As you undoubtedly are aware, on January 31, 2011, a federal district court judge in Florida ruled that the individual mandate in the Patient Protection and Affordable Care Act (PPACA) is unconstitutional. The court also ruled PPACA itself is unconstitutional because the individual mandate cannot be severed from the rest of the statute.
The Individual Mandate
The individual mandate is currently scheduled to take effect in 2014. It requires individuals to obtain health insurance coverage or pay a monetary penalty.
The Court’s Reasoning
The Florida court’s decision focused on a reading that the Constitution’s Commerce Clause did not give the Congress the authority to enact PPACA. While the decision to purchase or not purchase health insurance may have economic effects, the court found, the individual mandate is designed to regulate a passive individual’s failure to engage in commerce, which goes beyond the purview of the Commerce Clause. The court went on to rule that the individual mandate could not be severed from the rest of PPACA, so the entire statute is unconstitutional.
This is the second federal district court judge to find the individual mandate unconstitutional (although the first, a district court judge in Virginia, upheld the remainder of the law). Two other federal judges have upheld the constitutionality of the individual mandate and PPACA. These conflicting decisions are setting up what many expect to be an eventual Supreme Court hearing on the constitutionality of the individual mandate and PPACA.
There are two points to make at this stage: First, all employers should expect that the constitutionality of the individual mandate and PPACA will remain a volatile issue for some time to come. In the meantime, employers should refrain from making any plan design decisions based solely on this decision, until it becomes clear whether the decision will be stayed pending an appeal. Second, we add that Seyfarth’s Health Care Reform Team is closely monitoring judicial, legislative and regulatory developments on PPACA, and will continue to provide updates as developments occur.