First posted 9/29/11 on The Health Affairs Blog
Copyright ©2011 Health Affairs by Project HOPE – The People-to-People Health Foundation, Inc.
It had been widely expected that there would be a major pleading filed with the clerk in an Affordable Care Act challenge, as the response of the United States to a certiorari petition in the Sixth Circuit’s Thomas More case, which had upheld the ACA as constitutional, was due. A cert. petition asks the Supreme Court to exercise its discretion to review the decision of a lower court, and the losing plaintiffs in Thomas More had requested the Supreme Court to reverse that decision and find that Congress had no authority under the Commerce Clause of the Constitution to adopt the ACA’s minimum coverage requirement.
The Justice Department did file a response in that case, but very late in the day. Earlier in the day, to the surprise of most observers, three certiorari petitions were filed, asking the Court to review the decision of the Eleventh Circuit Court of Appeals in the Florida case, which had held the minimum coverage requirement to be unconstitutional. The Eleventh Circuit upheld several other rulings of the lower court finding other parts of the ACA to be constitutional, and had reversed the decision of the lower court striking down the entire ACA as being not “severable” from the minimum coverage requirement.
Late in the morning on the 28th, the National Federation of Independent Business and two individuals, plaintiffs in the Eleventh Circuit case filed a cert. petition, asking the Supreme Court to reverse the decision of the Eleventh Circuit refusing to hold the entire ACA to be unconstitutional. An hour or so later, the twenty-six states that are plaintiffs in the Eleventh Circuit case filed their own cert. petition asking the Court to strike down the entire ACA, but also asking the court to reverse the appellate court’s decision upholding the constitutionality of the ACA’s Medicaid expansions and of the employer mandate as applied to the states.
Next, in the biggest surprise of the day, the United States filed a cert. petition asking the Supreme Court to reverse the Eleventh Circuit’s decision striking down the minimum coverage requirement and to find the requirement constitutional. Finally, at the very end of the day, the Justice Department filed its response in Thomas More, asking the court to hold the petition in that case until the Court reviewed the Eleventh Circuit decision.
What It All Means
By the end of the day three things were reasonably clear. First, the Supreme Court will rule on the constitutionality of the ACA during its 2011-2012 term, probably in the late spring or early summer of 2012 (but well before the 2012 elections). Second, it will in all likelihood use review of the Eleventh Circuit’s decision as the vehicle for deciding that issue.
All parties to that case have now requested review. Given the fact that the Eleventh Circuit, the Sixth Circuit, and Fourth Circuit have now reached divergent conclusions on the constitutionality question — creating a “circuit split” — as well as the national importance of the questions raised by the case, review is very likely. The Court could concurrently take certiorari on the Sixth Circuit case, despite the request from the United States that it not do so, but review of the Eleventh Circuit case at least is highly likely.
Finally, that the Obama administration did not request an additional review of the Eleventh Circuit three-judge panel by the entire Eleventh Circuit, and that it filed a cert. petition well before the petition was due, make it clear that the administration wants the constitutional question decided as soon as possible, and in any event before next year’s election. It may also signal that the administration is quite confident that the law will be upheld.
A real question remains, however, as to what the Supreme Court will decide. When ruling on cert. petitions, the Supreme Court itself decides which particular issues raised by the lower court decision it wants to review. While the Court cannot avoid deciding whether the federal courts have jurisdiction to decide a particular issue (this question goes to the constitutional authority of the Court), it does not have to decide all of the issues raised by the parties. It could focus only on the minimum coverage requirement or also review the Medicaid and state employer mandate questions. If it decides that the minimum coverage requirement is unconstitutional, however, it will probably need to decide how much of the ACA goes with it.
The NFIB Petition
The NFIB petition focuses on a single issue: the Eleventh Circuit’s holding that the minimum coverage requirement could be severed from the rest of the ACA and struck down, leaving the rest of the law in place. It asks the Court to decide that the entire ACA be declared invalid. The NFIB asserts that the minimum coverage requirement is essential to all of the ACA’s insurance regulations, and that they must fall with it. It further claims, however, that the insurance regulations are central to the entire ACA, and that Congress would not have enacted the law without them. Thus, if the minimum coverage requirement goes, the entire law must go.
To date, only one court, the lower court in the NFIB/Florida case, has held that the entire ACA is unconstitutional. That decision was reversed by the Eleventh Circuit, which held that the rest of the ACA should remain in place. A lower federal court in Pennsylvania recently held that the ACA’s minimum coverage requirement could not be severed from the ACA’s guaranteed issue requirement and pre-existing condition exclusion prohibition and struck down those provisions as well. But all of the other courts that have ruled on the law have upheld the ACA in its entirety, struck down only the minimum coverage requirement, or held that they lacked jurisdiction to decide the issue.
The ACA contains ten titles, only two of which (Title I and Title X, which amends the earlier titles) deal with insurance reform. Other provisions of the ACA, dealing, for example, with Medicare, Medicaid, workforce reform, prevention and public health, fraud and abuse, and generic biosimilars, are completely independent of the minimum coverage requirement. Many are already in effect. Judge Vinson’s decision in the NFIB/Florida case was nonsensical, as was demonstrated by the Justice Department’s request that he clarify his decision.
There is no division of the circuit courts of appeal on the question of severability. While it is conceivable that the Supreme Court could strike down the guaranteed issue requirement and preexisting condition exclusion prohibition if it held the minimum coverage requirement to be unconstitutional (the Justice Department has taken the position that these three are integrally related), striking down the entire ACA would be a breathtaking act of judicial activism even for this activist Court.
The States Petition
The petition filed by the twenty-six states requests that the Court review the severability question and two other issues: the Medicaid expansions and the provision that applies the employer mandate to the states, requiring them to cover their employees adequately and affordably or pay a penalty if an employee receives premium tax credits through the exchange.
The states claim that the Medicaid expansion is unconstitutional because the law threatens the states with a total loss of Medicaid funding — their largest source of federal funds — if they do not participate in the expansion. They claim that this requirement is unconstitutionally coercive and thus invalid.
The Supreme Court has long recognized that Congress has considerable discretion in the conditions it imposes on the receipt of federal funding. In a couple of cases, however, the Supreme Court has stated in dicta that it is conceivable that the financial inducement that Congress offers a state to comply with a condition could be so coercive that it would violate the principles of federalism recognized by the Tenth Amendment.
The Supreme Court has never found a condition in a federal program to be unconstitutionally coercive and the Eleventh Circuit found that no appellate court had ever applied this requirement either. Several circuits have rejected the requirement as unworkable and others have held that it was not violated in the cases before them.
Whether or not the ACA benefits or harms the states financially is an unresolved question. An Urban Institute study published this summer found that the states would gain over $100 billion between 2010 and 2019 from the ACA’s provisions. But that is not the point. The states rather argue that if they choose not to participate in the Medicaid expansions they will lose all Medicaid funding, and that would be a substantial loss. Both the district court and the Eleventh Circuit rejected this claim, but it is conceivable that the Supreme Court will take certiorari on this claim as an opportunity to limit the spending clause power of Congress. Doing so would have serious ramifications for the ability of Congress to implement many other programs.
The states recognize that Supreme Court precedent supports the imposition of the employer mandate on the states. The Court has flip-flopped, however, on the extent to which Congress can regulate the states as employers, and it is conceivable that it will use this case as an opportunity to flip once again.
Finally, the states also challenge the severability of the minimum coverage requirement. Like the NFIB, they request that the Court strike down the entire ACA. The ability of the states to raise this issue is far from clear. Although the states clearly have standing to challenge the Medicaid expansions and the employer mandate, the minimum coverage requirement does not apply to them.
The district court had held that two of the states that had adopted statutes purporting to nullify the minimum coverage requirement had standing to challenge the requirement to defend their state laws; however, that decision was based on a district court decision in Virginia finding standing for Virginia to challenge the requirement, and that decision has been reversed by Fourth Circuit based on reasonably clear Supreme Court precedent that states cannot challenge the constitutionality of federal laws that do not apply to them. In any event, the Supreme Court will probably have to decide the severability issue if it holds the minimum coverage requirement to be unconstitutional, and is likely to allow the states to brief the issue.
The United States Petition
The United States argues in its petition that the Eleventh Circuit decision is wrong and that the minimum coverage requirement is constitutional. It contends, as it has in all of the cases so far, that Congress had the power to enact the law under its authority to regulate interstate commerce, to impose taxes (arguing that the exaction imposed on those who do not purchase insurance is a tax), and to enact laws “necessary and proper” to effectuate its other constitutional powers.
The arguments that the United States makes are familiar to anyone who has been following these cases, although it seems to be sharpening its arguments as the cases unfold. In particular, it refers repeatedly to Judge Sutton’s opinion in the Sixth Circuit case holding that Congress acted properly in regulating decisions of uninsured persons to “self-insure.” The United States has repeatedly lost in the lower courts on its claim that they minimum coverage requirement is a valid exercise of its power to tax, but finally convinced one judge in the Liberty University Fourth Circuit case, and continues to assert this argument.
The United States also requests that the Supreme Court decide another issue arguably present in the case: the applicability of the tax Anti-Injunction Act (AIA). The AIA prohibits the courts from enjoining the assessment or collection of a tax. The AIA is intended to block litigation that could impede the orderly collection of taxes, and channels all tax litigation into other procedures that require a tax to actually be assessed before it can be challenged.
If the AIA applied here, it would mean that the minimum coverage requirement could not be challenged until 2015, when penalties for violating the requirement will actually be assessed. The AIA has been interpreted very broadly to cover penalties as well as true taxes, and the Court has previously stated that it is jurisdictional, which would mean that the Court would have to decide whether the AIA applies before reaching the merits of the case.
The United States claimed in the lower court proceedings in the NFIB/Florida case that the AIA did apply, but on appeal argued that it did not. In its cert. petition the government maintains its position that the AIA does not apply, but asks the Court to appoint an amicus to argue that the AIA applies so that the issue can be decided.
The NFIB for its part argues cogently that the AIA does not apply. The Court will have to decide this, and other jurisdictional issues, before it can proceed, however, and it is quite conceivable that the Court could refuse to decide the constitutional question at this point, even though all the parties (and most Americans) would like to get this over with.
Timothy Stoltzfus Jost, J.D., holds the Robert L. Willett Family Professorship of Law at the Washington and Lee University School of Law.