A divided Court of Appeals for the Eleventh Circuit held that the Affordable Care Act’s individual mandate is unconstitutional, but reversed the district court’s ruling that the individual mandate cannot be severed from the rest of the Act and that the Act’s expansion of the Medicaid program is unconstitutional. Florida v. U.S. Dep’t of Health & Human Servs., Case No. 11-11021, 2011 WL 3519178 (11th Cir. Aug. 12, 2011). The majority opinion, written jointly by Chief Judge Joel Dubina (nominated by former President George H.W. Bush) and Judge Frank Hull (nominated by former President Bill Clinton), is the first appellate opinion to hold that the individual mandate is unconstitutional. By joining the majority, Judge Hull became the first judge nominated by a Democratic President to conclude that the individual mandate is unconstitutional. Judge Stanley Marcus (also nominated by former President Bill Clinton) concurred that the plaintiffs have standing, that the expansion of the Medicaid program is constitutional, and that the individual mandate cannot be supported by the Tax Power. Judge Marcus, however, dissented on all other points, and concluded that the individual mandate falls within Congress’s power granted by the Commerce Clause.
As a threshold issue, the majority first held that the plaintiffs have standing to challenge the constitutionality of the Affordable Care Act. The plaintiffs in Florida include Republican governors and attorneys general from 26 states, individuals, and the National Federation of Independent Businesses (“NFIB”). Citing several cases, the majority noted that as long as at least one plaintiff has standing to raise each claim, a court does not have to consider whether the other plaintiffs have standing to maintain the suit. The majority concluded that all of the plaintiffs have standing to challenge the constitutionality of the Act because the individual plaintiffs and the NFIB have standing to challenge the individual mandate and the state plaintiffs have standing to challenge the Medicaid provisions. Judge Marcus concurred in this part of the opinion.
After spending over 40 pages discussing the various provisions of the Affordable Care Act, the majority addressed the constitutionality of the Medicaid expansion, concluding that the Medicaid expansion is not unduly coercive and is permissible under the Spending Clause. The Spending Clause, found in Article I of the U.S. Constitution, permits Congress to attach strings to federal money that it disburses to the states. The permissibility of Congress to attach strings to federal money, however, is not without its limits. One such limitation recognized by the majority in Florida is that Congress cannot compel a state to participate in “optional” legislation by threatening the loss of a large amount of funds that are important to the state’s integral function as a state. The state plaintiffs argued that the Medicaid expansion is unduly coercive because it forces them to expand their Medicaid coverage in order to avoid losing all of their Medicaid funding.
After “serious thought and some hesitation,” the majority concluded that the expansion of Medicaid is not unduly coercive for several reasons. First, the majority noted that the Medicaid-participating states were warned from the beginning of the program that Congress could make changes to the Medicaid program. See 42 U.S.C. § 1304. Second, the majority noted that the federal government will bear nearly all of the costs associated with the Medicaid expansion. Third, the majority noted that states have sufficient time to decide whether to continue to participate in the Medicaid program by adopting the expansion. Finally, the majority noted that it is not a foregone conclusion that states will lose all of their Medicaid funding if they choose not to participate in the Medicaid expansion. The majority concluded that these factors, taken together, make it clear that states have a real choice whether to participate in the Act’s Medicaid expansion. Judge Marcus concurred in this part of the opinion.
The majority then addressed the constitutionality of the individual mandate under the Commerce Clause, concluding that the individual mandate exceeds Congress’s commerce power.
Near the beginning of its analysis, the majority stated that it is not particularly helpful or even necessary to decide the constitutional question by asking whether the individual mandate regulates activity or inactivity, or whether the individual mandate regulates economic or noneconomic activity. Instead, the majority perceived the relevant question to be “whether the federal government can issue a mandate that Americans purchase and maintain health insurance from a private company for the entirety of their lives.” In answering this question, the majority focused on three main issues: (1) the unprecedented nature of the individual mandate; (2) whether the individual mandate contains a limiting principle; and (3) the implications that the individual mandate has on federalism.
First, the majority concluded that the fact that Congress has never mandated individuals to purchase a product suggests that Congress does not have the power to do so. Instead of issuing mandates, the majority noted that Congress usually uses incentives to encourage commercial activities it favors and to discourage commercial activities that it disfavors. As an example, the majority discussed how Congress has never mandated those who own a house in a flood plain to purchase flood insurance, even though, in the majority’s opinion, it would be expedient to do so. The majority also found it telling that the personal mandates that Congress has imposed on U.S. citizens, such as serving on juries or registering for the draft, are very different than the individual mandate of the Affordable Care Act.
Next, the majority discussed whether the individual mandate has a limiting principle, which the Supreme Court has emphasized is needed for legislation made pursuant to enumerated powers. The majority concluded that if courts were to allow Congress to mandate individuals to purchase an expensive product such as health insurance then courts must allow Congress to issue other economic mandates. The majority rejected the government’s proposed limiting principle that stressed that health care’s unique and important role in the national economy warrants regulation through an individual mandate.
Finally, the majority stated that the fact that insurance and health care are areas of traditional state regulation “strengthens the inference of a constitutional violation.” In coming to this conclusion, the majority discounted the fact that the federal government plays an “indispensable role” in regulating health-related matters. Based on these three factors, the majority concluded that the individual mandate does not fall within Congress’s commerce power.
Judge Marcus wrote a strongly-worded dissent on this portion of the opinion, concluding that the individual mandate falls within Congress’s commerce power. He began his dissent by noting that “[i]n the process of striking down the mandate, the majority has ignored many years of Commerce Clause doctrine developed by the Supreme Court,” and that “[t]he approach taken by the majority has also disregarded the powerful admonitions that acts of Congress are to be examined with a heavy presumption of constitutionality.”
The relevant question for Judge Marcus, which he formulated based on the Supreme Court’s Commerce Clause decisions over the past 75 years, is “whether the target of the regulation is economic in nature and whether Congress has a rational basis to conclude that the regulated conduct has a substantial effect on interstate commerce.” To Judge Marcus, the answer to this question is clear:
At bottom, Congress rationally concluded that the uninsured’s consumption of health care services, in the aggregate, shifts enormous costs onto others and thus substantially affects interstate commerce. The individual mandate directly and unambiguously addresses this cost-shifting problem by regulating the timing and means of payment for the consumption of these services. Congress also fairly determined that the mandate is an essential part of the Act’s comprehensive regulation of the health insurance market. I would, therefore, uphold the mandate as constitutional, and I respectfully dissent on this critical point. Congress’ findings reflect its determination that this problem – the uncompensated consumption of health care services by the uninsured – has national economic consequences that require a national solution through comprehensive federal regulation.
In his analysis of whether the individual mandate falls within Congress’s commerce power, Judge Marcus addressed several points made by the majority. For instance, he concluded that it is clear that Congress’s rule-making power extends to the health insurance and health care markets. Judge Marcus supported this conclusion by pointing to several on-point Supreme Court cases and to several act of Congress that regulate the health insurance and health care markets, including HIPAA and ERISA. Judged Marcus also concluded that there is no doctrinal basis that requires Congress to wait until the cost-shifting problem materializes for each uninsured person before it may regulate the uninsured as a class. Citing several Supreme Court cases, Judge Marcus noted that Congress may regulate present conduct in order to avoid future disruptions of interstate commerce. He also stated that the majority erred in focusing on how the Affordable Care Act could be better tailored; in Judge Marcus’s view, the role of the judiciary in this case was not to act as a “superlegislature” but to determine whether the individual mandate falls within the boundaries of the Commerce Clause. Judge Marcus also addressed the unprecedented nature of the individual mandate, which led the majority to conclude that the individual mandate is unconstitutional. Regarding this issue, Judge Marcus stated:
The truth is that any ruling this Court issues on the individual mandate’s constitutionality is necessarily a departure from existing case law because the legislation and the issues presented are new. That the Supreme Court has never before upheld a regulation of this kind can hardly be decisive; it has never rejected one either.
After discussing the constitutionality of the individual mandate under the Commerce Clause, the majority addressed the constitutionality of the individual mandate under the Tax Power. The majority concluding that the individual mandate does not fall within the Tax Power because it operates as a regulatory penalty, not as a tax. The majority based this conclusion on the fact that the term “penalty,” not “tax,” is frequently used in the section of the Affordable Care Act that focuses on the individual mandate. The majority also stated that the congressional history suggests that Congress meant to impose a penalty, not a tax. The majority noted that while federal courts have split on whether the individual mandate falls within Congress’s commerce power, every federal court that has been presented with the question of whether the individual mandate falls within the Tax Power has answered in the negative. Judge Marcus concurred in this part of the opinion.
Finally, the majority held that the individual mandate, while unconstitutional, was severable from the rest of the Affordable Care Act. The majority began its analysis by noting that in the overwhelming majority of cases, the Supreme Court has severed the unconstitutional provision from the statute instead of invalidating the entire statute. Citing Morrison, the majority added that in the Commerce Clause context, the Supreme Court has struck down an important provision of a statute while leaving the remainder in place.
The Florida opinion, of course, is not the only appellate court ruling on the Affordable Care Act. The Florida opinion was released less than two months after the Court of Appeals for the Sixth Circuit affirmed a district court ruling that the minimum coverage provision of the Affordable Care Act is a valid exercise of Congress’ authority under the Commerce Clause. Thomas More Law Center v. Obama, Case No. 10-2388, 2011 WL 2556039 (6th Cir. June 29, 2011). The Court of Appeals for the Fourth Circuit also heard two related cases in May but has not yet issued its opinions. Many commentators believe that the circuit split increases the likelihood that the Supreme Court will grant the pending petition in Thomas More Law Center.