that only one Democrat opposed last December a Medicare “doc fix” that was also paid for by increasing repayment requirements for subsidies individuals erroneously obtained.

More Missed Deadlines; They Said WHAT on Constitutionality?

In case you hadn’t seen it, Politico reported this morning that the Administration has missed another two deadlines on health care in the past month:

HHS MISSES TWO MONTH-OLD DEADLINES – Two provisions related to health care quality have gone unaddressed, despite the deadlines passing just over a month ago. The two issues: an Interagency Working Group on Health Care Quality report that was supposed to be issued Dec. 31 and a Healthcare Quality website that the law had going live on Jan. 1.

–HHS responded by highlighting the many deadlines the agency has hit on related issues. “The Affordable Care Act is already working to improve the quality and delivery of health care through innovative new approaches to coordinate care, share information and knowledge, and manage chronic conditions to help prevent more serious health issue,” spokeswoman Jessica Santillo told us. “HHS has met and beaten deadlines required by the Affordable Care Act and plans to have additional announcements on innovative efforts to improve quality in the weeks ahead.”

These new delays, on top of the other deadlines the Administration has already missed, do not speak well to the ability of HHS to roll out the law’s full implementation in January 2014.

In other news, in an ABC News interview yesterday, Sen. Bill Nelson publicly claimed the health care law has a severability clause – even though the measure contains no such prohibition.  Here’s his quote on whether or not the Supreme Court will strike the law down:

I think that’s a possibility, but it’s not a probability.  We were very careful when we crafted this law.  It is going to pass constitutional muster. There might be parts of it that might be struck down.  But there is at the end of it what is called a severability clause, that says if parts are stuck down, that doesn’t strike down the whole law.

However, Sen. Nelson is incorrect – the law includes NO such provision, which is why Judge Vinson was forced to strike down the entire measure earlier this week.  The exchange raised echoes of Speaker Pelosi, who famously said we had to pass the bill to find out what’s in it.  Perhaps however Sen. Nelson, who serves on the Finance Committee, was merely following the lead of that committee’s Chairman, Max Baucus, who in August told his constituents “I don’t think you want me to waste my time to read every single word in that health care bill….It takes a real…real…expert to know what the heck it is.  We hire experts.”

On a related note, a debate in the North Carolina legislature about a state bill designed to prevent the federal government from requiring individuals to buy health insurance prompted a response from the House Minority Leader, Democrat Joe Hackney.  Hackney’s argument: “Don’t tell me you’re not going to have any medical costs.  This is not hardware, this is not furniture, this is not a house.  This is medical care and you are going to purchase it whether you want to or not.”  Not exactly persuasive reasoning for why an individual mandate is not coercive…