4th Circuit Rejects PPACA Constitutionality Suits

A 3-judge panel at the 4th U.S. Circuit Court of Appeals has dismissed two challenges to the constitutionality of the Patient Protection and Affordable Care Act (PPACA) health insurance ownership requirements on procedural grounds.

In one case, Virginia vs. Sebelius, the panel ruled 3-0 that Virginia Attorney General Kenneth Cuccinelli lacks standing to challenge the PPACA health insurance ownership requirements because only the residents of Virginia are affected by the mandate.

In another ruling, on Liberty University vs. Geithner, the panel ruled 2-1 that Liberty University filed its suit challenging the mandate scales of justice too soon.

If the PPACA coverage ownership requirements take effect in 2014 and work as drafters expect, the provisions will require individuals who do not get religious exemptions and who earn income over a minimum level to have "minimum essential coverage" or else pay a $695 yearly penalty.

In the Virginia case, "the sole provision challenged here – the individual mandate – imposes no obligations on the sole plaintiff, Virginia," Judge Diana Gribbon Motz writes in an opinion for the 3-judge panel. "Notwithstanding this fact, Virginia maintains that it has standing to bring this action because the individual mandate allegedly conflicts with a newly enacted state statute, the Virginia Health Care Freedom Act."

The Virginia Health Care Freedom Act (VHCFA) states that residents of Virginia are not required to buy health insurance.

"Contrary to Virginia's arguments, the mere existence of a state law like the VHCFA does not license a state to mount a judicial challenge to any federal statute with which the state law assertedly conflicts," Motz says. "Rather, only when a federal law interferes with a state's exercise of its sovereign 'power to create and enforce a legal code' does it inflict on the state the requisite injury-in-fact."

In the Liberty University opinion, Motz writes, "Because this suit constitutes a pre-enforcement action seeking to restrain the assessment of a tax, the Anti-Injunction Act strips us of jurisdiction. Accordingly, we must vacate the judgment of the district court and remand the case with instructions to dismiss for lack of jurisdiction."

The plaintiffs in the Liberty University case have argued that they want pay for health care as needed rather than buying health insurance.

The plaintiffs have noted that PPACA gives the Treasury secretary, the official who oversees the Internal Revenue Service, the power to use individual income tax returns to collect penalties from individuals who fail to comply with the PPACA coverage ownership mandate.

Like other plaintiffs who have challenged the constitutionality of the PPACA coverage ownership requirements, the plaintiffs in the Liberty University say Congress is exceeding the authority it has under the Commerce Clause of the U.S. Constitution to regulate interstate commerce.

The plaintiffs in the case also are arguing that the requirements would violate the Taxing and Spending Clause of the Constitution in a way likely to lead to significant financial hardships.

The Taxing and Spending Clause "only grants Congress the power to impose taxes upon certain purchases, not to impose taxes upon citizens who choose not to purchase something such as health insurance," the plaintiffs say.

The individual mandate assesses "a direct tax that is not apportioned according to census data or other population-based measurement," in violation of Congress's taxing power, the plaintiffs say.

Liberty University, a private Christian university located in Lynchburg, Virginia, has challenged a similar PPACA provision that will impose tax penalties on employers over a certain size that fail to offer coverage to employees. The employer mandate constitutes an "unapportioned direct tax upon employers in violation of" the Constitution, and "[i]mposition of the tax infringes upon Liberty University's rights to be free from improper taxation," the university says.

The Broccoli Question

Circuit Judge Andre Davis, the panel member who voted against the majority in the Liberty University decision, writes in a dissent that he believes the 4th Circuit has the legal authority to consider the legal merits of the suit and reject the suit.

U.S. District Judge Roger Vinson, a judge in Pensacola, Fla., wrote in a ruling on one anti-PPACA suit that the Commerce Clause gives the federal government no more right to require citizens to buy health insurance than it does to require them to buy broccoli.

Davis argues in his dissent that the federal government can regulate inaction as well as action, and that, in either case, the market for health insurance is different from the market for broccoli.

"Finally," Davis writes, "I pause to consider why purchase mandates–whether they be for health insurance or broccoli–occasion such fear of federal aggrandizement…. Since public goods are enjoyed by all, most individuals refuse to purchase them themselves, hoping instead that they can free-ride when someone else does. By forcibly collecting tax revenue and using it to purchase public goods, governments are able to solve this collective action problem."

Congress cannot make people eat broccoli, but it has often used tax revenues to subsidize various industries, and a broccoli purchase mandate would simply be a less efficient subsidy than a centralized broccoli industry subsidy, Davis says.