Bloomberg News

Obama Health-Care Law Leaves Fourth Appeals Court With Questions

September 24, 2011

Sept. 24 (Bloomberg) -- President Barack Obama’s health- care law got a mixed reception in its fourth review by a federal appeals court as three judges grappled with questions about the law’s constitutionality and their own authority to rule on it.

In a two-hour argument yesterday in Washington, two judges of the U.S. Court of Appeals for the District of Columbia Circuit said a ruling upholding the law, which requires that most Americans buy insurance or face a tax penalty, could leave the government with unprecedented power over its citizens.

“In 220 years there has been a whole lot of laws and a lot of crises, yet Congress has never once mandated a purchase,” said Judge Brett Kavanaugh, adding that the “lurking next step” might be a law requiring investment in private retirement accounts.

Kavanaugh also questioned whether federal courts could rule on the law before any taxpayer had been assessed a penalty.

The Washington appellate panel may be the last to rule on the law before it reaches U.S. Supreme Court. The Obama administration must signal next week whether it will seek high court review of another court’s opinion declaring the insurance mandate unconstitutional.

Appellate Rulings

Two federal appeals courts have ruled on the insurance mandate. A Cincinnati panel in June decided Congress’s authority to regulate interstate commerce extended to enacting the insurance mandate. The U.S. Court of Appeals in Atlanta threw out the mandate on Aug. 12, concluding Congress can’t compel people to buy a product for their entire lives.

An appeals panel in Richmond, Virginia, decided on Sept. 8 that it was blocked by a statute that generally bars challenging taxes before they’re collected or assessed.

The case argued yesterday was brought in June 2010 by five individuals who claimed they and their families could face collective penalties of more than $27,000 for failing to obtain insurance.

U.S. District Judge Gladys Kessler in February dismissed their suit, finding the mandate constitutional.

The U.S. calls the insurance mandate the linchpin of the Patient Protection and Affordable Care Act, claiming that without expanding the pool of younger, healthier customers the insurance industry can’t meet its obligations for coverage under the law.

Power to Tax

The government argued yesterday that the legislation is an extension of Congress’s power to tax, as people who fail to buy coverage starting in 2014 would face a penalty to be included on an individual’s tax return.

Edward White, arguing for the plaintiffs, said until now Congress used incentives, citing the cash vouchers offered new- car buyers under the “Cash for Clunkers” program. The health- care law, by contrast, requires people to purchase a product in the private marketplace with no opportunity to opt out, he said.

“You can never check out of this hotel,” said White of the American Center for Law & Justice. “You can check in, but you can never leave.”

Judge Harry Edwards likened the case to a 1942 Supreme Court ruling that upheld a fine on a farmer who exceeded his government-imposed quota for wheat production. The farmer contended that he wasn’t taking part in interstate commerce because he was growing wheat for consumption on the premises.

‘Precisely This Case’

The 1942 dispute is “precisely this case,” said Edwards, the lone Democratic appointee on the panel. “I don’t know how you distinguish it.”

Judge Laurence Silberman pressed the government for an example of what couldn’t be mandated under the Commerce Clause.

Beth Brinkmann, deputy assistant attorney general, said the health-care market was unique. The law is a means of financing current participation in that market, she said.

“This is about insurance,” she said. “There’s no constitutional right to have others pay for your medical bills.”

Had Congress called the penalty a tax, it would have resolved the issue, Kavanaugh said.

“Congress can do this -- still do this -- so easily through the tax code,” he said.

The third prong of yesterday’s argument dealt with the Anti-Injunction Act, the law barring tax lawsuits cited by the Virginia appeals court. Both sides said it shouldn’t prevent a decision in the case.

Kavanaugh said he still had “major concerns” that the act prevents the court from deciding the case until 2015.

The case is Seven-Sky v. Holder, 11-5047, U.S. Court of Appeals for the District of Columbia (Washington).

--With assistance from Greg Stohr in Washington. Editors: Mary Romano, Fred Strasser

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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