Legal Challenges to the Affordable Care Act
Posted on December 14, 2010 | Comments (3)
This is an updated version of a brief originally published on November 15, 2010.
Shortly after President Obama signed the Patient Protection and Affordable Care Act (ACA) into law, opponents of the law filed a series of legal challenges in federal court. This health reform implementation brief provides an overview of the legal challenges by identifying and providing summaries of the two major cases filed by states and select claims, not raised by the states, from other cases. In addition, relative to these cases, the brief discusses:
- provisions of the ACA subject to constitutional challenge;
- the provisions of the federal Constitution that are the basis for the claims;
- procedural issues the courts must address prior to making a decision on the merits of each case; and
- a brief history of Supreme Court rulings on the issues raised by the challenges.
More than 20 separate legal challenges to the ACA have been filed in federal district courts across the country. The two challenges that have received the most media attention were filed by states; however, additional suits have been filed by state and federal legislators, universities, private citizens and others. While the majority of the cases have been filed by Republican governors and attorneys general, Republican legislators, and conservative organizations, a handful of cases have been filed by businesses and private citizens who oppose specific provisions of the law (see Table 1).
In Commonwealth of VA v. Sebelius, Virginia Attorney General Kenneth Cuccinelli argues that Congress exceeded its Constitutional authority granted to it under the U.S. Constitution by requiring individuals to maintain health insurance. In addition, Attorney General Cuccinelli argues that because the federal law is an unlawful exercise of congressional authority, the law violates Virginia’s sovereignty because it invalidates a Virginia law protecting individuals from being forced to purchase health insurance. 
In Florida et al. v. HHS, 20 states (a figure that grew to 26 states following the mid-term elections), the National Federation of Independent Businesses (NFIB), and two uninsured individuals similarly argue that the individual requirement to purchase health insurance coverage exceeds the authority granted to the federal government under the U.S. Constitution. The Florida suit also challenges other provisions of the law, including the tax penalty associated with the individual requirement, the Medicaid expansions and the establishment of state health insurance exchanges, the insurance market reforms, and the employer responsibility provisions of the ACA.
Other cases, including Thomas More Law Center et al. v. Barack Hussein Obama et al., Liberty University et. al. v. Geithner et. al, have been filed by non-profit organizations, individuals, and Republican legislators. Many of these cases, as outlined below, challenge the constitutionality of the individual responsibility requirements and other provisions of the ACA.
In, Liberty University and Thomas More Law Center, federal judges have ruled that the individual mandate to maintain health insurance coverage is constitutional and have dismissed the cases. In both Florida and Virginia, federal judges have not yet reached the merits of the claims but have ruled that the plaintiffs have the right to challenge the constitutionality of the law. These rulings are discussed in more detail below.
Key ACA Provisions Challenged
Collectively the litigation raises constitutional challenges to four provisions of the ACA:
- Individual responsibility – The law’s requirement that beginning January 1, 2014, non-exempt individuals either maintain health insurance coverage (termed “minimum essential coverage”) or pay a penalty in the form of a tax.
- Medicaid expansion – The law’s requirement that states participating in Medicaid expand their programs, beginning January 1, 2014 to cover non-elderly persons with incomes below 133 percent of the federal poverty level (FPL), including individuals previously ineligible for federally assisted Medicaid benefits.
- Insurance market reforms – Federal reforms aimed at curbing certain practices by health insurers, specifically: reforms that require insurers and self-insured group plans to issue and renew health insurance coverage without regard to the health status of individuals or groups, and to offer coverage that is not subject to annual or lifetime limits and that complies with certain other requirements.
- Employer responsibility – The law’s minimum employer contribution responsibilities in the case of employers that either offer no plan or a plan with inadequate subsidies, with contribution responsibilities tied to the number of employees that qualify for a subsidy.
The Constitutional Provisions at Issue in the Cases
The litigation focuses on the scope and limits of Congress’s constitutional powers. In the case of the constitutional challenges to the ACA, the key sources of congressional powers under review are its powers to regulate interstate commerce and to tax and spend. Also at issue is the meaning of the First, Fifth, and Tenth Amendments. A basic principle of American government is that Congress may act only if there is implied authority to do so in the Constitution; conversely, states may act unless the Constitution prohibits them from doing so.
Federal Authority to Regulate Interstate Commerce: The Constitution gives Congress the power to “regulate commerce with foreign Nations, and among the several States, and with the Indian Tribes.” The majority of the cases charge that Congress exceeded its authority under the commerce clause in enacting the individual requirement to maintain health insurance coverage.
Federal Authority to Tax and Spend: Article I, Section 8 of the Constitution gives Congress the authority to “lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general welfare of the United States.” Article I, Section 2, clause 2, requires direct taxes to be “apportioned among the states.”
The First Amendment: The First Amendment prohibits Congress from enacting any law “respecting an establishment of religion,” or “prohibiting the free exercise thereof….”
The Fifth Amendment: The Fifth Amendment to the Constitution states that “No person shall be … deprived of life, liberty, or property without due process of law.”
The Tenth Amendment: The Tenth Amendment provides that the “powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
Procedural Phase of the ACA Cases
Article III of the Constitution constrains the power of federal courts to hear legal challenges to the validity of federal laws. Thus, for example, before a court can reach the merits of a claim that a federal law is unconstitutional, it must first determine that the plaintiffs have standing, that is, whether plaintiffs have suffered the type of legal injury that permits them to challenge a law at all as opposed to simply raising political arguments against the legislation. In determining whether adequate standing exists, a court will examine whether the individuals are actually harmed in some way, whether the harm or injury was caused by the law, and finally whether a court can redress the harm in the event that the individuals are found to have standing.
In addition, the courts will examine whether the case is “ripe” for review, that is, whether judicial review is timely and not premature, because the injury actually has happened. In evaluating the ripeness of a case, a court evaluates the fitness of the issues for decision and the hardship of the parties, should the court decide a case was not ripe for review.
In the cases brought by states, the U.S. Department of Justice filed motions to dismiss the cases on procedural grounds (that is, it asked the courts to dismiss the cases without ever reaching the constitutional merits). The federal government essentially argued that because the law had not yet taken effect and no individual had actually been required to purchase health insurance or pay a tax penalty, no injury had yet occurred, and indeed, injury may never occur if individuals in fact qualified for an exemption. Thus, argued the federal government, the plaintiffs lacked standing and the controversy was not ripe for review.
Federal district court judge Henry E. Hudson, who presides over the Virginia case, rejected the federal government’s motion to dismiss, finding that the state was indeed injured as a result of the clash between its own law and the ACA. Oral arguments on the substantive merits of the claims took place on July 1, 2010. In Florida et al. v. Sebelius, federal district Judge Roger Vinson heard arguments on the procedural matters and issued a ruling on October 14, 2010 dismissing four of six counts, but allowing for a hearing on the merits with respect to the questions whether the individual requirement exceeds congressional authority under the commerce clause and whether the Medicaid requirement violates state sovereign immunity.
In the Thomas More case, federal judge George Steeh determined that the individual plaintiffs had standing and that the matter was ripe for a decision on the merits. Judge Steeh based his decision on a finding that the law’s financial requirements meant that plaintiffs would have to begin saving to purchase health insurance and would be required to make economic decisions in the near future that would affect their personal lives. Judge Vinson likewise determined that individuals and the business association plaintiff in the Florida case had standing and that the case was ripe for hearing, citing Thomas More. Judge Norman K. Moon reached the same conclusion on standing and ripeness with respect to the majority of the plaintiffs in Liberty University, citing Thomas More. In Virginia, the state requested injunctive relief blocking the Secretary from implementing the individual requirement, pending higher court decision. Judge Hudson in his decision, refused to grant the injunction, noting that the key provisions relating to the individual requirement do not go into effect until 2013 at the earliest and that he saw “no compelling exigencies.”
Merits of Plaintiff’s Claims – Decisions to be made by Courts
While cases have been filed throughout the country, the plaintiffs in the cases described above raise the most common set of issues (some, but not all, plaintiffs raise more tangential issues such as religious freedoms or an “unconstitutional taking”). In Liberty University, for example, plaintiffs raised challenges to the ACA’s religious exemption provisions, alleging that the ACA unlawfully gives the government the right to determine which religious groups are able to claim exemption from the individual mandate on religious belief grounds and arbitrarily excludes the plaintiffs from that definition. Judge Norman Moon rejected this argument, citing the Supreme Court in Cutter v. Wilkinson, in which the Court upheld a provision of the Religious Land Use and Institutionalized Persons Act of 2000, noting that the government may “accommodate religious practices without violating the Establishment Clause.” Judge Moon went on to note that the religious exemption in the ACA was adopted from section 1402(g)(1) of the Internal Revenue Code, which has faced repeated challenge under the Establishment Clause, and has been upheld by courts for the last forty years.
Question 1: Does the Individual Responsibility Requirement Exceed Congress’ Commerce Clause Powers and Can the Mandate be Justified by the Necessary and Proper Clause?
Individual Responsibility Requirement
Congress included specific findings as part of section 1501 of the ACA, stating that the individual responsibility requirement is based on an exercise of power under the Commerce Clause. As noted above, the Commerce Clause gives Congress the authority to regulate commerce “among the several states.” Since the early 1940s the United States Supreme Court has held that, in addition to regulating the movement of goods across state lines, Congress’s power under the Commerce Clause also applies to local matters that “substantially affect interstate commerce.” The Court has upheld a variety of federal laws that regulate individual conduct, including laws that prohibit a refusal to interact with racial minorities and permit the federal government to regulate an individual growing wheat and marijuana for purely home consumption. As recently as 2005, in Gonzales v. Raich the Court upheld federal legislation prohibiting the use of medical marijuana, even when grown at home for personal use. Congressional power to regulate commerce also has been held to reach the power to regulate health insurance.
The Court, however, has put limits on Congress’s Commerce Clause authority. In the United States v. Lopez and United States v. Morrison, the Court struck down two federal laws — one banning guns in close proximity to public schools, and another creating civil liability for gender-motivated violent crimes — holding that the underlying issues that Congress was trying to address were basically criminal in nature and did not constitute economic enterprise.
At the same time, no case has ever squarely raised the question whether Congress can compel an individual to buy a good or service available in the market, even a regulated market of the type envisioned under the ACA.
The Department of Justice argues that Congress’s authority to regulate under the Commerce Clause is sufficiently broad to support the individual responsibility requirement. Citing Gonzales v. Raich, the government argues that Congress has broad authority to regulate interstate commerce, including activities that “substantially affect” interstate commerce, so long as there is a rational basis for concluding that the “class of activities” has a substantial effect on interstate commerce.
Thomas Moore Law Center
The Eastern District of Michigan, Southern Division, issued a decision in Thomas More agreeing with the Department of Justice. Plaintiffs in that case argued that arguments in past cases relating to economic activity should not apply. They argue that the ACA, in penalizing individuals who fail to maintain health insurance, are regulating “inactivity,” and that the Supreme Court has never addressed the regulation of “inactivity” in a decision. Judge Steeh, in the Thomas More case, conceded that the case is different but stated that the decision to self-insure and pay for health care services out-of-pocket is an economic decision, asserting that no one can opt out of the health care market. According to him, the question is how participants pay for expenses – through insurance or out-of-pocket. Judge Moon, in Liberty University reached a similar conclusion, holding that the plaintiffs, in forgoing insurance, are “making an economic decision to try to pay for health care services later, out of pocket, rather than now, through the purchase of insurance.”
In Virginia, Judge Hudson held that there is a difference between the decision not to purchase health insurance coverage and the economic activity found in the Wickard and Gonzales decisions. Where individuals made a conscious decision to grow wheat (Wickard) or marijuana (Gonzalez), they voluntarily placed themselves within the stream of interstate commerce. Judge Hudson notes Virginia’s argument that in the case of the individual requirement, the law “compels an unwilling person to perform and involuntary act, and as a result, submit to Commerce Clause regulation.”Citing Lopez and Morrison, he noted that the Court has rejected the argument that Congress can regulate a non-economic activity solely because it has an aggregate effect on interstate commerce, and concludes that the decision not to purchase coverage is not an economic activity. Judge Hudson rejected the argument that the necessary and proper clause offered an additional basis for upholding the constitutionality of the individual mandate.
Arguments on the merits in Florida will proceed December 16, 2010, with an opinion expected early next year. Update: click here for updated information on Florida case.
Individual responsibility penalty or tax
In Florida v. Sebelius, the states contend that the individual responsibility requirement is a direct tax and should be struck down because it is not apportioned among the states. Since the early 1900s, the Supreme Court has defined Congress’s authority to tax very broadly, upholding the constitutionally of laws enacted under this authority so long as the law did not violate another provision of the Constitution.
The Court has also upheld laws imposing taxes for the purpose of achieving a public policy goal (i.e., where a tax appears to be a regulatory tax rather than revenue-raising in nature). In U.S. v. Doremus, the Court held that a law could not be invalidated because of the motives, so long as the law has some reasonable relation to the tax imposed. In Sonzinsky v. U.S. the Court upheld a tax on firearms dealers and in Sunshine Anthracite Coal Co. v. Adkins, the Court upheld a tax on coal producers who did not meet certain federal requirements.
Despite this broad authority, the Supreme Court has held that the Constitution places some limits on Congressional taxing authority. First, direct taxes must be proportional to the census and apportioned among the states. The Sixteenth Amendment states that income taxes do not have to be apportioned among the states or proportional to the census, even if they are direct taxes. Indirect taxes, such as excise taxes, must be uniform, but are not subject to apportionment.
The individual responsibility tax penalty, which is classified by Congress as an excise tax, will not be subject to apportionment if found to be an indirect tax, but would be subject to uniformity. If the penalty were found to be a direct tax, it would be subject to apportionment. Congress has the authority to collect taxes under Article I, Section 8 of the Constitution. While the states do not argue that Congress has broad taxing authority, the plaintiffs in Florida v. HHS argue that the penalty that individuals must pay for failing to meet the individual responsibility requirement are direct taxes and fail to meet the constitutional requirement that taxes be apportioned among the states based on population, under the Constitution.,
The Department of Justice counters the states’ arguments by noting that only a very narrow category of taxes have been subject to apportionment, and the ACA penalty does not fall within that category. Further, the Justice Department argues that the tax is based on a choice of a method to finance the future cost of health care costs, and is an indirect tax not subject to apportionment. Judge Vinson, in the Florida case, spent considerable time discussing whether the penalty imposed to those failing to have insurance was a penalty or a tax, ultimately concluding that as a penalty, the constitutional validity should be based on the commerce clause, not Congress’s taxing authority. Judge Moon also concluded that although the penalties are expected to raise revenue, their main purpose is to enforce the individual requirement. In Virginia, Judge Hudson rejected the Justice Department’s characterization of the individual requirement as a tax, noting the statute in which individuals are required to pay a “penalty” if they fail to maintain insurance coverage, and noted that as a penalty, there must be a constitutional basis for the underlying law that the penalty enforces.
Individual requirement and the First Amendment
A few of the cases (including the Thomas More case) argued that the law violates the free exercise clause of the First Amendment by funding abortions; others suggest that the individual mandate would violate their religious freedoms because some religious groups believe that the church community has an obligation to care for each other’s health care needs, while others believe that spiritual treatment through prayer should be used over medical treatment.
Question 2: Does the Requirement to Expand Medicaid Amount to Commandeering of State Resources in Violation of the Tenth Amendment?
In Florida v. HHS, the states contend that the ACA alters the fundamental nature of the federal-state relationship under Medicaid, transforming the Medicaid program from a voluntary into a mandatory powers program. In South Dakota v. Dole, the Supreme Court held that under its spending powers, Congress may attach conditions on the receipt of federal funds. The Court placed three conditions on this authority: First, the exercise of spending power must be in pursuit of “the general welfare”; second, if Congress desires to condition States’ receipt of federal funds, it must do so unambiguously, enabling the States to exercise choice; and third, conditions on federal grants may be illegitimate if they are unrelated to the federal interest in the particular program. In the Florida case, the Department of Justice cited Dole and argued that Medicaid remains a voluntary program, and Medicaid expansions are no different than expansion that have been made by Congress since the program’s inception. The Supreme Court addressed the issue directly in Harris v. McRae, noting that participation in the Medicaid program is optional, but that once a state elects to participate, the state must comply with the requirements. The states argue that the consequences of opting out of the Medicaid program would result in a significant disruption of health care services for low-income individuals, making it impossible to choose not to participate. Judge Vinson noted that district courts were split on the theory of coercion and chose to allow the claim to proceed to a hearing on the merits.
Question 3: Does the employer requirement violate state sovereign immunity under the Tenth Amendment?
In Florida v. HHS, the states argue that the requirement for large employers to either provide insurance coverage or pay a penalty if uninsured employees receive premium or cost-sharing assistance under the ACA is a violation of states’ sovereign immunity. They argue that states, as employers, would be required to provide health insurance coverage to their employees. The Justice Department argues that Congress has for many years regulated the terms and conditions of employment in the labor market, including health insurance benefits. Citing a 2000 Supreme Court decision, the government argued that the Court has held that where a law equally applies to States and private employers, the law does not violate states sovereign immunity. Judge Vinson agreed that the employer requirement was a provision that was generally applicable and did not interfere with states sovereign immunity. In Liberty University, the University argued that the requirement to maintain minimum essential coverage for their employers is an unconstitutional exercise of Congressional power under the Commerce Clause. Judge Moon disagreed, noting that employer-sponsored health care is a valuable benefit offered in exchange for labor, much like wages. In dismissing the allegation, he stated that under well-established precedent, Congress has the power to regulate the terms and conditions of employment, and that health insurance offered by employers to their employees has substantial impact on interstate commerce.
Question 4: Do the insurance market reform and state insurance exchange provisions violate the states right to regulate insurance as part of its police power?
Insurance Regulation and State Exchanges
Although the power of the federal government to pre-empt state law is derived from the Supremacy Clause of the Constitution, the 10th Amendment reserves to the states those powers not directly delegated to the federal government. In Florida v. HHS, the states argue that the regulation of health insurance is an exercise of states’ police power and the state regulation in conjunction with state based exchanges violates states sovereign immunity. In 1945, however, Congress enacted the McCarran-Ferguson Act, exercising federal Commerce Clause authority and delegating to states the authority to regulate health insurance. In 1996, Congress enacted the Health Insurance Portability and Accountability Act (HIPAA), creating an exception to McCarran-Ferguson.
In the Florida case, states also ask the court to invalidate the ACA because it violates state sovereign immunity by having states enforce health insurance regulation. In Printz v. United States, the Supreme Court found that a federal law that required state and local law enforcement officers to conduct background checks of individuals seeking to purchase handguns would result in states commandeering state officials and ruled it a violation of the Tenth Amendment. Judge Vinson dismissed the state sovereign immunity claim noting that under the law the federal government may regulate insurance states may choose not to establish exchanges.
Question 5: If a provision of the law is invalidated, should the court strike down the entire law?
In Virginia, the state argues that the district court should invalidate the entire law if the individual requirement were determined to be unconstitutional. In refusing Virginia’s request, Judge Hudson cited a number of cases, noting that the Court has generally refused to invalidated entire statutes because a single provision is flawed. Judge Hudson citing Buckley v Valeo, “unless it is evident that the Legislature would not have enacted those provisions which are within its power, independently of that which is not, the invalid part may be dropped if what is left is fully operative law.” Judge Hudson notes that the courts must also consider whether the balance of the statute will function consistent with Congressional intent without the provision. Ultimately, he concluded that it would be impossible for him to determine whether Congress would have passed the bill without the individual requirement.
 One of the 16 state attorneys general and 4 governors filing the suit. http://www.reuters.com/article/idUSTRE6363NL20100407?pageNumber=1 (accessed September 29. 2010).
 Commonwealth of Virginia v. Sebelius, E.D. Va., available at http://dockets.justia.com/docket/virginia/vaedce/3:2010cv00188/252045/ (accessed September 29, 2010).
 Florida et. al. v. HHS, No. 3:10-cv-91-RV/EMT, amended complaint. (N.D. Fla. filed May 14, 2010). Available at http://docs.justia.com/cases/federal/district-courts/florida/flndce/3:2010cv00091/57507/55/ (accessed October 6, 2010).
 Florida et. al. v. HHS, amended complaint.
 Eastern District of Michigan, Docket no. 2:10-cv-11156.
 §2001 of PPACA.
 §§1001-1313 of PPACA.
 §1511 of PPACA.
 Erwin Chemerinsky, Constitutional Law, Principles and Policies (2d ed.) (Aspen Publishers, 2002)
 U.S. Constitution, Article I, Section 8.
 Chemerinsky at 103.
 Abbott Labs. v. Gardner, 387 U.S. 136. (1967).
 Florida et al. v. HHS, No. 3:10-cv-00188-HEH (N.D. Fla. filed Jul. 16, 2010). Available at http://docs.justia.com/cases/federal/district-courts/florida/flndce/3:2010cv00091/57507/55/ (accessed October 6, 2010).
 Commonwealth of Virginia v. Sebelius, E.D., 3:10CV188-HEH, Memorandum opinion. (N.D. signed Aug. 2, 2010). Available online at http://docs.justia.com/cases/federal/district-courts/virginia/vaedce/3:2010cv00188/252045/84/ (accessed October 6, 2010).
 Florida, Case No. 3:10-cv-91-RV/EMT, Order and Memorandum Opinion.
 Thomas More, 2:10-cv-11156, Order Denying Plaintiffs’ Motion for Injunction and Dismissing Plaintiffs’ first and Second Claims for Relief. Available at http://www.scribd.com/doc/38915565/THOMAS-MORE-LAW-CENTER-et-al-v-OBAMA (accessed October 11, 2010).
 Florida, Order and memorandum opinion.
 U.S. Constitution, Art. I, §8, Clause 3.
 United States v. Darby Lumber Co., 312 U.S. 100 (1941).
 Heart of Atlanta Motel, Inc. v. United States, 379 U.S. 241 (1964).
 Wickard v. Filburn, 317 U.S. 111 (1942).
 Gonzales v. Raich, 545 U.S. 1 (2005).
 545 U.S. 1 (2005).
 U.S v. South-Eastern Underwriters, 322 U.S. 533 (1944).
 Memorandum in support of Defendants’ Motion for Summary Judgment, State of Florida v HHS (Nov. 4, 2010)
 Order Denying Plaintiffs’ Motion for Injunction and Dismissing Plaintiffs’ First and Second Claims for Relief.
 Florida Order Denying Plaintiffs’ Motion for Injunction and Dismissing Plaintiffs’ First and Second Claims for Relief.
 Id at 24.
 Florida et al. v. HHS, No. 3:10-cv-91-RV/EMT, amended complaint.
 United States v. Butler, 297 U.S. 1 (1936).
 249 U.S. 86 (1919).
 Article I, Section 8, Clause 1.
 Florida et al. v. HHS, No. 3:10-cv-91-RV/EMT, amended complaint.
 U.S. Constitution, Art. I, §9, cl.1.
 Florida, Memorandum in Support of Defendants’ Motion to Dismiss, pp. 55-58.
 Florida, Order and Memorandum of Opinion, p. 7-29.
 Id. at 206.
 Id. at 207.
 Florida et al. v. HHS, Memorandum in Support of Defendants’ Motion to Dismiss, pp. 9-13.
 448 U.S. 297 (1980).
 Id. at 301.
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 Id at 57.
 Florida, Memorandum in Support of Defendants’ Motion to Dismiss, p. 20.
 Reno v. Condon, 485 U.S. 505.
 Florida, Memorandum in Support of Defendants’ Motion to dismiss, p. 20.
 Id at 46.
 Second amended complaint at paragraphs 96-99.
 Memorandum Opinion at 31.
 U.S. Constitution, Art. VI, cl. 2.
 Amendment X.
 Florida et al. v. HHS, No. 3:10-cv-91-RV/EMT, amended complaint.
 15 U.S.C. § 1011 et seq.
 42 U.S.C. §300 gg et seq.
 Florida, amended complaint.
 521 U.S. 898 (1997).
 Florida, order and memorandum opinion at 50.
 Virginia, Complaint for Declaratory and Injunctive Relief at 6.
 Free Enterprise Fund v. Public Co. Accounting Oversight Board, 130 S. Ct. 3138 (2010); Ayotte v. Planned Parenthood of N. New England, 546 U.S. 320 (2006); Champlin Refining Co. v. Corp. Comm’n of Okla., 286 U.S. 210 (1932); Alaska Airlines v. Brock, 408 U.S. 678 (1987), and Buckley v. Valeo, 424 U.S. 1 (1976).
 Virginia, Memorandum Opinion at 39.
 Id, citing Alaska Airlines.
 Id at 40.