This post was authored by O’Neill Institute research assistant and second-year Georgetown University Law Center student Dinesh Kumar.
For more information on all of the pending challenges to the Affordable Care Act, visit http://www.healthlawandlitigation.com. The website, a joint effort by the O’Neill Institute and the National Health Law Program, tracks the progress of litigation through the federal courts and provides a compendium of related academic literature.
On the morning of September 23, 2011, a crowd of about 150 members of the press and public filed steadily into the E. Barrett Prettyman Federal Courthouse to hear oral arguments for Seven-Sky v. Holder, the latest challenge to the Affordable Care Act (ACA) to be heard at the circuit level.
As with the other ACA cases, Seven-Sky focused on the constitutionality of the ACA’s minimum coverage provision (a.k.a. the “individual mandate”), which requires all U.S. citizens and legal residents to purchase health insurance or, beginning in 2014, pay a fine to the IRS that increases annually. Three appellate courts had previously ruled in three different ways. The Sixth Circuit upheld the individual mandate in Thomas More Law Center v. Obama, the Eleventh Circuit struck it down in Florida v. HHS, and the Fourth Circuit rejected the challenge outright in Liberty University v. Geithner, saying the court had no jurisdiction to hear the case under the Anti-Injunction Act (more on the AIA later). In a fourth case, Virginia v. Sebelius, the Fourth Circuit said the state of Virginia had no standing to bring suit.
A distinguished panel of three D.C. Circuit judges—Brett Kavanaugh, Harry Edwards, and Laurence Silberman—presided over Seven-Sky and ordered both sides to argue three major issues relating to the individual mandate:
Congress’s Commerce Clause Power
Both sides had to address the court’s thorny questions regarding Congress’s ability to establish the individual mandate under the Commerce Clause. For the plaintiffs, the question was: Isn’t the individual mandate an “essential part of a larger regulatory scheme,” for which the court should apply a rational basis test, as in Gonzalez v. Raich? For the government: If the individual mandate is constitutional, what exactly are the limits of Congress’s Commerce Clause power? Plaintiffs conceded that the court must have a “presumption of constitutionality.” Notably, the court never dwelled on the “activity/inactivity” distinction often espoused by opponents of the individual mandate and the plaintiffs here. Even though plaintiffs argued that Wickard v. Filburn did not allow regulation of economic inactivity such as refusal to buy health insurance, Judge Silberman noted that the logic of Wickard allows Congress to force a man to buy wheat on the open market to feed his family, which may be construed as a “mandate.” Meanwhile, despite heavily probing the government on the limiting principles issue, the court seemed to accept its premise that the health care market is a unique one in which everyone is a participant. However, the government’s strategy of characterizing insurance merely as a “traditional financing mechanism” for the health care market, rather than as its own separate market, was met with scrutiny from the court.
Congress’s Taxing Power
The court began by declaring that a simple tax provision in the Internal Revenue Code, stating that taxpayers must pay an annual assessment for not having health insurance, would be “clearly constitutional.” Why then, asked the court, does the plaintiff contend that the formulation of the law, which avoided the word “tax” and stated that individuals shall have health insurance or pay an annual penalty, is unconstitutional? In other words, is there actually a clear difference between a tax and a non-punitive civil penalty? Despite the plaintiff’s attempts to argue that Congress’s explicit use of the taxing power would have led to more “accountability” than using the Commerce Clause, the court seemed to believe the provision was fundamentally a tax. The court indicated that a strict textual reading of the ACA supported this notion. ACA states that the penalty associated with the individual mandate “shall be assessed and collected in the same manner as an assessable penalty under subchapter B of chapter 68” of the tax code; Judge Kavanaugh noted that Congress simply wanted to “avoid the t-word” and instead just cross-referenced to the section of the code that dealt with the collection of fines.
Of the three issues, the court struggled most with the AIA, which Judge Kavanaugh repeatedly called “a close call.” Congress enacted the AIA, which is encoded in the tax code, in 1867 to prevent a person from filing a claim to restrict the assessment or collection of a tax until he has already paid the tax to the IRS. A taxpayer may sue for a refund, but is blocked from pre-enforcement actions. Therefore, since the individual mandate does not go into effect until 2014, the plaintiffs should not be allowed to challenge the law until then (if in fact the fine is a “tax” as the court believes it to be). It was in the interest of both parties to argue against the AIA because both wanted a ruling on the merits of the constitutionality of the individual mandate (even though if the court struck down the case on AIA grounds, the government would presumably benefit from at least three more years of ACA implementation without legal repercussion). However, Kavanaugh said he personally had a “major concern” with the plaintiff’s ability to challenge the law at all, and that the AIA had been “underplayed” by the other courts (other than the Fourth Circuit).
It remains to be seen whether the court will follow the Fourth Circuit in blocking the case under the AIA. But the court did acknowledge the challenging nature of the issues before it and enormous potential impact of the ACA, perhaps signaling a reluctance to avoid ruling on the merits of the case.
Both sides certainly felt the heat of the moment. When counsel for the plaintiffs Edward White noted the few seconds remaining of his allotted 40 minutes during a particularly tough line of questioning regarding the distinction between tax” and “non-punitive civil penalty,” Judge Kavanaugh deadpanned, “We’re going to keep going”—and continued for at least 20 more minutes. Judge Silberman grew frustrated by Assistant Attorney General Beth Brinkmann’s inability to succinctly answer whether a series of hypothetical scenarios would be constitutional under Congress’ expansive Commerce Clause power. Several moments also elicited laughter from the onlookers, such as when Brinkmann called the reading of the tax code “difficult” and Judge Kavanaugh countered, “I don’t really think it’s that hard.”
Everyone in the courtroom seemed to sense that the oral arguments were a fascinating glimpse into the difficult issues that may ultimately decide the fate of the Affordable Care Act in the Supreme Court.
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