Health Reform Heads to the Courts

There was quite a bit of activity this week regarding the various legal challenges being brought by individual states and other stakeholder groups against the Patient Protection and Affordable Care Act. On Monday, Virginia Judge Henry Hudson ruled in favor of the Commonwealth of Virginia that the individual mandate provisions of PPACA are unconstitutional. The appeals process also began for the Thomas More Law Center’s challenge to PPACA. A federal judge upheld the constitutionality of PPACA in that case in October, but the Law Center appealed the decision and filed its appeals brief on Wednesday. Finally, yesterday, Judge Roger Vinson heard oral arguments on the challenge being offered in Florida by 20 state attorneys general and the National Federation of Independent Businesses.

In the Virginia ruling, Judge Hudson wrote “Neither the Supreme Court nor any federal circuit court of appeals has extended Commerce Clause powers to compel an individual to enter the stream of commerce by purchasing a commodity in the private market.” However, he declined to issue an injunction to prevent PPACA implementation from moving forward while the judicial process plays out, which means that for the time being, nothing with PPACA changes. Hudson’s ruling makes Virginia’s suit the first case where a portion of PPACA was deemed unconstitutional—thus far, judges in two other cases have upheld the law.
As expected, on Tuesday the Department of Justice said it is appealing the Virginia case, and while Virginia Attorney General Ken Cuccinelli tried to have the case fast-tracked and sent directly to the U.S. Supreme Court, that request was denied. Instead, experts predict that the legal actions against the legislation will take several years to resolve as the various challenges make their way through the federal appeals process, with one or more likely ending at the Supreme Court. In the Florida case, Judge Roger Vinson said that he will rule quickly, though that likely means mid-January, and that case will also certainly be appealed no matter what the ruling.

While some opponents of PPACA are cheering the advancements in court this week, many others view the rulings as a mixed blessing. PPACA does not have a severability clause, so some feel that if any portion of the law is ultimately found to be unconstitutional, the whole law could be struck down. However, recent federal Supreme Court rulings indicate that is a very unlikely outcome for PPACA. In recent years, a portion of the Sarbanes-Oxley Act, which regulates the accounting industry, was ruled unconstitutional, and despite the lack of a severability clause in that law, the remainder of its provisions are still in effect.

However, if the individual mandate provisions of the law are struck down, the insurance market reforms included in PPACA will be completely unworkable. Many, including NAHU, have expressed serious concerns that even with the weak individual mandate requirement in PPACA, the other insurance market reforms will have a significant negative impact on health insurance premiums, and the result could be a huge adverse selection problem causing severe damage to the private market. Virtually all insurance experts agree that without the individual mandate requirement, as weak as it is, drawing some healthy risks into the system, the results will be disastrous for risk-spreading in the private market, and alternative solutions will need to be crafted.