Legal Fight Over Health Care Law Jolted by Appeals Court Decision in Favor of States

Legal Fight Over Health Care Law Jolted by Appeals Court Decision in Favor of States

By Jane Norman, CQ HealthBeat Associate Editor

The turmoil and uncertainty that surround the implementation of the health care law increased Friday with an appeals court ruling in a multistate legal challenge striking down the heart of the law: its requirement that all Americans have health insurance. While every court decision so far has been a jolt, the 304-page opinion affirmed the view of a majority of the very bodies putting the law in place — the states.

The decision that the individual mandate is unconstitutional also means that federal appeals courts now are split on the law, appearing to increase the likelihood that the U.S. Supreme Court will take up the case. The speed with which that might happen, and whether it will come during the 2012 campaign, will depend on how quickly the Justice Department wants to move.

Not all was a victory for the 26 states that brought the suit, Florida v. Department of Health and Human Services . They lost their argument that the expansion of the Medicaid program was unconstitutional because it is so costly for them to bear their share of the federal-state program. The court said the expansion to an estimated 16 million additional beneficiaries “is not unduly coercive,” especially considering that the federal government will bear nearly all of the costs.

The White House downplayed the 2-1 decision by the U.S. Court of Appeals for the 11th Circuit. Aides stressed that four other federal courts, including one appeals court, already have found the law ( PL 111-148 , PL 111-152 ) constitutional. “We strongly disagree with this decision, and we are confident it will not stand,” said Stephanie Cutter, assistant to the president and deputy senior adviser.

Ron Pollack, executive director of the group Families USA, which supports the law, said the ruling will help implementation. “Today’s court ruling allows the Affordable Care Act to move forward,” he said. “All of the provisions of the act — save possibly for one, the personal responsibility provision — will be implemented in states across the country. On the personal responsibility issue, the appellate courts are now split.”

But the ruling was a victory for the states, many of which were prodded to the challenge by Republican lawmakers elected in 2010 and tea party activists. Earlier this week, Kansas Gov. Sam Brownback , a Republican, returned a $31.5 million grant from the federal government to set up an “early innovator” exchange, citing the uncertainty over the future of the health care law and its cost. Exchange planning in other states has been slowed by conservative objections.

Two of those suing — Mississippi and Nevada — had just hours earlier on Friday been awarded multimillion-dollar grants by the Department of Health and Human Services for the development of their health insurance exchanges, which will be used in the law to provide insurance for individuals and small businesses.

After a district court decision earlier this year that the entire law was unconstitutional, states hesitated on implementation. It wasn’t clear by Friday night if that would happen again, especially since it was just the mandate found unconstitutional, but state officials said they were heartened by the ruling and looking toward the likely next phase in the Supreme Court. “Today we have prevailed in preventing Congress from infringing on the individual liberty protected by the U.S. Constitution,” said Florida Attorney General Pam Bondi.

In addition, a judge appointed by President Bill Clinton was one of the two 11th Circuit judges ruling that the individual mandate is unconstitutional. Judge Frank M. Hull joined with Chief Judge Joel Dubina, who was appointed by President George Bush. Dissenting was Judge Stanley Marcus, another Clinton appointee, who had his own 96-page opinion explaining why the law should stand.

This was a twist on a ruling earlier this summer by the 6th Circuit, where conservative judge Jeffrey S. Sutton upheld the law, much to the joy of the law’s advocates. That case was brought by the conservative Thomas More Law Center and now has been appealed to the Supreme Court, the first challenge to the law to sent to the high court. The Supreme Court has not signaled which, if any, cases it will accept.

Still pending is a decision from the 4th Circuit in Richmond, Va., which is considering two cases: one by Virginia and a second by Liberty University. Yet another case is scheduled for oral arguments in the District of Columbia Circuit in September.

House Speaker John A. Boehner , R-Ohio, called for a speedy resolution by the Supreme Court. “The costly mandates, regulations, and taxes that are hanging over small businesses are adding to our economic uncertainty and joblessness,” Boehner said.

Celebrating was the National Federation of Independent Business Small Business Legal Center, a party to the suit with the states. Elizabeth Milito, senior executive counsel, said the group was disappointed that the entire law wasn’t struck down but nonetheless it was a “good day for small business.”

The government is almost certain to appeal the decision to the Supreme Court, and Milito said the NFIB wants that to occur as soon as possible so as to eliminate uncertainty for businesses and states in whether and how to implement the law. “A decision from the Supreme Court in the next term would be a good thing for the country,” she said.

But she said opponents also are worried that the Justice Department will ask for an “en banc” review from the 11th Circuit, which would mean a review by all of the judges on the appeals bench rather than just the three who heard oral arguments. That could mean a delay of a final decision by the high court.

The uncertainty must be resolved quickly, said James A. Klein, president of the American Benefits Council, a trade association representing those who administer or sponsor health and retirement plans for 100 million Americans.

“The fact that today’s decision upheld the rest of the law, while striking down the mandate, does not make the situation any clearer,” Klein said. “Knowing whether people must obtain health coverage is critical for individuals and for the employers from whom most Americans get their coverage. Citizens, employers and all stakeholders deserve the clarity that only the Supreme Court can provide.”

The ruling did not kill the entire law but just the individual mandate. The appeals court judges were considering a federal district court ruling by Judge Roger Vinson that declared the entire law unconstitutional. Hull and Dubina in their opinion explicitly said they do not intend to strike down portions of the law that protect consumers. Those provisions require insurance companies to end their practice of denying insurance because of pre-existing conditions, and require that they accept all applicants.

This was highlighted by the law’s supporters. “This decision makes clear that the courts will not undo health care reform and that insurance company abuses like discrimination against people with pre-existing conditions will not be tolerated,” said Ethan Rome, head of the advocacy group Health Care for America Now.

But the judges said that the individual mandate is an overreach by Congress and violates the Commerce Clause of the Constitution. “We have not found any generally applicable, judicially enforceable limiting principle that would permit us to uphold the mandate without obliterating the boundaries inherent in the system of enumerated congressional powers,” the judges wrote.

Another tussle has been over whether the individual mandate is a penalty, as described in the law, or a tax, as described by supporters. Hull and Dubina said that the mandate was enacted as a regulatory penalty, not a revenue-raising tax, and thus cannot be sustained as an exercise of congressional power under the Taxing and Spending Clause.

The mandate “represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy and to make them re-purchase that insurance product every month for their entire lives.” Supporters argue that the health insurance market is unique and so must be regulated, but “uniqueness is not a constitutional principle in any antecedent Supreme Court decision,” the judges said.