Obamacare: What’s at Stake

The Supreme Court reviews Obamacare

Effective January 1, 2014, the minimum coverage provision of the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119, amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 (Obamacare), will require non-exempted individuals to maintain a minimum level of health insurance or pay a tax penalty.  26 USCA 5000A.

The briefs on this issue have been filed with the United States Supreme Court.  The U.S. Solicitor General Donald B. Verrilli, Jr., represents the United States in all cases before the Supreme Court and argues in favor of the minimum Obamacare.  Paul D. Clement represents the states attorneys general and argues against Obamacare.   Robert Long was appointed by the Supreme Court to argue in favor of the application of the Tax Anti-Injunction Act (both General Verrilli and Mr. Clement agree that the Anti-Injunction Act does not apply).  As of March 28, the Court will have received all oral argument on the four legal issues before the justices.  By late June, the Court will publish its decision, determining whether this unprecedented piece of legislation will stand or will be stricken in part (the mandate alone) or in whole.  Of the nine Justices, Justice Anthony Kennedy could well be the swing vote on the central issue of whether the minimum coverage provision, also known as the individual mandate, is constitutional.  Although only a fool attempts to predict the outcome of cases before the federal courts (particularly ones that have such enormous legal significance), it seems increasingly likely that whatever the Court decides, the divide will likely be a close one, five to four perhaps, with likely one vote or two determining whether the individual mandate is upheld or is struck down.

The first of the four issues briefed concerns whether an 1867 law, the Tax Anti-Injunction Act, 26 USC 7421, prevents the Court from hearing the suit.  Although neither the United States petitioner nor the state attorneys general respondents argue to the Court that the Anti-Injunction Act applies (a reversal of the United States’ position below), the Fourth Circuit held that it did, while two other circuits held that it did not.  Acting on its own initiative, the Supreme Court appointed Covington & Burling constitutional lawyer and former Assistant United States Solicitor General Robert Long to argue in favor of the application of the statute.  On March 26, the Justices heard oral argument on the proposition.   Most agree that it is unlikely that the Justices will decide that the Act applies.  The Act reads in pertinent part: “No suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person, whether or not such person is the person against whom such tax was assessed.”

In the first instance, questions arose as to whether the statute is jurisdictional, meaning that it is not capable of being waived by the United States.  The general consensus on the subject was that, indeed, it is jurisdictional.  The second question concerned whether the Obamacare tax penalty was in fact a tax, rather than a penalty.  Congress did not place the penalty in the tax section of the Act, did not refer to the penalty as a tax, and has not made the primary purpose of the penalty the raising of revenue (indeed, if all comply there is no revenue raised by the penalty).  The third question concerned whether the suit itself is in fact one to restrain the assessment or collection of a tax.  The suit challenges the individual mandate, the requirement that all who presently do not have health insurance acquire it on or before January 1, 2014.  Mr. Long argued that the mandate is a requirement inextricably intertwined with the tax penalty, because the failure to comply results in the assessment of a tax by the IRS, but the purpose of the suit is not to restrain the collection of a tax but to eliminate the requirement that all presently uninsured buy health insurance.  It would appear, therefore, that the merits of this argument strongly favor a decision against application of the Anti-Injunction Act.  Consequently, the Court is likely to proceed to the merits in its late June 2012 decision.

The second of the four issues, for which oral argument was heard on March 27, concerns the central issue in the litigation:  Whether the Congress has the power under Article I of the Constitution to enact the minimum coverage provision.  Obamacare is the first instance in American history when the Congress of the United States has compelled Americans to purchase a private product, health insurance.   Under Article I, Congress is possessed of a power to tax and a power to spend, but there is no specific provision enabling the Congress to mandate that citizens finance through private purchases public policy objectives of Congress.  Moreover, the Supreme Court has never taken the position that the Commerce Clause was intended to be without limit.  Rather, the Court has held that the United States may regulate if it can establish that the object of the regulation has a substantial effect on interstate commerce.  Here, those who do not possess health insurance and do not want it would appear to have no impact on the market for health insurance.  The government argues that they do by reference to the fact that without their involvement, there is cost shifting to those who pay for health insurance, increasing the cost of their premiums.  All must obtain health care, argues the government, and to obtain it without health insurance means invariably that some will not pay and will force the cost on those who do, increasing the expense of health insurance.  The state attorneys general argue that this argument is too attenuated and speculative.  They contend that there is no direct impact on health insurance premiums and that, in any event, even with Obamacare cost shifting will occur or perhaps occur at an even greater rate as people “game” the system, choosing not to buy health insurance, suffer the tax penalty, and obtain emergency care without paying for it.  That has been a hallmark fault of the Massachusetts’ system.

If the Supreme Court upholds Obamacare, it will usher in a new era in which the Congress of the United States may impose all manner of “must buy” requirements on the American people to support public policy objectives.  Everything from electric cars to the purchase of green appliances and wind or solar systems for household energy generation could be required of American citizens, depriving them of an ever greater share of their after tax dollars.  In a very real sense, mandates of that sort would diminish the freedom of individuals to determine how best to spend their after tax resources, denying them freedom of choice.

The third of the four issues, for which oral argument was heard on March 28, concerns whether if the individual mandate is held unconstitutional, it can be severed from the rest of Obamacare or whether the entire law must be stricken.  Throughout the litigation below, both the state attorneys general and the United States argued that the individual mandate is enmeshed with the remainder of the law to such an extent that if it falls, the entire statutory schema is affected and must therefore be stricken.  The Eleventh Circuit decided to the contrary, striking the individual mandate, but upholding the remainder of the law.  At issue is whether the Supreme Court will view the individual mandate as severable from the remainder of the law, such that all other aspects of it may function as Congress intended without it, or whether it will view the individual mandate as central to the entire law.

The fourth issue, also the subject of oral argument on March 28, concerns whether the law imposes new burdens on the states when it expands eligibility requirements under Medicaid, in such a way as to violate the Tenth Amendment to the United States Constitution.  Of the four arguments, most believe this one the most difficult for the state attorneys general to maintain because the Tenth Amendment has been construed to be essentially toothless, more of a description of the relationship between the federal government and the states rather than an affirmative limit on federal power.  Nevertheless, as intended by the Founding Fathers, the Tenth Amendment was to be a barrier to the assumption of federal power beyond the limits of Article I that would invade the historic province of the states of which regulation of health and safety is undoubtedly a central part.

For many, the outcome of this case is a bellwether for the future of the nation.  If Obamacare is stricken, the commerce clause will be construed to have a distinct limit, one which disallows the Congress to compel private purchases.  That limit will reduce the potential of Congress to deny Americans freedom to determine how to spend their after tax dollars.  If Obamacare is upheld, Article I powers would seemingly have no limit because the commerce clause could be relied upon by Congress to compel the private purchase of any good or service at the whim of Congress.  At root, freedom of choice is at stake in the battle over Obamacare.

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