Raising serious questions about the constitutionality of a key part of President Obama”s new health care reform plan, and finding no Supreme Court decisions specifically on the issue, a federal judge on Monday ruled that the state of Virginia’s court challenge to the plan  may go forward.  U.S. District Judge Henry E. Hudson of Richmond, VA, rejected the Administration’s plea to dismiss that case at the outset.  The 32-page ruling — the first by any federal court on challenges to the new law — is here.

The new law, the judge commented, “radically changes” health care coverage in the country.  In passing it, he added, Congress broke new ground and extended “Commerce Clause powers beyone its current high watermark.”  Both sides, the decision said, have turned up prior rulings, but they are “short of definitive.”

“While this case raises a host of complex constitutional issues,” the judge wrote, “all seem to distill to the single question of whether or not Congress has the power to regulate — and tax — a citizen’s decison not to participate in interstate commerce” — that is, a private decision not to buy health insurance.  “Neither the U.S. Supreme Court nor any circuit court of appeals has squarely addressed this issue…Given the presence of some authority arguably supporting the theory underlying each side’s position, this Court cannot conclude at this stage that the [Virginia] complaint fails to state a cause of action….Resolution of the controlling issues in this case must await a hearing on the merits.”

The Virginia lawsuit is one of at least three major cases challenging the new Patient Protection and Affordable Care Act, one of the President’s main domestic policy initiatives.  Virginia’s challenge was aimed only at a provision that requires individuals either to obtain a minimum level of health insurance coverage or pay a penalty if they do not do so.  The law has two separate provision on that point: the mandate to buy health insurance, and the penalty for failure to do that.  Virginia challenged only the mandate.

The state’s complaint made two basic constitutional arguments: first, that Congress does not have the authority, under the Commerce Clause, to require an unwilling private person to buy something from a private source, and, second, that, since there was no constitutional basis for Congress to pass the mandate, the law cannot be upheld as a valid use of Congress’ authority to put a tax on that individual, under the Constitution’s Necessary and Proper Clause.

As an alternative, the state contended that its rights as a sovereign state under the Constitution’s Tenth Amendment are violated by the new federal mandate, because it conflicts directly with a new Virginia law — passed explicitly to set up such a test case — that protects the citizens of Virginia from any such federal health mandate.

Judge Hudson is the first federal judge, at any level, to rule on any of the constitutional arguments now being aimed at the new federal program.  While he did not resolve finally any of the issues, he found enough strength behind the state’s arguments that defeated the Administration plea to dismiss the case.

The Justice Department had contended that the state’s Attorney General could not pursue the case at all, on the theory that a state cannot sue the federal government in a test over the powers each has over the state’s citizens.  The Department also argued that the lawsuit was premature, becasuse the new buy-insurance mandate does not take effect until four years from now.  Moreover, it asserted that the state is barred by federal law from seeking a court order against enforcing a federal tax.

On the constitutional issues, the Department argued that Congress had the authority under the Commerce Clause to regulate an individual’s activity that has an effect on commerce among the states, and that the tax or penalty to enforce that mandate was a valid action under the Necessary and Proper Clause.

Judge Hudson found that the state Attorney General did have a legal right to file the case, in order to defend Virginia’s own law protecting its citizens from such a health mandate.  While the lawsuit might help protect Virginia’s citizens, the judge concluded, its main aim is to defend the state’s sovereign  interest in passing and enforcing its own laws, duly enacted by its legislature.

The judge went on to conclude that the lawsuit was not premature, because the state must soon begin to take steps to comply with the federal mandate.  The state, among other actions, would have to revamp its own health care program, specifically the Medicaid program of providing — with federal financial support — health casre for the poor.  The judge commented: “Unquestionably, this regulation radically changes the landscaspe of health insurance coverage in America.”

On the constitutional arguments, the judge said the task was simply to decide whether Virginia had outlined a case that was “legally viable.”  He found that Virginia had done so, although he did not ruled finally on any dispute in the case except the state’s legal right to bring the case to court.

The judge outlined both sides arguments on the Commerce Clause issue, and commented that that part of the case “raises issues of national significance.”  The two sides, he added, have taken “widely divergent and at times novel” positions on those issues.

Displaying some skepticism about the scope of the new mandate, Hudson said that “never before has the Commerce Clause and associated Necessary and ProperClause been extended this far. At this juncture, the Court is not persuaded that [the Administration] has demonstrated that the complaint fails to state a cause of action with respect to the Commerce Clause element.”

Moving on to whether the penalty attached to the health insurance mandate is a valid use of Congress’s legislative powers, the judge noted that the Administration had “appeared to concede” that if the mandate was beyond Congress’s constitutional powers, then the penalty attached to failure to obtain isnurance would necessarily fail.

The bottom line: the judtge denied the Justice Department motion to dismiss the case.

In one of the specific legal issues that the judge said will have to be examined as the case moves forward is whether, in deciding whether the state’s Tenth Amendment rights have been violated, a 1945 federal law reserves to the states the authority to regulate the business of insurance.  The McCarran-Ferguson Act of 1945 says that states have that authority unless Congress specifically says they do not.  The Justice Department has argued that Congress has taken over this authority, so states must yield, by preempting the regulation of a health mandate.  “The demarcation between state and federal responisibility in this area,” Hudson said, “will require further development in future proceedings.”

Posted in Cases in the Pipeline, Health Care