Summary Judgment Order Striking the Entire Health Reform Law in Florida v. U.S. Dep’t of Health and Human Services, Civ. Action. No. 3:10- CV-00091; --- F.Supp.2d ----, 2011 WL 285683 (N.D.Fla.,2011)

INTRODUCTION

In a ruling entered on January 31, 2011, United States District Court Judge Roger Vinson held, in a challenge to the health reform law, that Section 1501 (the “Individual Mandate”) of the Patient Protection and Affordable Care Act (“ACA”), Pub. L. No. 111-148 (2010), is unconstitutional. This is the second district court ruling striking down the Individual Mandate.1

The Individual Mandate requires that every United States citizen (with certain exceptions) maintain a minimum level of health insurance coverage or incur a penalty assessed by the Internal Revenue Service. Judge Vinson issued a declaratory judgment that the entire ACA was unconstitutional. This advisory includes a brief summary of the decision, followed by a short discussion of how the decision may affect health care reform generally and the expected time frame for an appeal.

SUMMARY OF THE DECISION

In striking down the Individual Mandate, the court held as follows:

  • Medicaid: First, Judge Vinson considered whether ACA’s Medicaid expansion provisions were “impermissibly coercive and effectively commandeer[ed] the states.” Florida v. U.S. Dep’t of Health and Human Services, No. 3:10-cv-00091, Order Granting Summary Judgment (“Order”) at 7 (N.D. Fla. Jan. 31, 2011). He analyzed the issue under the four restrictions, outlined by the Supreme Court in South Dakota v. Dole, 483 U.S. 203, 207-10 (1987), on the Spending Clause power: (1) the spending has to be for the general welfare; (2) the conditions must be stated clearly and unambiguously; (3) the conditions must bear a relationship to the purpose of the program; and (4) the conditions imposed may not require the States “’to engage in activities that would themselves be unconstitutional,’” as well as under the conceptual requirement outlined in dicta in Dole that “a spending condition cannot be ‘coercive.’” Order at 6. Judge Vinson noted that the States primarily relied on the “coercion and commandeering” theory, and found that ACA “plainly meets the first three of Dole’s spending restrictions, and it meets the fourth as long as there is no other required activity that would be independently unconstitutional.” Order at 7. Thus, as framed by the pleadings, the issue was “whether the Medicaid provisions are impermissibly coercive and effectively commandeered the states.” Id. Judge Vinson found that Medicaid participation by the states was voluntary, citing a number of cases, and that Congress expressly reserved the option to amend the Medicaid program. Order at 9. In addition, he noted news reports that several states, including certain plaintiff states, are considering whether to withdraw from the Medicaid program and that two plaintiff states acknowledged in declarations submitted in support of summary judgment that they can withdraw from the program. Order at 9. Given the lack of case law to support a coercion claim, Judge Vinson rejected the States’ commandeering claims, and granted summary judgment to the federal government on the constitutionality of ACA’s Medicaid provisions.
  • Individual Mandate: In order to determine the constitutionality of the Individual Mandate, Judge Vinson laid out two questions for analysis, based on his understanding of the Supreme Court’s Commerce Clause jurisprudence2: (1) “Is Activity Required Under the Commerce Clause?”; and (2) “Is the Failure to Purchase Health Insurance ‘Activity’?” Order at 39, 44. Judge Vinson held that “activity” is required under the Commerce Clause, and that the failure to purchase health insurance is not “activity” that Congress can regulate.
    • Is Activity Required?: First, Judge Vinson noted that the Supreme Court has never considered the distinction between activity and inactivity before because “Congress had never attempted to exercise its Commerce power in such a way before.” Order at 41. Judge Vinson found that “[i]t would be a radical departure from existing case law to hold that Congress can regulate inactivity under the Commerce Clause.” Order at 42. Further, “[he is] required to interpret [ACA] as the Supreme Court presently defines [interstate commerce]. Only the Supreme Court can redefine it or expand it further.” Order at 43. Therefore, he held that the regulation of “activity” is indispensable for a statute to be constitutional under the Commerce Clause.
    • Failure to Purchase Health Insurance: Judge Vinson held that the Individual Mandate regulates inactivity. First, he rejected the government’s argument that health care is a “unique” market. Specifically, he found no basis for the argument that a particular market was unique to be constitutionally significant. Further, under the government’s analysis, Congress could require people to buy broccoli or a General Motors automobile, or purchase a home financed with a mortgage. “Uniqueness is not an adequate limiting principle as every market is, at some level and in some respects, unique.” Order at 49. “[T]he mere status of being without health insurance, in and of itself, has absolutely no impact whatsoever on interstate commerce.” Order at 50. Similar to Judge Hudson’s conclusion in Cuccinelli v. Sebelius that the Supreme Court had previously “staked out the outer boundaries” of the Commerce Clause, Judge Vinson reasoned “to cast the net wide enough to reach everyone in the present, with the expectation that they will (or could) take those steps in the future, goes beyond the existing ‘outer limits’ of the Commerce Clause and would, I believe, require inferential leaps of the sort rejected” by the Supreme Court in the past. Order at 51 (emphasis in original). Finally, Judge Vinson rejected the argument that the “economic decision” to forego health insurance constitutes “activity.”
  • Necessary and Proper Clause: Judge Vinson did not believe the Necessary and Proper Clause should be considered separately, since it is “part and parcel” of a Commerce Clause analysis. Order at 13 n.7. But because the defendants presented the Necessary and Proper Clause argument separately, he considered it separately. Id. Judge Vinson found that the government’s application of the Necessary and Proper Clause would have the “perverse effect of enabling Congress to pass ill-conceived, or economically disruptive statutes, secure in the knowledge that the more dysfunctional the results … the more ‘necessary’ the statutory fix would be.” Order at 60. Relying on several Supreme Court cases, Judge Vinson stated that the Necessary and Proper Clause is not an independent source of federal power and held that it “cannot be utilized to ‘pass laws for the accomplishment of objects’ that are not within Congress’ enumerated powers.” Order at 62. Accordingly, Judge Vinson found that, because the Individual Mandate was outside the scope of Congress’s Commerce Clause authority, it was not “proper.” Order at 63.
  •  Severability: Judge Vinson engaged in an extended, substantive severability analysis, and held that the entire ACA was inseverable from the Individual Mandate. He interpreted the federal government to have conceded that all of ACA’s insurance market reforms are inseverable from the Individual Mandate. Order at 63-64. Judge Vinson also acknowledged the general rule favoring the partial invalidation of statutes based on severability principles, but concluded that this “is anything but the typical case.” Order at 65. He suggested that ACA could be viewed as “a carefully-balanced and clockwork-like statutory arrangement comprised of pieces that all work toward one primary legislative goal, and if that goal would be undermined if a central part of the legislation is found to be unconstitutional, then severability is not appropriate.” Order at 65.

Judge Vinson analyzed the statute under the two-part test for severability, citing Free Enterprise Fund v. Public Company Accounting Oversight Board, 130 S. Ct. 3138, 3161-62 (2010): (1) whether, without the unconstitutional provision, “the other provisions can function independently and remain ‘fully operative as a law’” and (2) whether Congress, if “presented with a statute that did not contain the struck part, would have preferred to have no statute at all.” Order at 65-66.

- Functional Independence: Judge Vinson reasoned that, although many of the remaining provisions could function independently, there was nothing to indicate that they could do so “in the manner intended by Congress.” Order at 65-66.

- Congressional Intent: Judge Vinson further found the Individual Mandate to be the “keystone or lynchpin of the entire health reform effort,” and, thus, that the statute’s text or historical context “seems to strongly indicate that Congress would not have passed the Act in its present form if it had not included the individual mandate.” Order at 66-67. The lack of a severability clause (especially since such a clause had been in an earlier version of ACA) is “strong evidence that Congress recognized the Act could not operate as intended without the individual mandate.” Order at 68 (emphasis in original). In addition, Judge Vinson viewed the government’s concessions that ACA’s health insurance market reforms cannot survive without the Individual Mandate as “extremely significant” because they are “the very heart of the Act itself.” Order at 68. These concessions and the Congressional findings with respect to the Individual Mandate led Judge Vinson to conclude that “the individual mandate is indisputably necessary to the Act’s insurance market reforms, which are, in turn, indisputably necessary to the purpose of the Act.” Order at 69-71. Judge Vinson concluded that “severing the individual mandate from the Act along with the other insurance reforms . . . cannot be done consistent with the principles [set forth by the Supreme Court in Ayotte v. Planned Parenthood of Northern New England, 545 U.S. 321 (2006)]” because it “would, in the end, be tantamount to rewriting the statute in an attempt to salvage it, which is foreclosed by Ayotte.” Order at 72-73. Continuing with the watch analogy, he concluded that “[t]he Act, like a defectively designed watch, needs to be redesigned and reconstructed by the watchmaker.” Order at 74.

  • Relief: The plaintiffs sought declaratory and injunctive relief. However, Judge Vinson relied on the long-standing presumption that the Executive Branch would adhere to the decision by the court and denied the injunction as unnecessary. Order at 75 (citing Comm. on Judiciary of U.S. House of Representatives v. Miers, 542 F.3d 909, 911 (D.C. Cir. 2008) and Sanchez-Espinoza v. Reagan, 770 F.2d 202, 208 n.8 (D.C. Cir. 1985) (Scalia, J.)).

DISCUSSION

Timing for Appeal: The government has sixty days (deadline: April 1, 2011) to appeal the order granting summary declaratory judgment to the Eleventh Circuit. However, the Justice Department issued a statement stating “we are analyzing this opinion to determine what steps, if any - including seeking a stay - are necessary while the appeal is pending.” http://blogs.usdoj.gov/blog/archives/1182. Given the far reaching effects of Judge Vinson’s ruling (as opposed to Judge Hudson’s narrow ruling striking only Section 1501 and directly related provisions in Cuccinelli (Virginia)), it seems likely that the government would move expeditiously to seek a stay of the order pending appeal. Under the Federal Rules of Appellate Procedure, such a motion must ordinarily first be presented to the district court. Fed. R. App. P. 8(a)(1). If that is impracticable, or if the district court denies the motion, a motion for stay may be presented to the court of appeals. Fed. R. App. P. 8(a)(2)(A). There, it would normally be considered by a panel of the court, but “in an exceptional case,” the motion may be considered by a single judge. Fed. R. App. P. 8(a)(2)(D).

Regardless of whether a stay is issued or not, once the notice is filed and the record completed by the district court, the Eleventh Circuit will issue a scheduling order that will govern briefing and oral arguments. This appeal may move on an expedited basis, especially if the decision is not stayed pending appeal, with briefing before the Eleventh Circuit within the next three to four months. Regardless of the outcome in the circuits where appeals are currently pending, the case will be appealed to the Supreme Court, which would rule on all cases before the end of the 2011-2012 term in June 2012. (Note, however, that there is also a seldom used procedure that would allow direct appeal to the Supreme Court and bypass the appellate courts. This procedure is extremely rare – and was not even used in the 2000 Presidential election case.3)

 Impact on Implementation of ACA: It is too soon to determine the impact of Judge Vinson’s ruling. The states have declared victory. An attorney for the states said “[w]ith regard to all parties to this lawsuit, the statute is dead.”4 However, should the government seek and win a stay, ACA implementation – including implementation of the insurance market reform provisions – can continue, pending final resolution of the case.

Questions remain regarding how this decision and the related ACA decisions that have been appealed (Cuccinelli v. Sebelius; Liberty University v. Geithner; and Thomas More Law Center v. Obama) will affect the entirety of ACA. An appellate court finding the Individual Mandate unconstitutional must decide whether to follow the narrow ruling of Cuccinelli (for analysis of Judge Hudson’s decision, click here), striking only Section 1501 and its related provisions and potentially remanding for a severability hearing at the District Court level; to strike the entire Act as inseverable from the Individual Mandate in Section 1501, as Judge Vinson did here; or to determine that a broader array of ACA provisions (but less than the entire statute) are inseverable from the Individual Mandate (such as the ACA insurance market reforms, or all of Title I of ACA), strike those provisions, and leave the remainder of the statute intact.

Insurers, providers, employers, and consumers should assume that a stay will be granted, and should not assume that the Individual Mandate is unconstitutional or that any part of ACA will fall until a final ruling by the Supreme Court.