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Appeals Court Decision on Health Care Law Gives Obama a Win—with an Asterisk

By Jane Norman, CQ HealthBeat Associate Editor

September 8, 2011 -- A federal appeals court shunted aside two challenges to the health care law on procedural issues, leaving the Obama administration with two fewer legal headaches in implementing a law that each day comes closer to being fully in force.

In a policy plus for Obama, the 4th District rulings by three Democratic appointees also give states no excuse to stall in setting up the health insurance exchanges needed for the sale of individual and small-group policies in 2014. The rulings provide no new fodder for members of Congress to renew debates over how the law might be changed. They might rob the outspoken Virginia Attorney General Kenneth T. Cuccinelli, who brought one of the suits, of a forum. And they give opponents in the GOP and the business community no fresh meat in their drive for repeal.

The decision by the Court of Appeals for the 4th Circuit to throw out the cases will be complex for the law's advocates to explain to the public and left the outlook as cloudy as ever as to how the Supreme Court may swing on a final decision on the law (PL 111-148, PL 111-152). Both of the losing parties—Cuccinelli and Liberty University—vowed to appeal the rulings to the Supreme Court.

The decisions also introduced yet another element of uncertainty swirling around the multiple lawsuits possibly bound for the high court. That's because two appeals court judges gave credence to an argument that the federal courts don't even have jurisdiction over the law until the law's penalties—which the judges said are taxes, not penalties—start to be collected from those who decline to buy insurance. Taxes can't be challenged until they are paid, under the Anti-Injunction Act.

Supporters of the law suggested that procedural argument could be so powerful that the Supreme Court could issue a decision on it alone and never get to the merits of the cases against the individual mandate. Courts could see the tax question as a barrier to any litigation before the law is fully in force, said Walter Dellinger, a supporter of the law and former acting solicitor general.

The decisions followed two other appeals court decisions this summer, one in the 11th Circuit that found the individual mandate unconstitutional but left the law intact and one in the 6th Circuit that upheld the law. That second case, brought by the Thomas More Law Center, already has been appealed to the Supreme Court.

As usual, those who back the law found many elements of victory in the court decisions, while opponents stressed that the issues centered only on judicial procedure and not whether the law is constitutional.

"This decision is another victory for the Affordable Care Act and the tens of millions of Americans already benefiting from this landmark law," wrote presidential assistant Stephanie Cutter on the White House blog, noting that two judges in the Liberty case said they think the law is constitutional.

But Robert Alt, an analyst with the conservative Heritage Foundation, said those judges' statements are irrelevant. "That, my friend, is dicta," he said. "That's not a holding of the court." He also said he believes the tax jurisdiction issue is an outlier and won't hold much influence over Supreme Court decisions on the law.

Two separate decisions were recently issued, following May 10 arguments at the appeals court in Richmond, Va. A suit filed by Cuccinelli, based on a Virginia law enacted shortly after the federal law was signed, was dismissed for lack of standing by all three appeals judges—Diana Gribbon Motz, Andre M. Davis and James A. Wynn, Jr.

The Justice Department had appealed a Dec. 13 ruling by U.S. District Court Judge Henry E. Hudson of the Eastern District of Virginia striking the law's requirement that all Americans have health insurance. Hudson was the first federal judge to find the individual mandate unconstitutional.

Allowing states to pursue such suits would make them into "roving constitutional watchdogs," the appeals court said.

The second decision went against Liberty University of Lynchburg, Va., but was much more layered. Motz and Wynn both said that the case should be dismissed for lack of jurisdiction in the 2-1 decision, while Davis disagreed.

Motz did not make a statement on whether she believes the law is constitutional. But Wynn and Davis both said they believe it is. Davis said that "I would hold that the challenged provisions of the act are a proper exercise of Congress' authority under the Commerce Clause to regulate the interstate markets for health services and health insurance."

Ian Millhiser, an analyst of judicial policy at the liberal-leaning Center for American Progress, said that the statements by Wynn and Davis constitute a victory for the law because they are two more federal judges in favor of it, even if the ruling was not on that basis. "The most important point is that a majority of the 4th Circuit panel said yes, the law is constitutional," Millhiser said.

But Matthew Staver, the law school dean at Liberty who argued the case before the appeals court, said the decision was surprising because no one involved in arguing the suit had contended it was relevant. Staver said that Liberty plans to ask the Supreme Court for a writ of certiorari to hear the case, rather than requesting an "en banc" hearing of the case by all the appeals judges on the 4th Circuit.

Grace Marie Turner, a policy analyst who opposes the law, said it was not a victory for the administration because there was no decision on the merits. "But neither does it help those opposed to the law," she wrote in National Review Online.

Cuccinelli also said in a statement he would ask for certiorari. "Our disappointment stems not only from the fact that the court ruled against us, but also that the court did not even reach the merits on the key question of Virginia's lawsuit—whether Congress has a power never before recognized in American history: the power to force on citizen to purchase a good or service from another citizen," he said.

But the judges in oral arguments on the case repeatedly raised the standing issue, and in their ruling they said that the individual mandate "imposes no obligation on the sole plaintiff, Virginia."

Analysts said the lack of standing found for Virginia won't affect the 11th Circuit suit filed by 26 states. That's because the states are accompanied by other plaintiffs who do have standing—two individuals and the National Federation of Independent Business.

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