Ballard Spahr LLP: Federal Court of Appeals Strikes Down Individual Mandate for Health Coverage

Ballard Spahr LLP: Federal Court of Appeals Strikes Down Individual Mandate for Health Coverage

 

By Edward I. Leeds

Deciding a case, Florida v. Department of Health and Human Services, that could herald a showdown in the U.S. Supreme Court, a divided panel of the U.S. Court of Appeals for the 11th Circuit has ruled that the individual mandate provision of the Patient Protection and Affordable Care Act (the 2010 health care reform legislation) is unconstitutional. However, the court found that the mandate may be severed from other PPACA requirements, leaving most of the new health care reform measures in place.

The individual mandate provisions require that, beginning in 2014, individuals either obtain health coverage or pay a penalty. Of all the requirements in PPACA, this mandate quickly emerged as the focal point for legal challenges. In the Florida case, the challenge came from 26 states, two individuals, and the National Federation of Independent Business. The trial court that originally heard the case determined that the individual mandate was unconstitutional and so integral to the other reforms in PPACA that the court struck down the entire statute. To view our alert on the trial court's decision, click here. The trial judge later issued a stay of his ruling pending appeal.

The 11th Circuit has now decided that appeal. In doing so, the majority affirms the trial court's ruling that the individual mandate violates the Commerce Clause of the U.S. Constitution. The majority views the mandate, which would impose a penalty on individuals who have no health coverage and who fail to enter the health insurance market, as unprecedented in nature and excessive in scope. It raises questions about whether any meaningful limit could be placed on Congress's Commerce Clause powers if the individual mandate were to be upheld. However, unlike the trial court, the majority does not view the individual mandate as an essential part of the larger legislation, and its opinion does not overturn the other reforms introduced by PPACA.

By contrast, the dissenting opinion sees the mandate regarding health coverage as intimately related to the market for health care. Giving weight to the uniqueness of the health care market, the dissent argues that Congress has the power to address problems within that market prophylactically through a requirement to purchase insurance. It believes that appropriate lines may be drawn to limit Congress's powers under the Commerce Clause to economic activity.

In an interesting twist, the dissent views the individual mandate as strongly connected to measures in PPACA regarding the guaranteed issue of insurance coverage and the prohibition against preexisting condition limitations. In the dissent's view, this connection supports retention of the mandate, but if the mandate is ruled to be unconstitutional, this connection could result in the invalidation of additional PPACA provisions.

The 11th Circuit decision establishes a split between two federal appeals courts on the constitutionality of the individual mandate. In June, a divided panel of judges in the Sixth Circuit Court of Appeals upheld the individual mandate. To view our prior alert on that case, click here. This split in authority echoes the contrasting views expressed by the majority and minority in the 11th Circuit, particularly with respect to whether the relevant market to examine is health care or health insurance, and sets the stage for review of PPACA by the U.S. Supreme Court.

With the 11th Circuit's decision not to invalidate more than the individual mandate, all states-even the 26 that participated in the Florida case-may consider their preparations for other PPACA requirements, including the rules regarding the establishment of state health insurance exchanges for which guidance is now emerging. To view our alerts on the U.S. Department of Health and Human Services regulation of state exchange establishment, click here.

If you have questions regarding this decision and how it might affect your operations, please contact Edward I. Leeds, 215.864.8419 or leeds@ballardspahr.com.

As the federal health care reform effort gained steam, Ballard Spahr attorneys formed an initiative to monitor and analyze legislative developments. With federal health care reform now a reality, our attorneys are assisting employers in understanding the relevant changes and planning for the future. For more information on the firm's Health Care Reform Initiative, please click here.  


Copyright © 2011 by Ballard Spahr LLP.
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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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