A constitutional challenge to recent health care reform: Court decision could ‘gut’ the bill as passed

Douglas W. Jackson

A Constitutional challenge was brought forward by a number of states shortly after the passage of the Patient Protection and Affordable Care Act. It was prompted by the Congressional mandate requiring all citizens to purchase health care insurance or be fined. According to the Obama administration and other backers, the newly passed legislation is justified by Congress’ power to regulate commerce. Those challenging the law feel this mandate is testing the outer limits of Congressional usage of the power under the commerce clause. This mandate establishes a unique fine — one that is assessed for not doing something (inactivity) — and is felt to be is without precedence in U.S. jurisprudence.

Attorneys David Rivkin and Lee Casey filed a lawsuit in Florida on behalf of 20 other state attorneys general. They argue that the Constitution grants Congress the power to tax and to regulate commerce between the states. However, they assert, it does not give Congress the power to require individuals to buy health insurance and impose a fine if they do not as this impairs personal liberty without precedence.

In addition, the National Federation of Independent Business (NFIB) has joined the states in the allegations and strongly objecting to this form of taxation. They have stated that this mandate will increase health care costs for small businesses.

Some of those defending this legislation as constitutional have claimed the lawsuits that have been filed are frivolous and hypocritical. Even the U.S. Department of Health and Human Services filed a motion to dismiss these lawsuits.

Dismissals denied

In August, U.S. District Court Judge Henry E. Hudson ruled in a case involving the state of Virginia’s challenge to the constitutionality of the law. In his 32-page opinion he wrote, “Never before has the commerce clause and associated necessary and proper clause been extended this far.”

Similarly, Florida Federal District Judge Roger Vinson ruled recently to allow Rivkin and Lee’s 20-state-backed challenges to continue in the courts by overruling the arguments presented by the Department of Justice for dismissal. In his 65-page ruling, he wrote that “the power that the individual mandate seeks to harness is simply without prior precedent.”

By denying dismissal, it appears after the sure-to-be-filed appeals occur that this will most likely be decided by the U.S. Supreme Court. This introduces further indecision and uncertainty into health care reform based on the possible legal outcomes.

Outcomes could nullify the reform

This litigation by no means is a sure victory for those raising these challenges. Some legal scholars feel any challenges will be readily defeated as the Supreme Court has tended to not want to limit Congressional power in this situation.

However, if the requirement for mandatory insurance is declared unconstitutional, the entire health reform package could unwind. The administration and critics of the plan know it will not work without mandatory insurance. The financing of this package is dependent on spreading the risk pool and the resources from having premiums paid by all Americans. This is necessary in part to help fund the additional costs to cover more people, those with pre-existing conditions, allow for insurance portability and for the mandated services including preventive-care initiatives included in the legislation.

The insurance-for-all mandate is so important to the administration’s plan, they did not include the usual legislative provision that if one part of the law is legally struck down, that the remainder of the bill remains in place.

When interviewed by ABC News’ George Stephanopoulos, Obama denied that the penalty for not buying insurance was an excise tax. He was repeatedly asked to defend that position by the interviewer and “absolutely” rejected the argument that the penalty is a tax. Ironically, it appears the administration may have difficulty defending their legal challenge under the commerce clause. Supporters are now suggesting they might argue that the mandate is permissible under the broader taxing powers for the general welfare, despite never describing the penalty as a tax before the bill passed or in Obama’s nationally televised arguments for it.

The voters speak

This summer, Missouri voters sent a strong message to Washington regarding public concerns about this particular mandate in the legislation: 71% of the voters cast their ballots against penalizing people who do not buy insurance. This similar issue will be on the ballot for voters in Oklahoma, Arizona and Florida this month. While this type of protest and state referenda will not change federal rulings, they do send a message that there are fairly strong objections to this aspect of the legislation.

Speaker of the House Nancy Pelosi (D-Calif.) was asked directly if it was constitutional for Congress to require Americans to buy health insurance and pay a fine if they did not comply. Her response: “Are you serious?” Speaker Pelosi should realize now that many Americans are serious in demanding an answer to the question and Judges Hughes and Vinson’s rulings support that the public is entitled to a better answer.

What is this excise tax?

Is the fine for not buying health care insurance an excise tax? This type of mandatory fine for not purchasing a product or service has not been seen before on this scale in this country. However, this issue becomes fuzzier. The actual legislation lists and defines the excise taxes to be used to help pay for the plan. These excise taxes are on businesses such as tanning salons and medical device companies and, as the bill was written, does not define the penalty for not having insurance as one of those excise taxes. It appears the administration will have to defend the use of the commerce clause as the basis for this mandate and not the power to tax the citizens.

All government will be tested

Many feel the Supreme Court will be reluctant to limit Congressional power in this type of legislation. However, before you write it off as entirely not justified; consider this individual mandate further and some of its potential consequences on your practice of medicine.

• All Americans will be required to purchase health insurance or pay a fine, the types of policy and coverage will be determined by the government;
• Beginning in 2014, a new federal agency will have the power to standardize insurance benefits, restrict how insurance companies manage their finances (medical loss ratios) and they will need permission to raise premiums; and
• The same legislation has mandates forcing insurers to cover more expensive primary-care and some new preventive services in full while the insurers may be blocked from raising premiums.

Physicians should pay attention as the insurance companies will have to reduce their costs to remain profitable. If they cannot raise premiums, it seems we will see further reductions in reimbursements.

What can we expect?

The next 3 years will see this legislation challenged in the courts as the Department of Justice lawyers defend the constitutionality of the individual mandate under the commerce clause is constitutional. In addition to this challenge in the courts, there will be challenges to the health care reform at the ballot box. The outcomes of these challenges will ultimately determine the extent we see governmental control over the entire health care industry.

It is difficult to predict what the final reform package will be and if it will be fully implemented in 2014 as scheduled. One thing that is for certain, during this next 3 years we will see ongoing controversy and clarifications to this legislation.

Douglas W. Jackson, MD, is Chief Medical Editor of Orthopedics Today. He can be reached at Orthopedics Today, 6900 Grove Road, Thorofare, NJ 08086; e-mail: OT@slackinc.com.

Follow OrthoSuperSite.com on Twitter