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District Court Ruling Finds Individual Mandate Unconstitutional

By Jane Norman, CQ HealthBeat Associate Editor

December 13, 2010 -- A U.S. District Court judge in Virginia struck down the centerpiece of President Obama's health care law, saying that the requirement that all Americans have health insurance coverage "exceeds the constitutional boundaries of congressional power." Judge Henry E. Hudson's ruling came in a case filed by the Commonwealth of Virginia against the federal government.

Hudson's decision is the first to find the individual mandate unconstitutional. His decision is expected to be appealed to the 4th U.S. Circuit in Richmond, Va., and the case filed by Virginia Attorney General Kenneth Cuccinelli will likely wind up in the U.S. Supreme Court.

"The unchecked expansion of congressional power to the limits suggested by the Minimum Essential Coverage Provision would invite unbridled exercise of federal police powers," Hudson wrote. "At its core, this dispute is not simply about regulating the business of insurance—or crafting a scheme of universal health insurance coverage—it's about an individual's right to choose to participate."

The ruling set off a flurry of reaction among politicians and interest groups. Congressional Republicans pushing hard for repeal seized upon it as evidence of fundamental problems with the eight-month-old law. Democrats said it is just one of more than a dozen rulings on the constitutionality of the measure that have been rendered—all of them until now favorable to the Obama administration.

Supporters of the law pointed out that Hudson did not strike down the entire law as requested by the plaintiffs but instead said that just the individual mandate is unconstitutional. However, they also said that the law would be unworkable without the mandate because people would wait until they were sick to purchase health insurance, driving up costs.

The court decisions on this case and others do not directly affect the Obama administration's work to put the law into effect, though the rulings will give Republicans a cudgel to use as they seek to "repeal and replace" the law and attack its funding. Hudson declined to grant a request for an injunction that would have halted implementation of the law. He said there were no "compelling exigencies" because key provisions on the law do not take effect until 2013 at the earliest. "Therefore, the likelihood of any irreparable harm pending certain appellate review is somewhat minimal," he said.

Administration officials said they were unperturbed by the ruling in the Eastern District of Virginia in Richmond. "We are confident that the Affordable Care Act will be upheld," said White House Press Secretary Robert Gibbs at his daily briefing.

Stephanie Cutter, assistant to the president for special projects, said in a blog post that the Department of Justice is "considering its options" for appeal. "We are pleased that Judge Hudson agrees that implementation of the law will continue uninterrupted," she said.

Cutter added that "history and facts are on our side" and similar legal challenges against landmark laws such as the Voting Rights Act, the Civil Rights Act and Social Security Act also failed.

The ruling was not a surprise. In August, Hudson had refused to dismiss the suit and was critical in his comments during oral arguments in October about the government's case, leading observers to predict that he would rule against the law.

There have been 14 other cases filed against the law that have been dismissed by district court judges for various reasons, including a lack of standing and on the merits of the law. Some have been appealed or are expected to be appealed.

Commerce Clause at Issue

Cuccinelli had argued that the Commerce Clause of the Constitution would bar the individual mandate requiring health insurance. Hudson wrote in his decision that in his review of constitutional law he found no decisions from any federal appellate courts extending the Commerce Clause "to encompass regulation of a person's decision not to purchase a product."

Hudson also wrote in a passage that appeared key to his opinion on the Commerce Clause: "Every application of Commerce Clause power found to be constitutionally sound by the Supreme Court involved some form of action, transaction or deed placed in motion by an individual or legal entity. The constitutional viability of Minimum Essential Coverage Provision in this case turns on whether or not a person's decision to refuse to purchase health care insurance is such an activity."

Hudson rejected arguments by the government that the penalty for not purchasing insurance is a "tax penalty" and allowed under congressional power of taxation. He wrote that early versions of the health care legislation included the "more politically toxic term 'tax'" when referring to the assessment for noncompliance with the mandate. In the final version, the word "penalty" is substituted for tax, Hudson wrote.

"A logical inference can be drawn that the substitution of this critical language was a conscious and deliberate act on the part of Congress," said Hudson. "This shift in terminology during the final hours preceding an extremely close floor vote undermines the contention that the terms 'penalty' and 'tax' are synonymous."

Other sections of the law specifically include the term "tax," including the tax on indoor tanning and taxes on certain high-income taxpayers, said Hudson. "The legislature's apparent careful choice of words supports the conclusion that the term "tax" was not used indiscriminately," he said.

Cuccinelli has argued that the term "tax" was avoided for political reasons.

Cuccinelli said in a conference call with reporters that the case was not about health care or health insurance but the limits of what government can compel individuals to do. The idea behind the law of expanding access to health insurance was "noble" but the individual mandate was not the way to accomplish that, he said.

"For now we've beaten it back here in Virginia—of course we will see where the final decision brings us," he said. "But if we cross this line with health care now, this unconstitutional line, where the government can force us to buy a private product and say it's for our own good, then we will have given the government the power to force us to buy other products—cars, gym memberships, asparagus. The list goes on."

He said he expects it may take the case a year to work its way through the appellate process and another year before it reaches the Supreme Court. And Cuccinelli pointed out that repeal of the law is "a major priority for the Tea Party here in Virginia."

The challenge to the law came after the General Assembly in Virginia approved and the governor signed into law a measure saying the federal government cannot require individuals to be insured. That law went into effect in July.
Tracy Schmaler, a spokeswoman for the Department of Justice, said the government expects to ultimately prevail because the law clearly follows legal precedent.

"We are disappointed in today's ruling but continue to believe—as other federal courts in Virginia and Michigan have found—that the Affordable Care Act is constitutional," said Schmaler. "There is clear and well-established legal precedent that Congress acted within its constitutional authority in passing this law and we are confident that we will ultimately prevail."

Ron Pollack, head of Families USA, which backs the law, said Virginia lost its attempt to have the entire law declared invalid. "As a result, the litigation scoreboard now shows two complete victories on the merits for the Affordable Care Act, 12 procedural victories for the Act, and one partial victory," said Pollack. "This means that the process for implementing the Affordable Care Act will continue to move forward around the country."

Only Individual Mandate Struck Down

In his ruling, Hudson severed the individual mandate, leaving the rest of the law intact. He wrote that he had to consider whether Congress would have enacted the balance of the law without the mandate, but it was difficult to determine given the speed with which the law was written.

"The final element of the analysis is difficult to apply in this case given the haste with which the final version of the 2,700 page bill was rushed to the floor for a Christmas Eve vote," he said. "It would be virtually impossible within the present record to determine whether Congress would have passed this bill, encompassing a wide variety of topics related and unrelated to health care, without Section 1501. Even then, the court's conclusions would be speculative at best."

However, Hudson said that in his ruling he was severing not just the mandate but also the "directly dependent provisions which make specific reference" to the section of law that included the individual mandate. Opinions were split as to what that meant.

Cuccinelli told reporters he believes it means the judge was including with the mandate the ban on discrimination against people with pre-existing conditions and other sections of the law aimed at ending insurance company abuses. However, Timothy Jost, a law professor at Washington and Lee University and an expert on the health care law, said he did not believe the ruling included those sections, though he said as a "practical matter" it would be difficult to implement the measure without the individual mandate.

The insurance industry has been among the biggest boosters of the individual mandate, arguing that the law could not go forward without it. Robert Zirkelbach, a spokesman for America's Health Insurance Plans, which represents the industry, said there was broad agreement throughout the debate that there would be "significant disruption and skyrocketing costs" unless all Americans have coverage.

Liberal-leaning backers of the law agreed with insurers that losing the mandate would be bad news. "If his decision is upheld, it would give the green light for insurance companies to deny people care based on pre-existing conditions," said Ethan Rome of Health Care for America Now. "Putting insurance companies back in charge of our health care is the wrong way to go."

The Politics of Judging

The question of which president appointed which judge in the various cases loomed large for some critics of the Hudson ruling. Hudson was nominated for the federal bench by President George W. Bush in 2002.

Two judges appointed by Democratic presidents have ruled in favor of the administration and dismissed challenges to the law. U.S. District Judge George Caram Steeh denied a request for a preliminary injunction brought by the Thomas More Law Center of Ann Arbor, Mich., and dismissed claims the center made against the individual mandate included in the law and penalties for not complying.

Steeh, who was appointed by President Clinton in 1998, said that Congress had the power under the Commerce Clause of the Constitution to enact the health care law.

Judge Norman K. Moon of the Western District of Virginia said in a ruling in late November that the law's requirement that Americans obtain health insurance was constitutional and a regulation of interstate commerce allowed under the Commerce Clause of the Constitution. The challenge was brought by Liberty University and five individuals. Moon is also a Clinton nominee.

Cuccinelli said there have been "cordial discussions" with government lawyers about his request that they bypass the appeals process and ask the Supreme Court to take the case. But the government has not agreed.

Rep. Eric Cantor, R-Va., on Monday called on the president and Attorney General Eric H. Holder Jr. to echo Cuccinelli's request. "In this challenging environment, we must not burden our states, employers and families with the costs and uncertainty created by this unconstitutional law and we must take all steps to resolve this issue immediately," said Cantor, the presumed incoming majority leader in the House.

But Jost said in the call with reporters that he sees that outcome as "very unlikely." He predicted that the appeals court will uphold the law.

Lawmakers React on Party Lines

Several Democratic lawmakers noted that previous challenges had been dismissed and said they were confident the law would be upheld by appellate decisions.

"There have been and will continue to be a wide range of attempts to weaken this law," said House Speaker Nancy Pelosi, D-Calif. "But as in previous court rulings across the country, I am confident that the Affordable Care Act will ultimately be sustained and will keep benefiting our middle class, our families, and our businesses, indeed every American. In Congress, we will stand firm against attempts to roll back the law, including the Patient's Bill of Rights and the critical consumer protections enacted by health insurance reform."

"A quality health care system for all Americans is built on the premise that responsibility is shared between employers, the government, and the individual," said House Ways and Means Committee Chairman Sander M. Levin, D-Mich. "Fourteen similar cases have been dismissed or decided in favor of the Affordable Care Act, recognizing the importance of a functioning, affordable health care market, and I am confident that after review at the appellate level, this case will also be decided in favor of the Affordable Care Act."

But Sen. Orrin G. Hatch, R-Utah, hailed the ruling as a victory for limited government.

"If the government can tell you what to buy, then what limits on federal power exist?" Hatch said. "The $2.6 trillion health law is an astonishing expansion of that power and bursts the limits that the Constitution imposes on the federal government."

Sen. Jim DeMint, R-S.C., called it the "beginning of the end for Obamacare." Sen. Charles E. Grassley, R-Iowa, who was the top Republican on the Finance Committee when the bill was passed by the Senate, said that the Congressional Research Service called requiring people to buy a good or service or be penalized a "novel issue."

Grassley added, "The ruling is likely to be appealed, but it's a clear signal that the constitutionality of the law, which was moved through Congress with a lot of controversy and partisanship, isn't as certain as its supporters have argued."

Rep. Fred Upton, R-Mich., praised the decision and promised many hearings on the law when he becomes Energy and Commerce chairman early next year.

"While the legal fights over the health care law are just beginning, our committee will vigorously weigh in and assert our oversight authority to ensure that the federal government is returned to its properly limited role," said Upton. "Our top priority in the new Congress will be repealing the job-killing health care law."

Arguments are scheduled for Thursday in a case in Florida federal court in which 20 states and the National Federation of Independent Business have challenged the individual mandate as well as the Medicaid expansion included in the law. Cuccinelli said that he expects that by the time new attorneys general and governors take office next year, more than half the states will join that suit. "I am not aware of that ever happening before" in an action against the federal government, he said.

Florida Attorney General Bill McCollum, the lead lawyer in the suit, said in a statement that it would cost states "hundreds of millions of dollars" to implement the law. States in 2020 will have to pick up 10 percent of the cost of those newly eligible for Medicaid under the law.

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