This case challenging the Patient Protection and Affordable Care Act, (Pub. L. No. 111-148 as amended by Pub. L. No. 111-152) (March 23, 2010) was brought by the attorneys generals and/or governors of 26 states, two private citizens (the “individual plaintiffs”) and the National Federation of Independent Business (NFIB). The defendants are the United States Department of Health and Human Services, the Department of Treasury, the Department of Labor and their Secretaries.

The question raised relates to the Constitutional role of the federal government and the decision relies on the Tenth Amendment that reaffirms the relationship between the power of the federal government versus the power of the states. The challenge in this case is “whether a particular federal law falls within or outside those powers….” The decision states that while the Medicaid expansion does not violate the Spending Clause, the individual mandate nevertheless exceeds Congressional authority under the Commerce Clause and declares the entire Act void.

  1. Medicaid expansion. The decision rejects the claim that the Medicaid provisions are impermissibly coercive and effectively commandeer the states. (South Dakota v. Dole, 483 U.S. 203, 107 S. Ct. 2793, 97 L. Ed. 2d 171 (1987)). The judge states that in the case of Medicaid, the federal government provides “sizeable funding to the states” and is therefore able to exert power over the states, yet unless Congress revisits the Spending Clause under the Constitution, “the states have little recourse to remaining the very junior partner in this partnership.”
  2. Individual mandate. First, the judge discussed the standing of the individuals, NFIB and the States to pursue the claim. Both individuals do not have workplace coverage (thereby premiums excluded from federal income taxation) and neither individual qualifies for Medicare or Medicaid and will not quality for tax credits in 2014. The judge found that these two individuals (including NFIB as an association of members with comparable issues) have standing as they are individually currently undertaking financial planning to ensure compliance with the requirement. Two States were found to have standing (Utah and Idaho) on the basis that they have State laws opposing the mandate, which triggers the duty of the attorneys general to enforce the State laws.

Second, the judge evaluated whether the provision is an appropriate exercise of power under the Commerce Clause and whether it is sustainable under the Necessary and Proper Clause. The analysis of the issue relates to whether the individual mandate to have health insurance coverage is a regulation of economic activity.

First, the judge concluded that “activity” is an indispensible part of Commerce Clause activity reasoning that “if Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be ‘difficult to perceive any limitation on federal power.’” (U.S. v. Lopez, 514 U.S. 549, 564 (1995)).

Next, the judge agreed with the plaintiffs that the individual mandate regulates inactivity on the grounds that the Act states that the mandate applies “if an applicable individual fails to [buy health insurance],” while also citing a Congressional Research Service report stating that the mandate “could be imposed on some individuals who engage in virtually no economic activity whatsoever.”

The judge rejected claims that unique factors in the health care market make economic activity inevitable, concluding that the argument that people without insurance are nevertheless actively engaged in interstate commerce is “neither factually convincing nor legally supportable.” The judge likewise rejected the argument that a decision to forego insurance is an economic decision to finance future health care costs out-of-pocket rather than through insurance on the grounds that such a legal rationale would have unlimited application as there would be no decision in the natural course of events that does not have an economic impact. The judge also rejected the claim that the individual mandate is proper under the Necessary and Proper Clause concluding that Congress cannot be permitted to “define the scope of its power merely by arguing that a provision is ‘necessary’ to avoid the negative consequences that will potentially flow from its own statutory enactments.”

After finding that the individual mandate exceeds Congressional authority under the Commerce Clause, the judge held that the individual mandate by itself could not be severed from the Act on the grounds that the health reform law was not “a bundle of separate legislative enactment[s] or a series of short laws” but rather a “carefully-balanced and clockwork-like statutory arrangement comprised of pieces that all work toward one primary goal.” As a result of the individual mandate being found unconstitutional and unseverable, the judge declared the entire Act void.

The plaintiffs also requested injunctive relief enjoining implementation of the Act, which the judge did not grant.

The Department of Justice has stated that they intend to appeal this determination. According to a statement released by the White House, “Twelve federal judges have already dismissed challenges to the constitutionality of the health reform law, and two judges — in the Eastern District of Michigan and Western District of Virginia — have upheld the law. In one other case, a federal judge in the Eastern District of Virginia issued a very narrow ruling on the constitutionality of the health reform law’s ‘individual responsibility’ provision and upheld the rest of the law.”