The U.S. Court of Appeals for the Eleventh Circuit in Atlanta on Friday ruled, in the 26-state challenge to the Patient Protection and Affordable Care Act (PPACA) in Florida v, U.S. Dept. of Health and Human Services, that the health care reform law’s requirement that nearly all Americans have health insurance is unconstitutional. This ruling comes two months after the U.S. Court of Appeals for the Sixth Circuit upheld the constitutionality of PPACA.
The United States had appealed a decision from the U.S. District Court for the Northern District of Florida, ruling that the individual insurance mandate of PPACA is unconstitutional. The District Court also concluded that the provisions requiring the individual mandate could not be severed from the rest of PPACA and thus held the entire law void.
In its 304 page opinion, the majority of the divided 2-1 panel concluded that most of the PPACA is permissible under the Commerce Clause. But, “what Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born until the time they die.”
The Eleventh Circuit had the opportunity to address the United States’ alternative argument that the individual mandate constitutes a valid constitutional tax (which was unaddressed by the Sixth Circuit given the Sixth Circuit’s conclusion that the mandate is permitted by the Commerce Clause). The Eleventh Circuit rejected this argument, relying on the text of PPACA, which refers to the “penalty” on an individual for failing to maintain a minimum level of health insurance coverage in any month beginning in 2014 as opposed to a “tax.” Because Congress allegedly invoked its Commerce Clause power as the foundation for the mandate, the two-justice majority explained they were “hard pressed to construe the statute in a manner that would require [them] to ignore the plain text of the statute, the words repeatedly employed by Congress, well-settled principles of statutory construction, and well settled law emphasizing the substantive distinction between a tax and a penalty.”
Whether the individual mandate is permissible as a tax pursuant to the Constitution’s Taxing and Spending Clause is an interesting issue. The United States’ argument is persuasive given that individual coverage will be tracked, and any penalties will be paid, with tax returns. However, as the two-justice majority notes, the marketing of PPACA clearly avoided any representation that the bill introduced new taxes.
Additionally, the Eleventh Circuit concluded that the individual mandate is severable from the rest of PPACA. Thus, according to the Eleventh Circuit, the individual mandate can be “excis[ed] … from the Act” without rendering the entire PPACA null and void. Accordingly, the specific insurance product reforms, regarding community rating and prohibiting discrimination based on health status, are severable and still enforceable under PPACA pursuant to the Eleventh Circuit’s decision.
While the individual mandate might be severable as a legal matter, questions remain as to whether the mandate is severable as a practical matter. The provision was intended to limit the number of insured persons who health care costs are passed on to others. In addition, one of the key goals of PPACA was to eliminate premium variations based on health, and the individual mandates was intended to prevent “adverse selection” whereby healthier people elect not to pay for coverage. Eliminating the individual mandate substantially changes the math on affordable care, and it is unclear how the changes slated for 2014 will be viable as a practical matter without that mandate. While the U.S. Government Accountability Office prepared a report analyzing some alternatives, there are no easy or clear answers at this point and we will just have to wait and see where this ride takes us.
Just as a Bush appointee joined in upholding the constitutionality of the law in the Sixth Circuit, a Clinton appointee, Judge Frank Hull, was one of the authors of the Eleventh Circuit’s opinion striking down the individual mandate as unconstitutional.
The Eleventh Circuit’s decision, which officially creates a split between the circuits, only increases the odds the U.S. Supreme Court will choose to review the issue of constitutionality of PPACA in the next term, which starts in October. Of course, the Supreme Court is not required to consider the issue, and it could decide to just continue watching the circuits.
