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Health Care

Circuit Panel Finds Individual Mandate In Health Care Reform Act Constitutional

WASHINGTON, D.C. - (Mealey's) A split panel of the District of Columbia Circuit U.S. Court of Appeals on Nov. 8 affirmed that the individual mandate contained in the Patient Protection and Affordable Care Act (PPACA) is constitutional, with the dissenting judge saying the court lacked jurisdiction to hear the case and that it should be remanded with directions to be dismissed for lack of jurisdiction (Susan Seven-Sky, et al. v. Eric H. Holder Jr., et al., No. 11-5047, D.C. Cir.). 

On Feb. 22, U.S. Judge Gladys Kessler of the District of Columbia dismissed a challenge to the PPACA brought by Charles Edward Lee, Susan Seven-Sky, Kenneth Ruffo and Gina Rodriguez.  In dismissing the case, Judge Kessler held that Congress acted within its authority under the commerce clause in enacting the individual mandate, which requires most Americans to purchase health care insurance or pay a penalty.  Judge Kessler also held that the mandate did not violate the Religious Freedom Restoration Act (RFRA). 

The plaintiffs appealed. 

Despite questions raised concerning the court's subject matter jurisdiction, the Anti-Injunction Act does not bar jurisdiction in the appeals court or the District Court, Judge Laurence H. Silberman wrote for the majority.  Judge Harry T. Edwards concurred. 

No court has ever held that "any tax" under the Anti-Injunction Act includes exactions that Congress deliberately called "penalties," and nothing seen by the court suggests that Congress intended "any tax" in the Anti-Injunction Act to include exactions unrelated to taxes that Congress labeled penalties, the majority said. 

Further, taxes and penalties carry distinct meanings in the Internal Revenue Code, and Congress has been deliberate when it wants certain penalties to be treated as taxes, the majority said.  Also, the government's determination that the act should not be interpreted to bar the suit is entitled to deference, the majority added. 

The plaintiffs' central objection to the mandate is that Congress, for the first time, has commanded that all Americans purchase a product that many of them have never purchased before, never wish to purchase and may never need, and they contend that the government cannot require an immensely broad group of people to buy health insurance now based on a likelihood that they will at some point need health care, the majority said.  The plaintiffs say that only individuals who are voluntarily engaging in an "activity" related to interstate commerce and not individuals who are "inactive" are within the scope of the commerce clause of the U.S. Constitution, the majority added. 

No Supreme Court case, however, has held or implied that Congress' commerce clause authority is limited to individuals who are presently engaging in an activity involving, or substantially involving, interstate commerce, the majority said. 

The plaintiffs' real argument is that upholding the mandate would turn the commerce clause into a federal police power, at the expense of state sovereignty, but "the distinctions that separate national and local sphere have been understood as those between intrastate and interstate commerce, and between traditional, non-economic areas of state concern and those involving commerce," the majority said.  The plaintiffs have not argued that health care and health insurance are uniquely state concerns and states' powers over health and general welfare do not make the health care industry a traditional state concern, the majority said.   

"Moreover, if Congress can regulate even instances of purely local conduct that were never intended for, or entered, an interstate market, we think Congress can also regulate instances of ostensible inactivity inside a state," the majority said. 

Judge Harry T. Edwards wrote separately to say Congress' power under the commerce clause is not without limits, but "Congress's power to make a regulation of the interstate market effective 'is not a power that threatens to obliterate the line between "what is truly national and what is truly local."'"  

Brett M. Kavanaugh dissented, saying the Anti-Injunction Act does apply to bar the suit because the plaintiffs' pre-enforcement suit, if successful, would prevent the Internal Revenue Service from assessing or collecting tax penalties from citizens who do not have health insurance.  The PPACA labels its exaction for failure to have health insurance as a tax "penalty" and not as a "tax," but the Anti-Injunction Act still applies because the PPACA requires that the tax penalty for failure to maintain health insurance "be assessed and collected in the same manner as an assessable penalty under" the Tax Code, Judge Kavanaugh said. 

He said he would vacate the District Court's judgment and remand with directions that the suit be dismissed for lack of jurisdiction. 

[Editor's Note:  Full coverage will be in the Nov. 16 issue of Mealey's Managed Care Liability Report.  In the meantime, the opinion is available at or by calling the Customer Support Department at 1-800-833-9844.  Document #31-111116-010Z.  For all of your legal news needs, please visit] 

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