Yet Another Ruling On The Individual Mandate

A recent ruling by a federal district court in Pennsylvania reflects a slightly different view of the issues in challenges to the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148). So far, appeals courts have differed on three fundamental issues:

  • (1) Do the federal courts have jurisdiction to rule on the validity of the law now?
  • (2) Is the charge to be assessed against individuals who won’t buy insurance a tax or a penalty?
  • (3) Does the requirement that individuals carry insurance whether they want to or not go beyond  Congress’ power under the Commerce Clause  of the Constitution?

The decisions that the courts do not yet have jurisidiction have been based on either or both of two grounds. First, the matter is not yet “ripe” and the challengers do not have standing. In other words, individuals can’t sue because they haven’t been harmed yet.  The law is not yet effective and the challengers may not be affected at all.  Challengers other than individuals cannot sue because they are not affected by the individual mandate.

Second, if the court finds that the assessment for noncompliance with the mandate is a tax, the Anti-Injunction Act (AIA) deprives the courts of  jurisdiction to prevent the enforcement or collection of a tax.  As we discussed recently, the Fourth Circuit ruled that the assessment is a tax under the AIA because the the purpose of the AIA is to allow the government to collect revenue without the obstacle of challenges to the law. The party objecting may always challenge the validity of the charge afterward. A charge may be a tax for purposes of the AIA but a penalty for other purposes.

The courts that have ruled on the Commerce Clause  issue have differed in their view of what constitutes participation in, or an effect on, interstate commerce. If individuals’ refusal to buy insurance is considered a decision to make the rest of us pay for their care when they need it, that decision affects interstate commerce. But if the decision is solely an exercise of the freedom to choose how to spend one’s money, the court is more likely to accept  the argument that Congress cannot require anyone to buy anything.  In the  Eleventh Circuit decision striking down the individual mandate, the court  reasoned that choosing not to purchase insurance was not economic activity, so that a requirement to purchase  insurance compelled people to enter the stream of commerce. The court also noted that the economic effects of the decision, the  shifting of the individuals’ health care costs to others, would not be felt until an unknown time in the future.

In contrast, the Sixth Circuit framed the choice not to purchase insurance as a choice to self-insure, the exercise of one of several options to pay for health care,  affecting the market for health care services in which nearly everyone participates at some point. The court viewed the  individual mandate as an integral part of the regulatory scheme, necessary to counteract the incentive to wait to buy insurance resulting from the guaranteed-issue and preexisting condition provisions.

This most recent district court decision falls somewhere in between. The court did not find the lawsuit premature.  The couple claimed as a present injury the choice not to buy as nice a car as they wanted because they needed to allow for the cost of insurance. The need to change spending habits in order to afford insurance when the mandate becomes effective was sufficient to establish injury. The court had ruled previously that the Anti-Injunction Act did not apply.

As to the relationship to interstate commerce, the court noted that in recent memory, the Supreme Court has struck down only two laws on the ground that they exceeded Congress’ power under the Commerce Clause. Both were criminal laws which contained no “jurisdictional hook”.  One criminalized possession of a gun in schools; the other made violence against a victim because of gender a federal crime. In both cases, the court found that the activity regulated as not economic activity, and the connection between the law and interstate commerce was too tenuous.

All the courts that have considered the issue agree on two points. First, the individual mandate reaches farther than any law previously enacted under the Commerce Clause. Second, none of the Supreme Court’s rulings points inexorably to one conclusion.  Arguably, the only clear limit on the power to regulate interstate commerce is that the activity regulated be economic, connected with commerce in some way. A choice to self-insure or shift one’s own risks to the public is economic activity affecting commerce, according to the Sixth Circuit. However, the district court in Pennsylvania would not go so far; it reasoned that an individual’s  choice not to buy health insurance has no effect on commerce until he or she  obtains health care services and fails to pay. Because the mandate applies before an individual has entered the market for services, the court found, the Commerce Clause does not support it, at least until the Supreme Court rules otherwise.