By Katherine Hayes and Sara Rosenbaum

Shortly after President Obama signed the Patient Protection and Affordable Care Act (ACA) into law, opponents filed a series of legal challenges in federal court. In a previous Implementation Brief we provided an overview of these legal challenges, identified provisions of the ACA that are the focus of challenges, discussed provisions of the Constitution that are the basis of these challenges, and provided brief histories of relevant Supreme Court rulings. The purpose of this brief is to provide an update on the status of the lawsuit filed by 26 states and other individuals in Florida et. al. v. HHS.^[1]

On January 31, 2011 the Federal District Court for the Northern District of Florida ruled that the ACA’s individual requirement to purchase health insurance exceeds congressional authority under the U.S. Constitution.^[2] The court also ruled that since the individual mandate is integral to the overall structure of the ACA, the entire law is invalid. However, because Judge Vinson specifically declined to grant an injunction barring enforcement of the law in the affected states,^[3] one of the less than clear dimensions of the decision is whether the law remains in effect in the states that brought the case, since he also noted that there is a “long-standing presumption . . . that officials of the executive branch will adhere to the law as declared by the court.^[4] As a result, the declaratory judgment is the functional equivalent of an injunction.” The plaintiffs have relied on this portion of the ruling to argue that the law is no longer in effect in the 26 plaintiff states. The defendants argue that the ACA remains in effect, indicating that they do not concur in the results and intend to appeal the decision. Whether the judge will issue an explicit injunction, and whether the Court of Appeals for the 11th Circuit will stay an injunction if one is issued, remain to be seen.

The Individual Mandate and the Commerce Clause

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 argue that the individual requirement to purchase health insurance coverage exceeds the authority granted to the federal government under the U.S. Constitution.^[5] The original complaint challenged 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.^[6] In an earlier decision, Judge Vinson dismissed claims challenges to the tax penalty, the establishment of state exchanges and insurance market reforms, and the employer responsibility provisions.^[7]

Judge Vinson, following a lengthy review of the history of the commerce clause, ruled that Congress had, indeed, exceeded its Commerce Clause authority by requiring individuals to purchase health insurance coverage.^[8] He wrote that his decision rested on two key questions. First, he asked whether the failure to purchase health insurance requires activity. Noting that the statute itself penalizes an individual who “fails” to purchase coverage, as well as a Congressional Research Service (CRS) report advising Congress prior to enactment that the “individual mandate could be imposed on individuals who engage in virtually no economic activity,” he concluded that the federal government could not effectively turn noneconomic activity (that is, a decision not to buy coverage) into an affirmative decision to self-insure, and that the conduct remained noneconomic in nature.^[9]

In determining that activity was required, Judge Vinson concluded that if Congress could penalize individuals for failing to engage in commerce [quoting U.S. v. Lopez^[10] ], it would be “difficult to perceive any limitation on federal power.”^[11] Judge Vinson distinguished the law at issue from the earlier laws challenged in Wickard v. Filburn^[12] and Gonzalez v. Raich,^[13] noting that in each of those cases, individuals were engaged in a clear activity (growing wheat and marijuana, respectively) and each had a choice to discontinue the activity and avoid the penalty.^[14] With the individual mandate, he argued, people have no choice but to buy insurance or be penalized.^[15] Giving a nod to the current political climate perhaps, he questioned whether the county’s Founding Fathers would have created a government in which people could be forced to buy tea, harkening back to efforts by the British to impose a nominal tax on all tea sold in America.^[16]

Second, he asked whether an individual decision not to purchase health insurance amounts to the type of economic activity that has a “substantial effect” on interstate commerce, a necessary prerequisite for Congress’ use of its commerce clause powers. He answered no, finding that were such a decision to be considered economic, there would be virtually limit to types of individual conduct that Congress could reach. In reaching this conclusion, Judge Vinson argued that the theory that failure to act could be determined to be “economic activity,” would have unlimited application, and that it would be difficult to find a decision that does not have a substantial effect on interstate commerce.^[17]

The Individual Requirement and the Necessary and Proper Clause

One issue not addressed in the previous GPS Implementation Brief on legal challenges, was the government’s contention that the individual requirement to purchase coverage was a reasonable exercise of Congress’ power to make all laws “necessary and proper” to carry out its enumerated powers. Article I, Section 8 of the Constitution gives Congress the power to “make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.” This clause has been paired with the Commerce Clause in numerous cases to permit Congress to reach individual activities not otherwise considered to affect commerce, as part of more far-reaching laws aimed at the overall regulation of commerce. Judge Vinson held that necessary and proper clause provides no independent basis for upholding the individual mandate.^[18]

Medicaid and Congressional Spending Power

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 program.^[19] Judge Vinson rejected the states’ claims that the Medicaid program was no longer voluntary and upheld the requirement to cover new populations given the extent to which states rely on federal funding.^[20]

Citing the four restrictions on federal spending power established in South Dakota v. Dole^[21] — 1) that spending must be for the general welfare, 2) that conditions for receipt of federal funding must be clear and unambiguous, 3) that the conditions for funding must bear a relationship to the purpose of the program, and 4) that the conditions may not require states to engage in unconstitutional activities — Judge Vinson noted that the states had not alleged that the Medicaid program violates any of the requirements. Instead the states relied on arguments based on a comment in Dole in which the Court speculated that at some point the financial inducement might be coercive. Judge Vinson pointed out that differing data offered by states resulted in disputed issues of material fact, but even without the disputed issues, there was no support for the coercion argument.^[22] In drawing that conclusion, he pointed out that although states claim that the program was no longer voluntary, two states in the lawsuit filed documents saying that they intended to do just that (Nevada and South Dakota).^[23]

Finally, Judge Vinson noted that he appreciated the difficult financial situation that the states were in, and pointed out that some believe the Supreme Court should reconsider case law on the Congressional Spending Clause under the Constitution. Citing a treatise on the issue and quoting its author, Judge Vinson noted that until the Court revisits its position, “the states have little recourse to remaining the very junior partner in this partnership.”^[24]

Validity ACA absent Individual Requirement

Also at issue in the Florida case was given that a key provision was found to be unconstitutional, and absent a severability clause, whether the entire law should be invalidated. Judge Vinson concluded that the “the individual mandate and the remaining provisions are all inextricably bound together in purpose and must stand or fall as a single unit.” Citing Ayotte v. Planned Parenthood of Northern New England,^[25] Judge Vinson noted that where the court strikes down a provision of law as unconstitutional, the court should strike down as little of the law as possible.^[26] Also citing Ayotte, Judge Vinson noted, however, that the Supreme Court cautioned against the courts acting as legislators in “re-balancing a statutory scheme by engaging in quasi-legislative ‘line drawing’.”^[27]

Judge Vinson concluded that given concessions by the government that “reforms cannot survive without the individual mandate,”^[28] and evidence that Congress had explicitly removed the severability clause (which would have preserved the law had a provision been struck down by the courts), severing the individual mandate from the ACA was inconsistent with the principles laid out by the Supreme Court in Ayotte.