Will the courts derail obamacare?

Article Highlights

  • Each of these court cases raises constitutional or significant legal questions with the potential to significantly disrupt implementation

    Tweet This

  • Obamacare and its tens of thousands of pages of companion regulations have spawned nearly 100 lawsuits

    Tweet This

  • The courts may yet topple the entire law or at least cripple it badly enough to require Congress to act to fix or replace it

    Tweet This

The conventional wisdom is that John Roberts [an “evil genius,” “political genius” “coward,” “pragmatist”] settled the matter of Obamacare’s constitutionality with his [“stunning,” “convoluted,” “statesmanlike,” “bipolar,” “bold”] decision [“constitutional malpractice” “a singular act of courage,” “sophistry,” “fancy footwork,” “deft performance,” “a brilliant act of judicial statesmanship”] 14 months ago to save the law by essentially rewriting some of its core provisions. The Supreme Court has spoken, Obamacare is the law of the land, Republicans should “get over it” and, in Bill Clinton’s words it should be “all hands on board” to get it launched successfully. What if the conventional wisdom is wrong? While it may not be prudent to bet the farm on this outcome, the courts may yet topple the entire law or at least cripple it badly enough to require Congress to act to fix or replace it. Here are 5 key cases to pay attention to in the months ahead.

All told, Obamacare and its tens of thousands of pages of companion regulations have spawned nearly 100 lawsuits, although, as Washington and Lee University legal scholar Timothy Jost has pointed out, “over half of these challenge a single regulation promulgated under the law (the preventive services contraceptive requirement) rather than the law itself.” Currently, dozens of other lawsuits are pending. However, many are on hold until the law fully takes effect in 2014. That said, at least five are moving forward, having cleared preliminary hurdles to being heard on their merits. Each of these court cases raise constitutional or significant legal questions, i.e., whose resolution has the potential to significantly disrupt implementation of the law. These cases are presented below in order of the gravity (not likelihood) of the threat posed to the ACA.

Violation of the Origination Clause: Sissel v. United States Department of Health & Human Services (D.C. Circuit Court of Appeals)

The Issue: Did Passage of the ACA Violate the Constitution’s Origination Clause?  Obamacare imposes a charge on Americans who fail to buy health insurance — a penalty payment that the U.S. Supreme Court characterized in June 2012 as a federal tax. In this case, the non-profit Pacific Legal Foundation argues that that this purported tax is illegal because it was introduced in the Senate rather than the House, as required by the Constitution’s Origination Clause.[2]   The exact procedure used to pass the ACA is succinctly described at Breitbart.com: “On September 17, 2009, Congressman Charlie Rangel introduced a bill in the House, H.R. 3590, the “Service Members Home Ownership Tax Act of 2009,” whose purpose was “to amend the Internal Revenue Code of 1986 to modify the first-time homebuyers credit in the case of members of the Armed Forces and certain other Federal employees.” The bill passed the House on October 8 by a 416-0 vote. On November 19, Harry Reid introduced his own version of H.R. 3590 in the Senate. He took the bill that had been unanimously passed by the House, renamed it the “Patient Protection and Affordable Care Act,” deleted all its contents after the first sentence, and replaced it with totally different content. What followed was the first pass of the Senate version of ObamaCare.”

What if the Courts Rule Against Obamacare?  A ruling in favor of the plaintiff would invalidate the entire law. Critics argue that courts could not justify setting aside the entire law based on such a procedural nuance.  As well, the identical procedure has been used in the past, for example to pass the TARP bill in October 2008.  The Supreme Court also established in 1892 an “enrolled bill rule” in its 1892 decision in the Marshall Fields Co. v. Clark case.  Under this rule, “the Court essentially says if Congress tells it a bill originated in a specific House, it simply accepts that statement of enrollment as the ‘proper origination of the bill.’” The Supreme Court has reviewed only eight Origination Clause claims in its entire history, and has never invalidated an Act of Congress on that basis. However, recall that prior to Justice Roberts’ ruling, there was a widespread consensus that seven decades of Supreme Court precedents had pretty firmly established that there were few if any limits on the Congress’s use of the Commerce Clause. Yet a majority of the Court ultimately determined that Obamacare represented a step too far in terms of the exercise of that provision of the Constitution. It is certainly conceivable the Court could elect to put a stop to Congress’s steady erosion of the intent and letter of the Origination Clause by deciding that wiping out every word of a House-passed bill to substitute 2300 pages of Senate text would effectively render the Origination Clause meaningless were the Court to ignore it.

Current Status of the Case. The Chairman of the House Judiciary Subcommittee on the Constitution, Rep. Trent Franks of Arizona, and 19 House colleagues have co-sponsored H.Res. 153 on April 12, “Expressing the sense of the House of Representatives that the Patient Protection and Affordable Care Act of 2009 violates article I, section 7, clause 1 of the United States Constitution because it was a ‘Bill for raising Revenue’ that did not originate in the House of Representatives.”

The district court for the District of Columbia granted defendants’ motion to dismiss on June 28, 2013. Plaintiff appealed to the D.C. Circuit Court of Appeals on Jul. 5, 2013 and the case currently is awaiting briefing schedule.

Exchange Subsidies: Pruitt v. Sebelius (U.S. District Court for the Eastern District of Oklahoma)

The Issue: Are Subsidies Permitted in Federally-Run Exchanges? The ACA provides tax credits and subsidies for the purchase of qualifying health insurance plans on state-run insurance exchanges. An Internal Revenue Service (IRS) rule finalized on May 23, 2012 purports to extend these tax credits and subsidies to the purchase of health insurance in federal exchanges created in states without exchanges of their own.

Critics argue this rule lacks statutory authority. The text, structure, and history of the Act show that tax credits and subsidies are not available in federally run exchanges.  Consequently, the IRS rule is contrary to congressional intent and cannot be justified on other legal grounds.  Senator Orrin G. Hatch of Utah, the senior Republican on the Senate Finance Committee, argues that the Obama administration is usurping the role of Congress and rewriting the law to provide tax credits through federal exchanges. Consequently, in an amended lawsuit originally filed in January 2011, the attorney general for the state of Oklahoma has challenged this rule in court.

Supporters such as Washington and Lee University health law professor Timothy Jost concede that there was a “drafting error” but argue that congressional intent was clear: subsidies would be available in all exchanges, not just those run by the states. In scoring the bill, for example, CBO assumed subsidies would be available in all states and no objections were raised by Republicans that the CBO analysis was flawed.

What if the Courts Rule Against Obamacare? Under the employer mandate, employers are penalized for not offering coverage only if one or more workers obtain subsidized coverage on the exchange. Likewise, people can obtain an exemption from the individual mandate if the least expensive plan in their area exceeds 8% of income, a situation that will affect many more people if there are no subsidies available through the exchange. Thus, if the court upholds Oklahoma’s position, the immediate effect, according to AEI legal and health policy expert Tom Miller, would be to “cripple the federal exchange operations in Oklahoma, and encourage dozens of other states to mount similar challenges and continue to refuse to authorize their own state-administered exchanges.”  If these challenges are successful (or resolved by the Supreme Court), then in states that do not set up their own exchange, the entire employer mandate will be unenforceable, along with the individual mandate for many people. Effectively, the law might well completely collapse in the 28 states planning to rely on a federal exchange (and likely the 7 states in partnership exchanges as well).

Current Status of this Case. On August 12, 2013, the district court rejected a motion to dismiss the Oklahoma case and ruled that the case could move forward.  As Tom Miller summarized it, the court “dismissed two counts in the amended complaint but upheld three other ones that now will move ahead for consideration under upcoming motions for summary judgment later this year.” The three issues still in contention are whether the IRS rule was (1) beyond the power or authority of the federal agency to issue, (2) in violation of the federal Administrative Procedure Act (e.g., for being arbitrary, capricious, an abuse of discretion, not authorized by law), and (3) potentially trying to commandeer state government authority in an unconstitutional manner by allowing the federal government to set up its own exchange in Oklahoma as a “state-administered” exchange — as defined in section 1311 of the ACA. A favorable ruling on any one of these substantive points would put the exchange subsidies in jeopardy.

Exchange Subsidies: Halbig v. Sebelius (U.S. District Court for District of Columbia)

The Issue: Are Subsidies Permitted in Federally-Run Exchanges?  This suit, filed in May 2013 by a group of employers and individuals, is a challenge to the legality of exchange subsidies that parallels the Oklahoma case.

[continued on next page]

 

Exchange Subsidies: Halbig v. Sebelius (U.S. District Court for District of Columbia)

The Issue: Are Subsidies Permitted in Federally-Run Exchanges?  This suit, filed in May 2013 by a group of employers and individuals, is a challenge to the legality of exchange subsidies that parallels the Oklahoma case.

What if the Courts Rule Against Obamacare? The implications are identical to those just described above in the Oklahoma case. What matters is that this is a different district court and a different group of plaintiffs, offering the law’s opponents “two bites of the apple” as it were in terms of getting this legal argument taken seriously. A split decision across the two courts would almost certainly force the issue to be considered by the Supreme Court to resolve which interpretation of the law was correct.

Current Status of this Case. As it did in the Oklahoma case, the Department of Justice has moved to dismiss the case for lack of standing, and this issue is currently being argued. In the Oklahoma case, the court ruled that the state had standing as an employer reasoning that even though the employer mandate has been delayed for a year, Oklahoma would need to begin to take steps now to comply with it. As well, in keeping with other circuit court decisions, the Oklahoma court “held that the tax Anti-Injunction Act does not bar the state as an employer from proceeding to challenge the employer mandate.” If the D.C. district court follows these precedents, the case should move forward.

Employer Mandate: Liberty University v. Lew (on appeal to Supreme Court)

The Issue: Is the Employer Mandate Constitutional?  Liberty University, a Christian college in Lynchburg, Virginia, argues that the employer mandate was beyond Congress’s powers under the Commerce Clause, and that it violated Liberty’s religious beliefs, protected by the First Amendment. Specifically, “the suit claims that by requiring organizations to pay into the health care system, the law effectively forces them to subsidize abortions, which many other plans cover. This conflicts with its religiously based opposition to abortion, and therefore infringes its right to religious freedom under the first amendment to the Constitution.”

What if the Courts Rule Against Obamacare?  As the fractious debate over the administration’s decision to delay the employer mandate for a year has suggested, the administration clearly views the employer mandate as less central to the effective operation of the law than the individual mandate. Having already found a way to save the individual mandate by declaring it a tax, it seems dubious that the Supreme Court would deep-six the entire law simply based on a finding that the employer mandate violates the First Amendment. More likely, the Court would either invalidate the employer mandate, leaving the rest of the law to stand, or insist on a conscience exemption to the mandate that provides an escape hatch for those who otherwise would feel their First Amendment rights were being infringed. While this might appear to be “legislating from the bench” it is not materially different than what the Court did with the Medicaid expansion. Rather than voiding the expansion entirely and sending the law back to Congress to clean up, the Court decided to let the expansion proceed on a voluntary basis—i.e., without states losing the entire amount of their Medicaid matching funds should they elect not to adopt the expansion.

Current Status of the Case. On July11, 2013, the Fourth Circuit Court in Richmond ruled that Congress had clear authority under the Commerce Clause to impose the requirement that larger employers provide adequate health insurance for their workers or pay a financial penalty to the government (a linch-pin to a majority of the Supreme Court determining the individual mandate was a violation of the Commerce Clause was the concern that Congress was forcing individuals to engage in activity. In contrast, the Circuit Court reasoned “all employers are, by their very nature, engaged in economic activity” which Congress has longstanding authority to regulate). The good news for plaintiffs was that the court did rule that Liberty University and the individual plaintiffs have legal standing to bring the case, and the Anti-Injunction Act (AIA) also did not bar the case from being heard.

Although Liberty University and its employees had the option of asking the full Circuit Court to reconsider the case en banc, plaintiffs announced on July 11 their intention to file a petition to the Supreme Court to rule on the employer mandate (the case now renamed Liberty University vs. Geithner due to the change in Treasury secretaries). In their view, “the employer mandate exceeds Congress’s enumerated powers because it would impose a heavy burden upon employers. The penalties, which can be up to $15,000 per day per employee, are so punitive that they will not be upheld under the Taxing and Spending Clause.”

Because it was a belated claim, the Fourth Circuit Court did not rule on a separate claim regarding the constitutionality of the HHS contraception mandate. Liberty counsel may elect to file a separate suit against the mandate, but the merits and prospects for such a suit are not materially different than for the other contraception mandate cases described below.

Contraception Mandate: Roman Catholic Archdiocese of New York v. Sebelius (U.S. District Court, Eastern District of New York, docket 12-02542)

The Issue: Is the Contraception Mandate Constitutional?  “Forty-three Catholic organizations, including the archdioceses of New York and Washington, as well as the University of Notre Dame and the Catholic University of America, filed 12 lawsuits earlier this year in courts across the country, arguing that the mandate violates the freedom of religion guaranteed in the U.S. Constitution’s First Amendment.”

What if the Courts Rule Against Obamacare?  In contrast to the legal challenges to the exchange  subsidies and employer mandate, these contraception mandate cases are focused on the legality of the contraception coverage rule. Thus, the courts hypothetically might strike the conception mandate entirely. More likely, they will require that there be a religious exemption to selected requirements (e.g., the 1993 Religious Freedom Restoration Act provides for such exemptions). Either outcome would not pose a threat to the viability of Obamacare itself.

Current Status of the Case. According to Politico (November 2012), “The second category of plaintiffs are religiously affiliated entities — schools, universities and dioceses…..But some of these suits have been tossed out as “unripe”[1]  or denied an injunction because they are temporarily exempt from the contraception coverage rule. That’s because the Obama administration gave itself until next August to refine the exemption policy. Churches and some religious organizations already are exempt. But so far, a compromise has not been reached for religiously affiliated employers, who say they may still have to indirectly pay for coverage. But the courts say it’s premature for them to weigh in.” However, on December 5, 2012, the New York court rejected a motion to dismiss and ruled that the Roman Catholic Archdiocese of New York and two other Catholic entities can proceed with their legal challenge.

As summarized by SCOTUSBlog (June 27, 2013), “With some sixty lawsuits unfolding nationwide that challenge the mandate — some by profit-making firms, others by non-profit colleges, schools, and other institutions — the issue is almost certain to reach the Supreme Court at its next Term.”

Contraception Mandate: Hobby Lobby Stores, Inc. v. Sebelius (Tenth Circuit, Circuit docket 12-6294)

The Issue: Do the contraceptive coverage requirements of the Affordable Care Act (ACA) impose a “substantial burden” under RFRA when a non-profit employer objects to the requirements on free exercise grounds?

Obamacare requires employment-based group health plans include coverage of FDA-approved contraceptives. A number of these contraceptives are possible or actual abortifacients which are opposed on religious grounds by the Christian owners of Hobby Lobby Stores. As summarized by the American Bar Association: “While there are a number of broad exceptions to the ACA’s contraceptive coverage requirements (e.g., religious employers, non-profits with religious objectives, etc.), Appellants did not fit into one of these exceptions. Because they were not exempt from the requirements, they faced regulatory penalties for non-compliance ranging from twenty-six million dollars a year to four hundred and seventy-five million dollars a year.”

What if the Courts Rule Against Obamacare?  The challenge here is not on constitutional grounds, but whether Obamacare runs afoul of an existing federal law (signed by President Bill Clinton) regarding religious exemptions. Most likely, the courts will simply provide for an exemption without striking down the mandate entirely.

Current Status of the Case. On June 28, 2013, plaintiffs got a temporary court order barring the government from enforcing the mandate to provide birth control health insurance for their employees. A federal district judge issued a temporary stay until he can hold a hearing, set for July 19, on whether to impose a more lasting order. According to SCOTUSBlog, “This was the first ruling by a federal appeals court on the so-called “contraceptive mandate” in the new federal health care law. The decision did not immediately block the mandate, but hinted strongly at that outcome.”

There are other for-profit companies that have challenged the provision on religious liberty grounds.  According to Politico (November 2012):

  • “In three cases so far, district court judges in Colorado, Michigan and Washington, D.C., have issued preliminary injunctions. That doesn’t overturn the law, or spell out a complete legal victory. But the injunctions temporarily halt enforcement for a specific company — and recognize the plaintiff is raising legitimate questions that deserve a day in court. These involved an HVAC company, a seller of outdoor power equipment and a Bible publisher.”
  • “But not all the judges have agreed. Plaintiffs in Oklahoma have been denied a preliminary injunction. And one district court judge in Missouri last month dismissed not just the request for a temporary injunction but the whole case.”

The Bottom Line

So there you have it: a handful of cases, some of which pose a mortal threat to Obamacare. As AEI’s Tom Miller has observed “The main tactic is to keep running out the legal clock until Obamacare is too far along to be stopped, and taxpayer subsidies for coverage can’t be rolled back politically.” More pithily, he concludes:

It will take just one judge committed to the rule of law to start releasing the air out of this balloon, as major implementation deadlines approach. We should not expect all of Obamacare to evaporate overnight. But stripping away one of the core legal fictions that tries to prop up its unworkable edifice of federal mandates, regulations, and subsidies will accelerate a return to the political bargaining table to rebalance the rights and responsibilities of all parties. Until then, picture the similar image of the Black Knight in “Monty Python and the Holy Grail” getting chopped down limb by limb, while crying out boldly, :”It’s Only a Flesh Wound!”

None of the cases just reviewed is going to be resolved soon enough to get Congress off the hook from its looming contentious debate over defunding the ACA. On the other hand, the mere fact that such momentous legal challenges still hang over this misguided law’s head is yet one more strong argument in favor of delaying the entire law at least a year to let the most dangerous of these cases play out and get resolved by the Supreme Court (which, realistically, is not going to make a ruling before Exchange subsidies start flowing on January 1). Any inconvenience posed by such a delay would pale in the face of the chaos that would be created were the law to get upended after the individual and employer mandates are fully in place and Medicaid expansions (in states that adopt them) are proceeding full speed ahead. As Yogi Berra once said: “”it ain’t over till it’s over.”  Stay tuned. This ain’t over yet.

 

Footnotes

[1] An example of one of these opinions was issued by the District Court for the District of Columbia on January 25, 2013 on grounds that even though the plaintiffs had standing, the case was not ripe for decision in light of pending changes in regulations that might be made in August.

[2] The Constitution’s Origination Clause. Article 1, Section 7, Clause 1 states: “All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills.”

Also Visit
AEIdeas Blog The American Magazine
About the Author

 

Christopher J.
Conover

What's new on AEI

Rebuilding American defense: A speech by Governor Bobby Jindal
image Smelling liberal, thinking conservative
image Stopping Ebola before it turns into a pandemic
image All too many reasons for pessimism about Europe
AEI on Facebook
Events Calendar
  • 20
    MON
  • 21
    TUE
  • 22
    WED
  • 23
    THU
  • 24
    FRI
Monday, October 20, 2014 | 2:00 p.m. – 3:30 p.m.
Warfare beneath the waves: The undersea domain in Asia

We welcome you to join us for a panel discussion of the undersea military competition occurring in Asia and what it means for the United States and its allies.

Tuesday, October 21, 2014 | 8:30 a.m. – 10:00 a.m.
AEI Election Watch 2014: What will happen and why it matters

AEI’s Election Watch is back! Please join us for two sessions of the longest-running election program in Washington, DC. 

Wednesday, October 22, 2014 | 1:00 p.m. – 2:30 p.m.
What now for the Common Core?

We welcome you to join us at AEI for a discussion of what’s next for the Common Core.

Thursday, October 23, 2014 | 10:00 a.m. – 11:00 a.m.
Brazil’s presidential election: Real challenges, real choices

Please join AEI for a discussion examining each candidate’s platform and prospects for victory and the impact that a possible shift toward free-market policies in Brazil might have on South America as a whole.

No events scheduled this day.
No events scheduled this day.
No events scheduled this day.
No events scheduled this day.