Breaking News

Health insurance mandate struck down

NOTE TO READERS:  This blog is currently carrying an on-line symposium on the constitutionality of the new health care law.  Several of the entries can be viewed on this page.


In a massive, 300-plus page opinion, a divided Eleventh Circuit Court on Friday struck down, as beyond Congress’s power, the new federal health care law’s requirement that virtually every American obtain health insurance by the year 2014.  The Court, however, did not strike down the entire law, as a federal judge in Florida had done earlier, because the Circuit Court found that the insurance mandate could be lopped off without nullifying all of the sweeping law.  It also upheld the law’s expansion of state duties under the Medicaid program for the poor.  The opinion is here.

This was the second federal appeals court ruling on the constitutionality of the insurance mandate, and it conflicted directly with the first — by the Sixth Circuit.   The Sixth Circuit, while not ruling directly on Congress’s authority to adopt that provision, turned aside a constitutional challenge to it.  Even so, the conflicting rulings almost certainly assured that the Supreme Court would step in to resolve the dispute — if the ruling Friday is not successfully challenged in an en banc review by that Circuit.  The federal government has the option of seeking review of the three-judge panel decision by the full 11-judge bench of the Circuit.

The Sixth Circuit ruling is already being challenged in the Supreme Court (Thomas More Law Center, et al., v. Obama, et al., docket 11-117).

Besides finding that Congress lacked the commerce-regulating power to adopt the insurance requirement, the Circuit Court ruled that the mandate could not be upheld under Congress’s power to tax, since it concluded that the mechanism for enforcing the requirement is a penalty, not a tax.  The three-judge Circuit panel was divided — 2 to 1 — only on the insurance provision.  The majority opinion — totaling 207 pages — was written jointly by Chief Judge Joel F. Dubina and Circuit Judge Frank M. Hull.  Circuit Judge Stanley Marcus wrote an 84-page dissenting opinion on the insurance issue.  There was also a 13-page appendix outlining the major provisions of the huge law, signed by President Obama in March of last year, and immediately attacked in court.

One other Circuit Court — the Fourth — has held a hearing on the insurance mandate’s constitutionality, but has yet to rule.

Although the new law measures 975 pages, in the version used by the Eleventh Circuit Friday, only two of its provisions were challenged in the lawsuit by 26 states, two individuals, and the National Federation of Independent Business.  The two challenged provisions were the requirement that virtually everyone have health insurance by 2014, and the law’s expansion of coverage — and state financial responsibility — for the federal-state Medicaid program, which provides health care benefits for the poor.  The federal government had defended the insurance mandate under both Congress’s power over interstate commerce, and its taxing authority.  It defended the Medicaid expansion under Congress’s power to pass spending bills.

The Circuit Court had little trouble upholding unanimously the Medicaid expansion.  It rejected the states’ argument that the changes would be so burdensome for state governments that they would amount to federal coercion of the states to pass new laws even if they do not want to do so, and the claim that the states really would have no choice because of their need for the federal funds provided under the program.  Such coercion, the states contended, would violate the Constitution’s Tenth Amendment and its protection for the powers of the states to conduct their own governmental lives.

The panel noted that the Supreme Court has never used this coercion argument to strike down any federal law that attached conditions to the right to receive federal funds, and it noted that some courts have even expressed doubt that the coercion doctrine actually exists in reality.  While not questioning the doctrine itself, the Circuit panel said that the new Medicaid requirements were not unduly coercive.   States, it said, have long been on notice that Congress might alter the terms of the Medicaid program.

Moreover, the panel added, the states’ rising share of the funding obligation will only reach a maximum of 10 percent, and that is hardly coercive.   And, it said, the states have three years to decide whether to stay in the program and continue getting the federal funds, or drop out.   It also said that the states could set up their own programs of health care for the poor, if they don’t want to take part in the federal program.  Finally, the panel said states might not have all of the federal funds taken away even if they do not fulfill all of the conditions of the expansion.

The panel, of course, parted in its reaction to the insurance-purchase mandate — but only on the Commerce Clause objection, since all three judges concluded that the requirement could not be upheld as a taxing measure.   The majority, aside from finding that Congress lacked the commerce-regulating power to require individuals to have health insurance “from birth to death,” also ruled that the mandate could not be upheld under Congress’s more expansive power under the Constitution’s Necessary and Proper Clause.  The majority used 30 pages of its opinion simply to recite the major Supreme Court rulings interpreting the Commerce and Necessary and Proper grants of authority.

Its finding that the insurance mandate was not within the Commerce power began on page 100 of the majority opinion.  That power, it said, was “necessarily broad yet potentially dangerous to the fundamental structure of our government.”  The main limitations it found on federal power were that it must be used only to deal with problems that are”truly national” and Congress may not exercise “a general police power.”

In lecturing Congress (and other courts) on the limits of this congressional authority, the Circuit majority made a strong argument under the rubric of “federalism,” and bolstered that argument by quoting comments that Supreme Court Justice Anthony M. Kennedy made in an opinion just last Term (Bond v. U.S., 09-1227) extolling the virtues of federalism as a mechanism for protecting not the states, but individual Americans.

The majority, while saying it was not totally convinced by the main argument that the challengers to the mandate have used, it embraced that at least in part.  That argument is that Congress can only regulate economic “activity,” and a failure to buy health insurance is a form of “inactivity,” a refusal to enter the economic marketplace.  It found that what those who do not have insurance have done is to make a different choice about spending their money than Congress would have them do.  So, it said, the constitutional question is whether Congress can step in and tell them to make a different choice, and back that up with an economic mandate.

What the Supreme Court has never done, the majority said, “is interpret the Commerce Clause to allow Congress to dictate the financial decisions of Americans through an economic mandate.”  And, it added, while such power might be very tempting to Congress, the lawmakers have never before attempted to use it — until they did so in enacting the insurance mandate.  What Congress has now attempted, it said, was to require an individual “to enter into a compulsory contract with a private company,” and it called that “a sharp departure from all prior exercises of federal power.”

Along with its finding that such a power was unprecedented, the panel majority concluded that Congress had sought to compel a future decision — whether some day to buy health insurance or pay for care with one’s own funds — to be made now, in advance of a need for it.  And it found that the mandate simply reached much further than was justified, commenting that it was “breathtaking in its expansive scope,” treating an individual’s “mere existence” as having a substantial impact on interstate commerce, so that Congress would have power to “regulate them at every point in their life.”

Before concluding its review of the insurance mandate’s validity, the panel majority also found that Congress had intruded on the states’ broad police power to regulate the insurance that their residents may obtain, thus “imperiling the federal structure,” and it ruled that the mandate could not be upheld on a theory that it was necessary to make the entire new health care law, with its expanded requirement of insurance coverage, work as planned.

The panel (unanimous on this point) took only 18 pages — a mere wave of the judicial hand in an opinion of such length — to reject the argument that the insurance mandate can be upheld under Congress’s power to tax.   The mandate is enforced, it concluded, by way of a “regulatory penalty,” not a tax, and it said that Congress itself had essentially conceded that by the label it used for this mechanism.

The final portion of the majority opinion — the last 18 pages — rejected the argument that, because the mandate was invalid, the entire new law had to fall, too.   That was the conclusion that U.S. District Judge Roger Vinson of Pensacola, Fla., had drawn in finding that the law as a whole had to succumb to the flaw in the mandate.

Operating on Supreme Court guidance that a court should not strike down any more of a law than was “absolutely necessary,” the panel majority said Judge Vinson was wrong on this point.  It said that “the lion’s share” of the provisions in the law “have nothing to do with private insurance, much less the mandate that individuals buy insurance.”

The majority, however, said it had paused before concluding that no part of the law would fail without the insurance mandate, and cited two approaches in the law that it conceded were linked to that requirement: the need to shape the insurance market in such a way that coverage for virtually everyone is guaranteed, and the need to assure adequate premiums so that insurance companies can afford to stop excluding coverage for people with pre-existing medical conditions.   The majority, however, finally concluded that those, too, need not depend upon the insurance mandate, because Congress could have said explicitly (but did not) that it would not add those requirements without a mandate to finance them.

Thus, it said, Congress’s preference was to have those two changes without the mandate, with the rest of the law intact.  And, it said, there are other parts of the broad law that will help to promote more coverage for those now uninsured, doing work that the mandate was supposed to have done.  If Congress, faced with the loss of the insurance mandate, finds that it needs to change the new law, that is up to the lawmakers, the majority said.

Judge Marcus, in his lengthy dissenting opinion, severely chastised the majority, accusing it of taking on the role of “a super-legislature,” and of ignoring both Congress’s broad power over commerce, and the Supreme Court’s “expansive reading” of that authority.    The majority said in its final footnote that it would not respond to such criticisms, but went on to stress how limited it perceived its decision to be — nullifying only one section of the huge law — and to defend its refusal to “abdicate our constitutional duty.”


Recommended Citation: Lyle Denniston, Health insurance mandate struck down, SCOTUSblog (Aug. 12, 2011, 1:37 PM),