On June 8, 2011, the 11th Circuit heard arguments in the 26-state lawsuit that challenged the Patient Protection and Affordable Care Act (ACA) signed into law last year. The 11th Circuit judges hearing the case were Chief Judge Joel Dubina, Judge Stanley Marcus, and Judge Frank Hull.

The United States appealed a decision by the U.S. District Court for the Northern Division of Florida, Pensacola Division (Judge Roger Vinson) ruling that the individual insurance mandate portion of the ACA is unconstitutional and that the provisions requiring the individual mandate could not be severed from the rest of the law. Because the individual mandate was unconstitutional and not severable, the District Court held that the entire law was void. The 26-state party to this case (the “States”) cross-appealed the District Court’s grant of summary judgment on the issue of the States’ coercion claim in Medicaid expansion.

At the outset of the oral arguments, Judge Dubina informed the parties that the issues of interest in this case were not only the constitutionality of the individual mandate requirement, but also whether the District Court correctly held that the federal government can force states to expand their Medicaid programs as a precondition for continuing to receive matching federal funds for the program.

Individual Mandate

The main focus on the constitutionality of the individual mandate provision dealt with whether to define the decision to not buy health insurance as inactivity or commercial activity subject to regulation under the Commerce Clause. Acting U.S. Solicitor General Neal Katyal, defending the law, stressed the uniqueness of healthcare compared to other markets, noting that all people would need healthcare services at some point and that billions of dollars shift in the economy when people without coverage seek medical care. Paul Clement, representing the States, argued that Congress lacked the authority to compel people to engage in a transaction of buying health insurance.

Much of the arguments centered on timing. The States conceded that it was certainly within Congress’s power to require people to buy insurance once they arrive to a hospital to receive care, however, it was not commercial activity when a person is sitting on their couch and has decided not to purchase care. The United States argued that if the government can require consumers to purchase insurance once they get to the hospital, they can also do so ahead of time.

Judge Hull stated that she believes the decision whether to purchase health insurance is economic activity. However, all judges questioned whether upholding the individual mandate impermissibly stretches the limitations on Congress’s power.

Medicaid Expansion

The ACA requires states to expand their Medicaid programs from 100% to 133% of the federal poverty level as a condition precedent to receiving any federal matching funds for Medicaid. The States argued that this requirement forces states to adopt the expansion requirements in violation of the Coercion Doctrine. The Coercion Doctrine stands for the premise that the financial inducement offered by Congress might be so coercive as to turn pressure into compulsion. However, the federal government argued that a state’s participation in this expansion is voluntary, rather than coercive, and that the withholding of funds from states that do not participate in the expansion program is merely a penalty, rather than coercion.

Judge Marcus seemed concerned that such a provision constituted an unconstitutional degree of coercion of the states by the federal government.

Severability

The judges also spent significant time questioning the severability clause.

Judge Katyal noted that if the insurance mandate was held unconstitutional, the result would not be to strike down the entire ACA, but only certain provisions tied to the mandate, such as provisions preventing insurance companies from discriminating against people with pre-existing conditions.

The States, however, argued the insurance mandate is the driving force of the broader package. Describing the insurance mandate as the hub of a wheel, Mr. Clement noted that “if you take out the hub, the spokes will fall.”

At the end of the arguments, Judge Dubina hinted that this case was likely to be heard in the Supreme Court.