State of Florida v. U.S. Department of HHS ( 2011 )

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
Nos. 11-11021 & 11-11067 AUG 12, 2011
JOHN LEY
________________________ CLERK
D.C. Docket No. 3:10-cv-00091-RV-EMT
STATE OF FLORIDA, by and through Attorney General, STATE OF SOUTH
CAROLINA, by and through Attorney General, STATE OF NEBRASKA, by and
through Attorney General, STATE OF TEXAS, by and through Attorney General,
STATE OF UTAH, by and through Attorney General, et. al.,
Plaintiffs - Appellees - Cross-Appellants,
versus
UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES,
SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND
HUMAN SERVICES, UNITED STATES DEPARTMENT OF THE TREASURY,
SECRETARY OF THE UNITED STATES DEPARTMENT OF TREASURY,
UNITED STATES DEPARTMENT OF LABOR, SECRETARY OF THE
UNITED STATES DEPARTMENT OF LABOR,
Defendants - Appellants - Cross-Appellees.
________________________
Appeals from the United States District Court
for the Northern District of Florida
________________________
(August 12, 2011)
Before DUBINA, Chief Judge, and HULL and MARCUS, Circuit Judges.
DUBINA, Chief Judge, and HULL, Circuit Judge:1
Soon after Congress passed the Patient Protection and Affordable Care Act,
Pub. L. No. 111-148, 124 Stat. 119 (2010), amended by Health Care and
Education Reconciliation Act of 2010 (“HCERA”), Pub. L. No. 111-152, 124 Stat.
1029 (2010) (the “Act”), the plaintiffs brought this action challenging the Act’s
constitutionality. The plaintiffs are 26 states, private individuals Mary Brown and
Kaj Ahlburg, and the National Federation of Independent Business (“NFIB”)
(collectively the “plaintiffs”).2 The defendants are the federal Health and Human
Services (“HHS”), Treasury, and Labor Departments and their Secretaries
(collectively the “government”).
The district court granted summary judgment (1) to the government on the
state plaintiffs’ claim that the Act’s expansion of Medicaid is unconstitutional and
(2) to the plaintiffs on their claim that the Act’s individual mandate—that
1
This opinion was written jointly by Judges Dubina and Hull. Cf. Waters v. Thomas, 46
F.3d 1506, 1509 (11th Cir. 1995) (authored by Anderson and Carnes, J.J.) (citing Peek v. Kemp,
784 F.2d 1479 (11th Cir.) (en banc) (authored by Vance and Anderson, J.J.), cert. denied, 479
U.S. 939, 107 S. Ct. 421 (1986)).
2
The 26 state plaintiffs are Alabama, Alaska, Arizona, Colorado, Florida, Georgia, Idaho,
Indiana, Iowa, Kansas, Louisiana, Maine, Michigan, Mississippi, Nebraska, Nevada, North
Dakota, Ohio, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington,
Wisconsin, and Wyoming.
2
individuals purchase and continuously maintain health insurance from private
companies3—is unconstitutional. The district court concluded that the individual
mandate exceeded congressional authority under Article I of the Constitution
because it was not enacted pursuant to Congress’s tax power and it exceeded
Congress’s power under the Commerce Clause and the Necessary and Proper
Clause. The district court also concluded that the individual mandate provision
was not severable from the rest of the Act and declared the entire Act invalid.
The government appeals the district court’s ruling that the individual
mandate is unconstitutional and its severability holding. The state plaintiffs cross-
appeal the district court’s ruling on their Medicaid expansion claim. For the
reasons that follow, we affirm in part and reverse in part.4
INTRODUCTION
Legal issues concerning the constitutionality of a legislative act present
important but difficult questions for the courts. Here, that importance and
3
As explained later, unless the person is covered by a government-funded health program,
such as Medicare, Medicaid, and others, the mandate is to purchase insurance from a private
insurer.
4
We review the district court’s grant of summary judgment de novo. Sammy’s of Mobile,
Ltd. v. City of Mobile, 140 F.3d 993, 995 (11th Cir. 1998). We review de novo a constitutional
challenge to a statute. United States v. Cunningham, 607 F.3d 1264, 1266 (11th Cir.), cert.
denied, 131 S. Ct. 482 (2010).
3
difficulty are heightened because (1) the Act itself is 975 pages in the format
published in the Public Laws;5 (2) the district court, agreeing with the plaintiffs,
held all of the Act was unconstitutional; and (3) on appeal, the government argues
all of the Act is constitutional.
We, as all federal courts, must begin with a presumption of constitutionality,
meaning that “we invalidate a congressional enactment only upon a plain showing
that Congress has exceeded its constitutional bounds.” United States v. Morrison,
529 U.S. 598, 607, 120 S. Ct. 1740, 1748 (2000).
As an initial matter, to know whether a legislative act is constitutional
requires knowing what is in the Act. Accordingly, our task is to figure out what
this sweeping and comprehensive Act actually says and does. To do that, we
outline the congressional findings that identify the problems the Act addresses,
and the Act’s legislative response and overall structure, encompassing nine Titles
and hundreds of laws on a diverse array of subjects. Next, we set forth in greater
depth the contents of the Act’s five components most relevant to this appeal: the
insurance industry reforms, the new state-run Exchanges, the individual mandate,
5
Pub. L. No. 111-148, 124 Stat. 119 (2010), Pub. L. No. 111-152, 124 Stat. 1029 (2010).
Some of the sections of the Act have not yet been codified in the U.S. Code, and for those
sections we cite to the future U.S. Code provision, along with the effective date if applicable.
4
the employer penalties, and the Medicaid expansion.
After that, we analyze the constitutionality of the Medicaid expansion and
explain why we conclude that the Act’s Medicaid expansion is constitutional.
We then review the Supreme Court’s decisions on Congress’s commerce
power, discuss the individual mandate—which requires Americans to purchase an
expensive product from a private insurance company from birth to death—and
explicate how Congress exceeded its commerce power in enacting its individual
mandate. We next outline why Congress’s tax power does not provide an
alternative constitutional basis for upholding this unprecedented individual
mandate. Lastly, because of the Supreme Court’s strong presumption of
severability and as a matter of judicial restraint, we conclude that the individual
mandate is severable from the remainder of the Act. Our opinion is organized as
follows:
I. STANDING
II. THE ACT
A. Congressional Findings
B. Overall Structure of Nine Titles
C. Terms and Definitions
D. Health Insurance Reforms
E. Health Benefit Exchanges
F. Individual Mandate
5
G. Employer Penalty
H. Medicaid Expansion
III. CONSTITUTIONALITY OF MEDICAID EXPANSION
A. History of the Medicaid Program
B. Congress’s Power under the Spending Clause
IV. SUPREME COURT’S COMMERCE CLAUSE DECISIONS
V. CONSTITUTIONALITY OF INDIVIDUAL MANDATE UNDER
THE COMMERCE POWER
A. First Principles
B. Dichotomies and Nomenclature
C. Unprecedented Nature of the Individual Mandate
D. Wickard and Aggregation
E. Broad Scope of Congress’s Regulation
F. Government’s Proposed Limiting Principles
G. Congressional Findings
H. Areas of Traditional State Concern
I. Essential to a Larger Regulatory Scheme
J. Conclusion
VI. CONSTITUTIONALITY OF INDIVIDUAL MANDATE UNDER
THE TAX POWER
A. Repeated Use of the Term “Penalty” in the Individual Mandate
B. Designation of Numerous Other Provisions in the Act as “Taxes”
C. Legislative History of the Individual Mandate
VII. SEVERABILITY
I. STANDING
As a threshold matter, we consider the government’s challenge to the
6
plaintiffs’ standing to bring this lawsuit. “Article III of the Constitution limits the
jurisdiction of federal courts to ‘cases’ and ‘controversies.’” Socialist Workers
Party v. Leahy, 145 F.3d 1240, 1244 (11th Cir. 1998) (citations omitted). As we
have explained:
The case-or-controversy constraint, in turn, imposes a dual limitation on
federal courts commonly referred to as “justiciability.” Basically,
justiciability doctrine seeks to prevent the federal courts from
encroaching on the powers of the other branches of government and to
ensure that the courts consider only those matters that are presented in
an adversarial context. Because the judiciary is unelected and
unrepresentative, the Article III case-or-controversy limitation, as
embodied in justiciability doctrine, presents an important restriction on
the power of the federal courts.
Id. (citations omitted). Indeed, there are “three strands of justiciability
doctrine—standing, ripeness, and mootness—that go to the heart of the Article III
case or controversy requirement.” Harrell v. The Fla. Bar, 608 F.3d 1241, 1247
(11th Cir. 2010) (quotation marks and alterations omitted).
As for the first strand, “[i]t is by now axiomatic that a plaintiff must have
standing to invoke the jurisdiction of the federal courts.” KH Outdoor, LLC v. City
of Trussville, 458 F.3d 1261, 1266 (11th Cir. 2006). “In essence the question of
standing is whether the litigant is entitled to have the court decide the merits of the
dispute or of particular issues.” Primera Iglesia Bautista Hispana of Boca Raton,
7
Inc. v. Broward Cnty., 450 F.3d 1295, 1304 (11th Cir. 2006) (quotation marks
omitted). To demonstrate standing, a plaintiff must show that “(1) he has suffered,
or imminently will suffer, an injury-in-fact; (2) the injury is fairly traceable to [the
statute]; and (3) a favorable judgment is likely to redress the injury.” Harrell, 608
F.3d at 1253; see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61, 112
S. Ct. 2130, 2136 (1992). “The plaintiff bears the burden of establishing each of
these elements.” Elend v. Basham, 471 F.3d 1199, 1206 (11th Cir. 2006). And
standing must be established for each claim a plaintiff raises. See Harrell, 608
F.3d at 1253–54. “We review standing determinations de novo.” Bochese v. Town
of Ponce Inlet, 405 F.3d 964, 975 (11th Cir. 2005).
In fact, “[s]tanding is a threshold jurisdictional question which must be
addressed prior to and independent of the merits of a party’s claims.” Id. at 974
(quotation marks and alteration omitted). And “we are obliged to consider
questions of standing regardless of whether the parties have raised them.” Id. at
975.
Notably, the government does not contest the standing of the individual
plaintiffs or of the NFIB to challenge the individual mandate. In fact, the
government expressly concedes that one of the individual plaintiffs—Mary
8
Brown—has standing to challenge the individual mandate. See Government’s
Opening Br. at 6 n.1 (“Defendants do not dispute that plaintiff Brown’s challenge
to the minimum coverage provision is justiciable.”). Nor does the government
dispute the state plaintiffs’ standing to challenge the Medicaid provisions.
The only question raised by the government is whether the state plaintiffs
have standing to challenge the individual mandate. The government claims that the
state plaintiffs do not have standing because they are impermissibly suing the
government as parens patriae—or as representatives of their citizens—in
violation of the rule articulated in Massachusetts v. Mellon, 262 U.S. 447, 485–86,
43 S. Ct. 597, 600 (1923).6 The state plaintiffs respond that they are not in
violation of the Mellon rule, but rather have standing to challenge the individual
mandate for three independent reasons: first, because the increased enrollment in
Medicaid spurred by the individual mandate will cost the states millions of dollars
in additional Medicaid funding; second, because they are injured by other
provisions of the Act—such as the Medicaid expansion—from which the
individual mandate cannot be severed; and finally, because the individual mandate
6
In Mellon, the Supreme Court held that states cannot sue the federal government in a
representative capacity to protect their citizens from the operation of an allegedly
unconstitutional federal law. 262 U.S. at 485–86, 43 S. Ct. at 600. This has come to be known as
the Mellon rule.
9
intrudes upon their sovereign interest in enacting and enforcing state statutes that
shield their citizens from the requirement to purchase health insurance. States’
Opening Br. at 67–69.
Although the question of the state plaintiffs’ standing to challenge the
individual mandate is an interesting and difficult one, in the posture of this case, it
is purely academic and one we need not confront today. The law is abundantly
clear that so long as at least one plaintiff has standing to raise each claim—as is
the case here—we need not address whether the remaining plaintiffs have
standing. See, e.g., Watt v. Energy Action Educ. Found., 454 U.S. 151, 160, 102 S.
Ct. 205, 212 (1981) (“Because we find California has standing, we do not consider
the standing of the other plaintiffs.”); Vill. of Arlington Heights v. Metro. Hous.
Dev. Corp., 429 U.S. 252, 264 & n.9, 97 S. Ct. 555, 562 & n.9 (1977) (“Because
of the presence of this plaintiff, we need not consider whether the other individual
and corporate plaintiffs have standing to maintain suit.”); ACLU of Fla., Inc. v.
Miami-Dade Cnty. Sch. Bd., 557 F.3d 1177, 1195 (11th Cir. 2009) (“Because
Balzli has standing to raise those claims, we need not decide whether either of the
organizational plaintiffs also has standing to do so.”); Jackson v. Okaloosa Cnty.,
21 F.3d 1531, 1536 (11th Cir. 1994) (“In order for this court to have jurisdiction
10
over the claims before us, at least one named plaintiff must have standing for each
of the claims.”); Mountain States Legal Found. v. Glickman, 92 F.3d 1228, 1232
(D.C. Cir. 1996) (“For each claim, if constitutional and prudential standing can be
shown for at least one plaintiff, we need not consider the standing of the other
plaintiffs to raise that claim.”). Because it is beyond dispute that at least one
plaintiff has standing to raise each claim here—the individual plaintiffs and the
NFIB have standing to challenge the individual mandate, and the state plaintiffs
undeniably have standing to challenge the Medicaid provisions—this case is
justiciable, and we are permitted, indeed we are obliged, to address the merits of
each. Accordingly, we turn to the constitutionality of the Act.
II. THE ACT
A. Congressional Findings
The congressional findings for the Act, including those relating to the
individual mandate, are contained in two pages, now codified in 42 U.S.C.
§ 18091(a)(1)–(3). Approximately 50 million people are uninsured.7 The
7
U.S. Census Bureau, P60-238, Income, Poverty, and Health Insurance Coverage in the
United States: 2009, at 23 tbl.8 (2010) (“Census Report”), available at
http://www.census.gov/prod/2010pubs/p60-238.pdf. Although the congressional findings do not
state the precise number of the uninsured, the parties use the 50 million figure, so we will too.
Copies of the Internet materials cited in this opinion are on file in the Clerk’s Office. See
11th Cir. R. 36, I.O.P. 10.
11
congressional findings focus on these uninsureds, health insurance, and health
care. Id.
1. The Uninsured and Cost-Shifting Problems
The congressional findings state that some individuals make “an economic
and financial decision to forego health insurance coverage and attempt to self-
insure, which increases financial risks to households and medical providers.” Id.
§ 18091(a)(2)(A). In its findings, Congress determined that the decision by the
uninsured to forego insurance results in a cost-shifting scenario. Id.
§ 18091(a)(2)(F).
Congress’s findings identify a multi-step process that starts with
consumption of health care: (1) some uninsured persons consume health care; (2)
some fail to pay the full costs; (3) in turn the unpaid costs of that health care—$43
billion in 2008—are shifted to and spread among medical providers; (4) thereafter
medical providers, by imposing higher charges, spread and shift the unpaid costs
to private insurance companies; (5) then private insurance companies raise
premiums for health policies and shift and spread the unpaid costs to already-
insured persons; and (6) consequently already-insured persons suffer higher
premiums. Id. § 18091(a)(2). Also, some uninsured persons continue not to buy
coverage because of higher premiums. Id.
12
The findings state that this cost-shifting scenario increases family premiums
on average by $1,000 per year. Id. § 18091(a)(2)(F). Although not in the findings,
the data show the cost-shifting increases individual premiums on average by $368
to $410 per year.8 The cost-shifting represents roughly 8% of average premiums.9
In its findings, Congress also points out that national health care spending in
2009 was approximately $2.5 trillion, or 17.6% of the national economy.10 Id.
§ 18091(a)(2)(B). Thus, the $43 billion in shifted costs represents about 1.7% of
total health care expenditures. Of that $2.5 trillion in national health care spending
in 2009, federal, state, and local governments paid $1.1 trillion, or 44%.11
8
Uncompensated care costs translate into “a surcharge of $368 for individual premiums
and a surcharge of $1017 for family premiums in 2008.” See Families USA, Hidden Health Tax:
Americans Pay a Premium 7 (2009), available at http://familiesusa2.org/assets/pdfs/hidden-
health-tax.pdf (cited by both the plaintiffs and the government).
9
“[A] ‘hidden tax’ on health insurance accounts for roughly 8% of the average health
insurance premium” and “[t]his cost-shift added, on average, $1,100 to each family premium in
2009 and about $410 to an individual premium.” Br. of Amici Curiae Am. Ass’n of People with
Disabilities, et al., in Support of the Government at 15 (citing Ben Furnas & Peter Harbage, Ctr.
for Am. Progress Action Fund, The Cost Shift from the Uninsured 1–2 (2009), available at
http://www.americanprogressaction.org/issues/2009/03/pdf/cost_shift.pdf (calculations based on
a 2005 analysis by Families USA)).
10
See Centers for Medicare & Medicaid Services (“CMS”), National Health Expenditure
Web Tables tbls.1, 5, 11, available at
http://www.cms.gov/NationalHealthExpendData/downloads/tables.pdf (derived from
calculations).
11
See CMS, National Health Expenditure Web Tables, supra note 10, at tbl.5. The
governments’ health care spending in 2009 included $503 billion for Medicare and $374 billion
for Medicaid and the Children’s Health Insurance Program (“CHIP”).
Projected Medicare spending is $723.1 billion in 2016 and $891.4 billion in 2019. CMS,
Nat’l Health Expenditure Projections 2009–2019 tbl.2, available at
13
Private insurers still paid for 32% of health care spending in 2009,12 id.,
through: (1) primarily private employer-based insurance plans, or (2) the private
individual insurance market. The private employer-based health system covers 176
million Americans. Id. § 18091(a)(2)(D). The private individual insurance market
covers 24.7 million people.13 Undisputedly, “[h]ealth insurance and health care
services are a significant part of the national economy.” Id. § 18091(a)(2)(B).
2. $90 Billion Private Underwriting Costs Problem
Congress also recognized that many of the uninsured desire insurance but
have been denied coverage or cannot afford it. Its findings emphasize the barriers
created by private insurers’ underwriting practices and related administrative
costs. Id. § 18091(a)(2)(J). Private insurers want healthy insureds and try to
protect themselves against unhealthy entrants through medical underwriting,
especially in the individual market. As a result of medical underwriting, many
uninsured Americans—ranging from 9 million to 12.6 million—voluntarily sought
health coverage in the individual market but were denied coverage, charged a
http://www.cms.gov/NationalHealthExpendData/Downloads/NHEProjections2009to2019.pdf.
With the Act’s Medicaid expansion and other factors, projected Medicaid and CHIP
spending is $737.5 billion in 2016 and $896.2 billion in 2019. Id.
12
See CMS, National Health Expenditure Web Tables, supra note 10, at tbl.3 (derived
from calculations).
13
See Census Report, supra note 7, at 22–25 & 23 tbl.8 (derived from calculations).
14
higher premium, or offered only limited coverage that excludes a preexisting
condition.14
In its findings, Congress determined that the “[a]dministrative costs for
private health insurance” were $90 billion in 2006, comprising “26 to 30 percent
of premiums in the current individual and small group markets.” Id. The findings
state that Congress seeks to create health insurance markets “that do not require
underwriting and eliminate its associated administrative costs.” Id. The Act
requires private insurers to allow all applicants to enroll. 42 U.S.C. § 300gg-1(a).
Congress stated that the Act, by eliminating underwriting costs, will lower health
insurance premiums. Id.
3. Congress’s Solutions
Given the 50 million uninsured, $43 billion in uncompensated costs, and
$90 billion in underwriting costs, Congress determined these problems affect the
national economy and interstate commerce. Id. § 18091(a)(2). The congressional
findings identify what the Act regulates: (1) the “health insurance market,” (2)
14
HHS, Coverage Denied: How the Current Health Insurance System Leaves Millions
Behind, http://www.healthreform.gov/reports/denied_coverage/index.html (citing
Commonwealth Fund Biennial Health Insurance Survey, 2007); Sara R. Collins, et al., The
Commonwealth Fund, Help on the Horizon: How the Recession Has Left Millions of Workers
Without Health Insurance, and How Health Reform Will Bring Relief xi (2011), available at
http://www.commonwealthfund.org/~/media/Files/Surveys/2011/1486_Collins_help_on_the_hor
izon_2010_biennial_survey_report_FINAL_31611.pdf.
15
“how and when health care is paid for,” and (3) “when health insurance is
purchased.” Id. § 18091(a)(2)(A), (H). The findings also state that the Act’s
reforms will significantly reduce the number of the uninsured and will lower
health insurance premiums. Id. § 18091(a)(2)(F).
To reduce the number of the uninsured, the Act employs five main tools: (1)
comprehensive insurance industry reforms which alter private insurers’
underwriting practices, guarantee issuance of coverage, overhaul their health
insurance products, and restrict their premium pricing structure; (2) creation of
state-run “Health Benefit Exchanges” as new marketplaces through which
individuals, families, and small employers, now pooled together, can
competitively purchase the new insurance products and obtain federal tax credits
and subsidies to do so; (3) a mandate that individuals must purchase and
continuously maintain health insurance or pay annual penalties; (4) penalties on
private employers who do not offer at least some type of health plan to their
employees; and (5) the expansion of Medicaid eligibility and subsidies.
The Act’s Medicaid expansion alone will cover 9 million of the 50 million
uninsured by 2014 and 16 million by 2016.15 The Act’s health insurance reforms
15
CBO’s Analysis of the Major Health Care Legislation Enacted in March 2010: Before
the Subcomm. on Health of the H. Comm. on Energy & Commerce 112th Cong. 18 tbl.3 (2011)
(Statement of Douglas Elmendorf, Director, Cong. Budget Office) [hereinafter CBO, Analysis],
available at http://www.cbo.gov/ftpdocs/121xx/doc12119/03-30-HealthCareLegislation.pdf.
16
remove private insurers’ barriers to coverage and restrict their pricing to make
coverage accessible to the 9 to 12 million uninsured who were denied coverage or
had their preexisting conditions excluded.16 The Act’s new Exchanges, with
significant federal tax credits and subsidies, are predicted to make insurance
available to 9 million in 2014 and 22 million by 2016.17
Congress’s findings state that the Act’s multiple provisions, combined
together:18
(1) “will add millions of new consumers to the health insurance market” and
“will increase the number and share of Americans who are insured”;
(2) will reduce the number of the uninsured, will broaden the health
insurance risk pool to include additional healthy individuals, will increase
economies of scale, and will significantly reduce insurance companies’
administrative costs, all of which will lower health insurance premiums;
(3) will build upon and strengthen the private employer-based health
insurance system, which already covers “176,000,000 Americans”; and
(4) will achieve “near-universal” coverage of the uninsured.
16
See HHS, Coverage Denied, and Collins, supra note 14.
17
CBO, Analysis, supra note 15, at tbl.3.
18
The congressional findings refer six times to the individual mandate “requirement,
together with the other provisions of this Act.” 42 U.S.C. § 18091(a)(2)(C), (E), (F), (G), (I), (J).
17
Id. § 18091(a)(2).
Although the congressional findings summarily refer to “the uninsured,” the
parties’ briefs and the 52 amici briefs contain, and indeed rely on, additional data
about the uninsured. Before turning to the Act, we review that data.19
4. Data about the Uninsured and Uncompensated Care
So who are the uninsured? As to health care usage, the uninsured do not fall
into a single category. Many of the uninsured do not seek health care each year. Of
course, many do. In 2007, 57% of the 40 million uninsured that year used some
medical services; in 2008, 56% of the 41 million uninsured that year used some
medical services.20
As to medical services, 50% of uninsured people had routine checkups in
the past two years; 68% of uninsured people had routine checkups in the past five
19
There has been no evidentiary objection by any party to the data and studies cited in the
parties’ briefs or in any of the amici briefs. In fact, at times the parties cite the same data.
20
HHS, Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey,
Household Component Summary Tables (“MEPS Summary Tables”), Table 1: Total Health
Services–Median and Mean Expenses per Person with Expense and Distribution of Expenses by
Source of Payment: United States, 2007 & 2008, available at
http://www.meps.ahrq.gov/mepsweb/data_stats/quick_tables.jsp (follow “Household Component
summary tables” hyperlink; then select 2007 or 2008 for “year” and follow the “search”
hyperlink; then follow the hyperlink next to “Table 1").
The Medical Expenditure Panel Survey (“MEPS”) is a set of large-scale surveys of
families and individuals, their medical providers (including doctors, hospitals, and pharmacies),
and employers across the United States. It is conducted under the auspices of HHS.
18
years.21 In 2008, the uninsured made more than 20 million visits to emergency
rooms,22 and 2.1 million were hospitalized.23 The medical care used by each
uninsured person cost about $2,000 on average in 2007, and $1,870 on average in
2008.24
When the uninsured do seek health care, what happens? Some pay in full.
Some partially pay. Some pay nothing. Data show the uninsured paid on average
37% of their health care costs out of pocket in 2007, and 46.01% in 2008,25 while
21
June E. O’Neill & Dave M. O’Neill, Who Are the Uninsured? An Analysis of America’s
Uninsured Population, Their Characteristics and Their Health, EMP ’T POLICIES INSTITUTE , 21
tbl.9 (2009), available at http://epionline.org/studies/oneill_06-2009.pdf.
22
Br. of Amici Curiae Am. Hosp. Ass’n et al. in Support of the Government at 11 (citing
Press Release, HHS, New Data Say Uninsured Account for Nearly One-Fifth of Emergency
Room Visits (Jul. 15, 2009), available at http://www.hhs.gov/news/press/2009pres/
07/20090715b.html).
23
In 2008, U.S. hospitals reported more than 2.1 million hospitalizations of the uninsured.
Office of the Assistant Sec’y for Planning and Evaluation, HHS, The Value of Health Insurance:
Few of the Uninsured Have Adequate Resources to Pay Potential Hospital Bills 5 (2011),
available at http://aspe.hhs.gov/health/reports/2011/valueofinsurance/rb.shtml.
24
MEPS Summary Tables, supra note 20. An Economic Scholars’ amici brief, filed in
support of the government, states: “The medical care used by each uninsured person costs about
$2000 per year, on average.” Br. of Amici Curiae Economists in Support of the Government at
16 (citing “Agency for Health Care Quality and Research, Medical Expenditure Panel Survey,
Summary Data Tables, Table 1" (see MEPS Summary Tables, supra note 20); Jack Hadley, et
al., “Covering the Uninsured in 2008: Current Costs, Sources of Payment, and Incremental
Costs,” 27(5) HEALTH AFFAIRS W399-415 (2008)).
In contrast, this same amici brief points out: “In 2007, the average person used $6,186 in
personal health care services.” Id. at 11 (citing “Center for Medicare and Medicaid Services,
National Health Expenditure Accounts”); see CMS, National Expenditure Web Tables, supra
note 10, at tbl.1.
25
See MEPS Summary Tables, supra note 20.
19
third parties pay another 26% on their behalf.26 Not surprisingly, the poorer
uninsured, on average, consume more health care for which they do not pay.27
Even in households at or above the median income level ($41,214) in 2000, the
uninsured paid, on average, less than half their medical care costs.28
It is also undisputed that people are uninsured for a wide variety of reasons.
The uninsured are spread across different income brackets:
(1) less than $25,000: 15.5 million uninsured, or about 31%;
(2) $25,000 to $49,999: 15.3 million uninsured, or about 30%;
(3) $50,000 to $74,999: 9.4 million uninsured, or about 18%;
(4) $75,000 or more: 10.6 million uninsured, or about 21%.29
As the data show, many of the uninsured have low to moderate incomes and
simply cannot afford insurance. Some of the uninsured can afford insurance and
tried to obtain it, but were denied coverage based on health status.30 Some are
26
See Families USA, Hidden Health Tax, supra note 8, at 2 (cited by both the plaintiffs
and the government).
27
Bradley Herring, The Effect of the Availability of Charity Care to the Uninsured on the
Demand for Private Health Insurance, 24 J. HEALTH ECON . 225, 229–31 (2005).
28
Herring, supra note 27, at 231 (“[T]he median income for all household[s] in the U.S. is
roughly 300% of poverty, and the poverty threshold was US$13,738 for a family of three in
2000.”); see id. at 230 tbl.1.
29
See Census Report, supra note 7, at 23 tbl.8.
30
See HHS, Coverage Denied, and Collins, supra note 14.
20
voluntarily uninsured and self-finance because they can pay for their medical care
or have modest medical care needs. Some may not have considered the issue.
There is no one reason why people are uninsured. It is also not surprising,
therefore, that Congress has attacked the uninsured problem through multiple
reforms and numerous avenues in the Act that we outline later.
Given these identified problems, congressional findings, and data as
background, we now turn to Congress’s legislative response in the Act.
B. Overall Structure of Nine Titles
The sweeping and comprehensive nature of the Act is evident from its nine
Titles:
I. Quality, Affordable Health Care for All Americans
II. Role of Public Programs
III. Improving the Quality and Efficiency of Health Care
IV. Prevention of Chronic Disease and Improving Public Health
V. Health Care Workforce
VI. Transparency and Program Integrity
VII. Improving Access to Innovative Medical Therapies
VIII. Community Living Assistance Services and Supports
21
IX. Revenue Provisions31
The Act’s provisions are spread throughout many statutes and different titles in the
United States Code. As our Appendix A demonstrates, the Act’s nine Titles
contain hundreds of new laws about hundreds of different areas of health
insurance and health care. Appendix A details most parts of the Act with section
numbers. Here, we merely list the broad subject matter in each Title.
Title I contains these four components mentioned earlier: (1) the insurance
industry reforms; (2) the new state-run Exchanges; (3) the individual mandate; and
(4) the employer penalty. Act §§ 1001–1568. Title II shifts the Act’s focus to
publicly-funded programs designed to provide health care for the uninsured, such
as Medicaid, CHIP, and initiatives under the Indian Health Care Improvement Act.
Id. §§ 2001–2955. Title II contains the Medicaid expansion at issue here. Title II’s
provisions also create, or expand, other publicly-funded programs. Id.
Title III primarily addresses Medicare. Id. §§ 3001–3602. Title IV
concentrates on prevention of illness. Id. §§ 4001–4402. Title V seeks to increase
the supply of health care workers through education loans, training grants, and
other programs. Id. §§ 5001–5701.
Title VI creates new transparency and anti-fraud requirements for physician-
31
There is also a tenth Title dedicated to amendments to these nine Titles.
22
owned hospitals participating in Medicare and for nursing facilities participating
in Medicare or Medicaid. Id. §§ 6001–6801. Title VI includes the Elder Justice
Act, designed to eliminate elder abuse, neglect, and exploitation. Id.
Title VII extends and expands certain drug discounts in health care facilities
serving low-income patients. Id. §§ 7001–7103. Title VIII establishes a national,
voluntary long-term care insurance program for purchasing community living
assistance services and support by persons with functional limitations. Id. §§
8001–8002. Title IX contains revenue provisions. Id. §§ 9001–9023.
We include Appendix A because it documents (1) the breadth and scope of
the Act; (2) the multitudinous reforms enacted to reduce the number of the
uninsured; (3) the large number and diverse array of new, or expanded, federally-
funded programs, grants, studies, commissions, and councils in the Act; (4) the
extensive new federal requirements and regulations on myriad subjects; and (5)
how many of the Act’s provisions on their face operate separately and
independently.
We now examine in depth the five parts of the Act largely designed to
reduce the number of the uninsured. Because of the Act’s comprehensive and
complex regulatory scheme, it is critical to examine what the Act actually does and
does not do. We start with some terms and definitions.
23
C. Terms and Definitions
The Act regulates three aspects of health insurance: (1) “markets,” the
outlets where consumers may purchase insurance products; (2) “plans,” the
insurance products themselves; and (3) “benefits,” the health care services or items
covered under an insurance plan.
1. Markets
Given its focus on making health insurance available to the uninsured, the
Act recognizes and regulates four markets for health insurance products: (1) the
“individual market”; (2) the “small group market”; (3) the “large group market”;
and (4) the new Exchanges, to be created and run by each state.
The term “individual market” means “the market for health insurance
coverage offered to individuals other than in connection with a group health plan.”
42 U.S.C. §§ 300gg-91(e)(1)(A), 18024(a)(2).
The term “group market” means “the health insurance market under which
individuals obtain health insurance coverage (directly or through any arrangement)
on behalf of themselves (and their dependents) through a group health plan
maintained by an employer.” Id. § 18024(a)(1).
Within the “group market,” the Act distinguishes between the “large group
market” and the “small group market.” The term “large group market” refers to the
24
market under which individuals purchase coverage through a group plan of a
“large employer.” Id. §§ 300gg-91(e)(3), 18024(a)(3). A “large employer” is an
employer with over 100 employees. Id. §§ 300gg-91(e)(2), 18024(b)(1).
The term “small group market” refers to the market under which individuals
purchase coverage through a group plan of a “small employer,” or an employer
with no more than 100 employees. Id. §§ 300gg-91(e)(4), (5), 18024(a)(3), (b)(2).
The term “Exchanges” refers to the health benefit exchanges that each state
must create and operate.32 Id. § 18031(b). Companies (profit and nonprofit)
participating in the Exchanges will offer insurance for purchase by individuals and
employees of small employers. See id.; id. § 18042. The uninsured can obtain
significant federal tax credits and subsidies through the Exchanges. See 26 U.S.C.
§ 36B; 42 U.S.C. § 18071. In 2017, the states will have the option to open the
Exchanges to large employers. 42 U.S.C. § 18032(f)(2)(B).
2. “Essential Health Benefits Package” Term
Two key terms in the Act are: (1) “essential health benefits package” and (2)
“minimum essential coverage.” Although they sound similar, each has a different
meaning.
32
The Act allows a state to opt out of creating and operating an Exchange, in which case
the federal government (or a nonprofit contractor) will establish the Exchange. 42 U.S.C.
§ 18041(c).
25
The term “essential health benefits package” refers to the comprehensive
benefits package that must be provided by plans in the individual and small group
markets by 2014. Id. § 300gg-6(a) (effective Jan. 1, 2014); id. § 18022(a). The Act
does not impose the essential health benefits package on plans offered by large
group employers to their employees.
An “essential health benefits package” must: (1) provide coverage for the
“essential health benefits” described in § 18022(b); (2) limit the insured’s cost-
sharing, as provided in § 18022(c); and (3) provide “either the bronze, silver, gold,
or platinum level of coverage” described in § 18022(d). Id. § 18022(a).
The Act leaves it to HHS to define the term “essential health benefits.” Id.
§ 18022(b). However, that definition of “essential health benefits” must include at
least these ten services:
(A) Ambulatory patient services.
(B) Emergency services.
(C) Hospitalization.
(D) Maternity and newborn care.
(E) Mental health and substance use disorder services, including
behavioral health treatment.
(F) Prescription drugs.
(G) Rehabilitative and habilitative services and devices.
(H) Laboratory services.
(I) Preventive and wellness services and chronic disease management.
(J) Pediatric services, including oral and vision care.
26
Id. § 18022(b)(1).33 The bronze, silver, gold, and platinum levels of coverage
reflect the levels of cost-sharing (or actuarial value of benefits) in a plan and do
not represent the level or type of services. Id. § 18022(d)(1)–(2). For example, a
bronze plan covers 60% of the benefits’ costs, and the insured pays 40% out of
pocket; a platinum plan covers 90%, with the insured paying 10%. Id.
§ 18022(d)(1)(A), (D).
3. Individual Mandate’s “Minimum Essential Coverage” Term
The Act uses a wholly different term—“minimum essential coverage”—in
connection with the individual mandate. “Minimum essential coverage” is the type
of plan needed to satisfy the individual mandate. A wide variety of health plans
are considered “minimum essential coverage”: (1) government-sponsored
programs, (2) eligible employer-sponsored health plans, (3) individual market
health plans, (4) grandfathered health plans, and (5) health plans that qualify for,
and are offered in, a state-run Exchange. 26 U.S.C. § 5000A(a), (f)(1).
Many of these plan types will satisfy the mandate even if they do not have
the “essential health benefits package” and regardless of the level of benefits or
33
In defining “essential health benefits,” HHS must ensure that the scope of essential
health benefits is “equal to the scope of benefits provided under a typical employer plan.” 42
U.S.C. § 18022(b)(2). HHS must take additional elements into consideration, such as balance
among the categories of benefits, discrimination based on age or disability, and the needs of
diverse segments of the population. Id. § 18022(b)(4).
27
coverage. The requirement of the “essential health benefits package” is directly
tied to some of the insurance product reforms, but not the individual mandate.
We turn to the Act’s first component: the insurance reforms.
D. Health Insurance Reforms
To reduce the number of the uninsured, the Act heavily regulates private
insurers and reforms their health insurance products. We list examples of the
major reforms.
1. Guaranteed issue. Insurers must permit every employer or individual
who applies in the individual or group markets to enroll. 42 U.S.C. § 300gg-1(a)
(effective Jan. 1, 2014). However, insurers “may restrict enrollment in coverage
described [in subsection (a)] to open or special enrollment periods.”34 Id. § 300gg-
1(b)(1) (effective Jan. 1, 2014).
2. Guaranteed renewability. Insurers in the individual and group markets
must renew or continue coverage at the individual or plan sponsor’s option in the
absence of certain exceptions, such as premium nonpayment, fraud, or the
34
The Act directs HHS to promulgate regulations with respect to enrollment periods. 42
U.S.C. § 300gg-1(b)(3) (effective Jan. 1, 2014). Insurers must establish “special enrollment
periods for ‘qualifying events.’” Id. § 300gg-1(b)(2). “Qualifying events” include, for example:
(1) “[t]he death of the covered employee”; (2) “[t]he termination (other than by reason of such
employee’s gross misconduct), or reduction of hours, of the covered employee’s employment”;
and (3) “[t]he divorce or legal separation of the covered employee from the employee’s spouse.”
29 U.S.C. § 1163.
28
insurer’s discontinuation of coverage in the relevant market. Id. § 300gg-2(b).
3. Waiting periods. Under group health plans, insurers may impose waiting
periods of up to 90 days before a potential enrollee is eligible to be covered under
the plan. Id. §§ 300gg-7 (effective Jan. 1, 2014), 300gg-3(b)(4). The Act places no
limits on insurers’ waiting periods for applications in the individual market.
4. Elimination of preexisting conditions limitations. Insurers may no
longer deny or limit coverage due to an individual’s preexisting medical
conditions. The Act prohibits preexisting condition exclusions for children under
19 within six months of the Act’s enactment, and eliminates preexisting condition
exclusions for adults beginning in 2014.35 Id. § 300gg-3.
5. Prohibition on health status eligibility rules. Insurers may not establish
eligibility rules based on any of the health status-related factors listed in the Act.36
35
For dates effective as to children and then adults, see Pub. L. No. 111-148, Title I,
§ 1255 (formerly § 1253), 124 Stat. 162 (2010) (renumbered § 1255 and amended, Pub. L. No.
111-148, Title X, § 10103(e), (f)(1), 124 Stat. 895 (2010), and codified in note to 42 U.S.C.
§ 300gg-3).
36
Health status-related factors include:
(1) Health status.
(2) Medical condition (including both physical and mental illnesses).
(3) Claims experience.
(4) Receipt of health care.
(5) Medical history.
(6) Genetic information.
(7) Evidence of insurability (including conditions arising out of acts of domestic
violence).
(8) Disability.
(9) Any other health status-related factor determined appropriate by the [HHS]
29
Id. § 300gg-4 (effective Jan. 1, 2014).
6. Community rating. In the individual and small group markets and the
Exchanges, insurers may vary premium rates only based on (1) whether the plan
covers an individual or a family; (2) “rating area”; (3) age (limited to a 3–to–1
ratio); and (4) tobacco use (limited to a 1.5–to–1 ratio). Id. § 300gg(a)(1). Each
state must establish one or more rating areas subject to HHS review. Id.
§ 300gg(a)(2)(B). This rule prevents insurers from varying premiums within a
geographic area based on gender, health status, or other factors.
7. Essential health benefits package. The individual and small group
market plans must contain comprehensive coverage known as the “essential health
benefits package,” defined above. Id. §§ 300gg-6(a) (effective Jan. 1, 2014),
18022(a). The Act does not impose this requirement on large group market plans.37
8. Preventive service coverage. Insurers must provide coverage for certain
enumerated preventive health services without any deductibles, copays, or other
cost-sharing requirements. Id. § 300gg-13(a).
Secretary.
42 U.S.C. § 300gg-4(a) (effective Jan. 1, 2014).
37
Rather, the large group market is subject to only a few coverage-reform requirements
that apply broadly to either all insurance plans or group health plans in particular. See Amy
Monahan & Daniel Schwarcz, Will Employers Undermine Health Care Reform by Dumping Sick
Employees?, 97 VA . L. REV . 125, 147 (2011).
30
9. Dependent coverage. Insurers must allow dependent children to remain
on their parents’ policies until age 26. Id. § 300gg-14(a).
10. Elimination of annual and lifetime limits. Insurers may no longer
establish lifetime dollar limits on essential health benefits. Id. § 300gg-
11(a)(1)(A), (b). Insurers may retain annual dollar limits on essential health
benefits until 2014.38 Id. § 300gg-11(a).
11. Limits on cost-sharing by insureds. “Cost-sharing”39 includes out-of-
pocket “deductibles, coinsurance, copayments, or similar charges” and “qualified
medical expenses.”40 Id. § 18022(c)(3)(A). Annual cost-sharing limits apply to
group health plans, health plans sold in the individual market, and qualified health
plans offered through an Exchange.41 Id. §§ 300gg-6(b) (effective Jan. 1, 2014),
18022(a), (c).
38
HHS shall determine what restricted annual limits are permitted on the dollar value of
essential health benefits until 2014. 42 U.S.C. § 300gg-11(a)(1), (2). “Subsection (a) shall not be
construed to prevent a group health plan or health insurance coverage from placing annual or
lifetime per beneficiary limits on specific covered benefits that are not essential health
benefits . . . .” Id. § 300gg-11(b).
39
“Cost-sharing” does not include “premiums, balance billing amounts for non-network
providers, or spending for non-covered services.” 42 U.S.C. § 18022(c)(3)(B).
40
“Qualified medical expense” is defined in 26 U.S.C. § 223(d)(2).
41
Annual limits on cost-sharing are equal to the current limits on out-of-pocket spending
for high-deductible health plans under the Internal Revenue Code (for 2011, $5,950 for self-only
coverage and $11,900 for family coverage), adjusted after 2014 by a “premium adjustment
percentage.” 42 U.S.C. §§ 300gg-6(b) (effective Jan. 1, 2014), 18022(c)(1); 26 U.S.C.
§ 223(c)(2)(A)(ii), (g); I.R.S. Pub. 969, at 3 (2010).
31
12. Deductibles. Deductibles for any plans offered in the small group
market are capped at $2,000 for plans covering single individuals and $4,000 for
any other plan, adjusted after 2014. Id. §§ 300gg-6(b) (effective Jan. 1, 2014),
18022(c)(2). The deductible limits do not apply to individual plans or large group
plans. See id.
13. Medical loss ratio. Insurers must maintain certain ratios of premium
revenue spent on the insureds’ medical care versus overhead expenses. Id.
§ 300gg-18(a), (b)(1). In the large group market, insurers must spend 85% of their
premium revenue on patient care and no more than 15% on overhead. Id. § 300gg-
18(a), (b)(1)(A)(i). In the individual and small group markets, insurers must spend
80% of their revenue on patient care and no more than 20% on overhead. Id.
§ 300gg-18(a), (b)(1)(A)(ii). This medical-loss ratio requirement applies to all
plans (including grandfathered plans). Id. § 300gg-18(a), (b)(1). Insurers must
report to HHS their ratio of incurred claims to earned premiums. Id. § 300gg-
18(a).
14. Premium increases. HHS, along with all states, shall annually review
“unreasonable” increases in premiums beginning in 2010. Id. § 300gg-94(a)(1).
Issuers must justify any unreasonable premium increase. Id. § 300gg-94(a)(2).
15. Prohibition on coverage rescissions. Insurers may not rescind
32
coverage except for fraud or intentional misrepresentation of material fact. Id.
§ 300gg-12.
16. Single risk pool. Insurers must consider all individual-market enrollees
in their health plans (except enrollees in grandfathered plans) to be members of a
single risk pool (whether enrolled privately or through an Exchange). Id.
§ 18032(c)(1). Small group market enrollees must be considered in the same risk
pool. Id. § 18032(c)(2).
17. Temporary high risk pool program. To cover many of the uninsured
immediately, the Act directs HHS to establish a “temporary high risk health
insurance pool program” to offer coverage to uninsured individuals with
preexisting conditions until the prohibition on preexisting condition exclusions for
adults becomes effective in 2014. Id. § 18001(a). The premiums for persons with a
preexisting condition remain what a healthy person would pay. Id.
§§ 18001(c)(2)(C), 300gg(a)(1). The Act allocates $5 billion to HHS to cover this
high-risk pool. When this temporary program ends in 2014, such individuals will
be transferred to coverage through an Exchange. Id. § 18001(a)–(d), (g).
18. State regulation maintained. States will license insurers and enforce
both federal and state insurance laws. Id. § 18021(a)(1)(C). The Act provides for
the continued operation of state regulatory authority, even with respect to
33
interstate “health care choice compacts,” which enable qualified health plans to be
offered in more than one state.42 Id. § 18053(a).
In addition to reforming health insurance products, the Act requires the
creation of Exchanges where the uninsured can buy the new products. We examine
this second component of the Act, also designed to make insurance more
accessible and affordable and thus reduce the number of the uninsured.
E. Health Benefit Exchanges
1. Establishment of State-Run Exchanges
By January 1, 2014, all states must establish “American Health Benefit
Exchanges” and “Small Business Health Options Program Exchanges,” which are
insurance marketplaces where individuals, families, and small employers can shop
for the Act’s new insurance products. Id. § 18031(b). Consumers can compare
prices and buy coverage from one of the Exchange’s issuers. Id. § 18031(b), (c).
Exchanges centralize information and facilitate the use of the Act’s significant
federal tax credits and other subsidies to purchase health insurance. See 26 U.S.C.
42
Health care choice compacts allow qualified health plans to be offered in the individual
markets of multiple states, yet such plans will “only be subject to the laws and regulations of the
State in which the plan was written or issued.” 42 U.S.C. § 18053(a)(1)(A). The issuer of such
qualified health plans offered through health care choice compacts “would continue to be subject
to market conduct, unfair trade practices, network adequacy, and consumer protection standards
. . . of the State in which the purchaser resides” and “would be required to be licensed in each
State in which it offers the plan under the compact.” Id. § 18053(a)(1)(B)(i)–(ii).
34
§ 36B; 42 U.S.C. §§ 18031, 18071, 18081–83. States may create and run the
Exchanges through a governmental or nonprofit entity. 42 U.S.C. § 18031(d)(1).
States may establish regional, interstate, or subsidiary Exchanges. Id.
§ 18031(f). The federal government will provide funding until January 1, 2015, to
establish Exchanges. Id. § 18031(a). Insurers may offer their products inside or
outside these Exchanges, or both. Id. § 18032(d).
Importantly, the Exchanges draw upon the states’ significant experience
regulating the health insurance industry. See id. § 18041. The Act allows states
some flexibility in operations and enforcement, though states must either (1)
directly adopt the federal requirements set forth by HHS, or (2) adopt state
regulations that effectively implement the federal standards, as determined by
HHS. Id. § 18041(b). In a subsection entitled, “No interference with State
regulatory authority,” the Act provides that “[n]othing in this chapter shall be
construed to preempt any State law that does not prevent the application of the
provisions of this chapter.” Id. § 18041(d).
2. Qualified Individuals and Employers in the Exchanges
The Act provides that “qualified individuals” and “qualified employers”
may purchase insurance through the Exchanges. Id. § 18031(d)(2). Although
35
“qualified individuals” is broadly defined,43 “qualified employers” are initially
limited to small employers, but in 2017, states may allow large employers to
participate in their Exchanges. Id. § 18032(f)(2)(A), (B). Qualified employers can
purchase group plans in or out of Exchanges. Id. § 18032(d)(1).
3. Qualified Health Plans in the Exchanges
The Act prescribes the types of plans available in the Exchanges, known as
“qualified health plans.” Id. § 18031(d)(2)(B)(i). A “qualified health plan” is a
health plan that: (1) is certified as a qualified health plan in each Exchange
through which the plan is offered; (2) provides an “essential health benefits
package”; and (3) is offered by an issuer that (a) is licensed and in good standing
in each state where it offers coverage, and (b) complies with HHS regulations and
any requirements of the Exchange. Id. § 18021(a)(1). The issuer must agree, inter
alia, to offer at least one plan in the “silver” level and one in the “gold” level in
each Exchange in which it participates, as described in § 18022(d). Id. §
18021(a)(1)(C). The issuer must charge the same premium rate regardless of
43
A “qualified individual” is a legal resident who (1) seeks to enroll in a “qualified health
plan” in the individual market through the Exchange, and (2) resides in the state that established
the Exchange. 42 U.S.C. § 18032(f)(1), (3). Prisoners and illegal aliens may not purchase
insurance through Exchanges. Id. § 18032(f)(1)(B), (3).
36
whether a plan is offered in an Exchange or directly.44 Id.
4. “Essential Health Benefits Package” and Catastrophic Plans
The “essential health benefits package” is required of all qualified health
plans sold in the Exchanges. Id. § 18021(a)(1)(B). States may require that a
qualified health plan offered in that state cover benefits in addition to “essential
health benefits,” but the state must defray the costs of additional coverage through
payments directly to patients or insurers. Id. § 18031(d)(3)(B).
One significant exception to the “essential health benefits package”
requirement is the catastrophic plan in the individual market only. In and outside
the Exchanges, insurers may offer catastrophic plans which provide no benefits
until a certain level of out-of-pocket costs—$5,950 for self-only coverage and
$11,900 for family coverage in 2011—are incurred. Id. § 18022(e); see id.
§ 18022(c)(1), (e)(1)(B)(i); 26 U.S.C. § 223(c)(2)(A)(ii), (g); I.R.S. Pub. 969, at 3
(2010). The level of out-of-pocket costs is equal to the current limits on out-of-
pocket spending for high deductible health plans adjusted after 2014. 42 U.S.C.
§ 18022(e), (c)(1).
44
HHS establishes the criteria for certification of insurance plans as “qualified health
plans” and develops a rating system to “rate qualified health plans offered through an Exchange
in each benefits level on the basis of the relative quality and price.” 42 U.S.C. § 18031(c)(1), (3).
States must rate each health plan offered in an Exchange (in accordance with federal standards)
and certify health plans as “qualified health plans.” See id. § 18031(e).
37
This catastrophic plan exception applies only if the plan: (1) is sold in the
individual market; (2) restricts enrollment to those under age 30 or certain persons
exempted from the individual mandate; (3) provides the essential health benefits
coverage after the out-of-pocket level is met; and (4) provides coverage for at least
three primary care visits. Id. § 18022(e)(1), (2).
5. Federal Premium Tax Credit
To reduce the number of the uninsured, the Act also establishes
considerable federal tax credits for individuals and families (1) with household
incomes between 1 and 4 times the federal poverty level; (2) who do not receive
health insurance through an employer; and (3) who purchase health insurance
through an Exchange.45 26 U.S.C. § 36B(a), (b), (c)(1)(A)–(C).
To receive the credit, eligible individuals must enroll in a plan offered
45
Specifically, the amount of the federal tax credit for a given month is an amount equal
to the lesser of (1) the monthly premiums for the qualified health plan or plans, offered in the
individual market through an Exchange, that cover the taxpayer and the members of the
taxpayer’s household, or (2) the excess of: (a) the monthly premium the taxpayer would be
charged for the second lowest-cost silver plan over (b) 1/12 of the taxpayer’s yearly household
income multiplied by the “applicable percentage,” a percentage which ranges from 2.0% to 9.5%,
depending on income. 26 U.S.C. § 36B(b)(3)(A)–(C).
An example helps translate. For a family of four with an income of $33,075 per year,
assuming that the premium in the second lowest-cost silver plan covering the family is $4,500
per year ($375 per month), the federal tax credit would be $3,177 per year ($264.75 per month).
See Families USA, Lower Taxes, Lower Premiums: The New Health Insurance Tax Credit 8
(2010), available at http://www.familiesusa.org/assets/pdfs/health-reform/Premium-Tax-
Credits.pdf. Without the federal tax credit, the family pays $375 per month; with the credit, the
family pays $110.25 per month, or a total of $1,323, instead of the full $4,500 premium. Id. The
federal tax credit provides a major incentive for the uninsured (in the individual market) to
purchase insurance from a private insurer but through the Exchange.
38
through an Exchange and report their income to the Exchange. 42 U.S.C.
§ 18081(b). If the individual’s income level qualifies, the Treasury pays the
premium tax credit amount directly to the individual’s insurance plan issuer. Id.
§ 18082(c)(2)(A). The individual pays only the dollar difference between the
premium tax credit and the total premium charged. Id. § 18082(c)(2)(B). The
credit amount is tied to the cost of the second-cheapest plan in the silver level
offered through an Exchange where the individual resides, though the credit may
be used for any plan purchased through an Exchange.46 See 26 U.S.C. § 36B(b)(2).
6. Federal Cost-Sharing Subsidies
The Act also provides a variety of federal cost-sharing subsidies to reduce
the out-of-pocket expenses for individuals who (1) enroll in a qualified health plan
46
Commentators have explained the operation of the tax credit for households between
one and four times the federal poverty level as follows:
For taxable years after 2013, certain low- and moderate-income individuals who
purchase insurance under a health insurance exchange that the states are required to
create will receive a refundable credit that subsidizes their purchase of that insurance.
. . . According to the Social Security Administration, the current poverty level for a
single individual is $10,830; thus a single individual can have household income of
as much as $43,320 and still qualify to have his insurance cost subsidized by the
government. For a family of four, the current poverty level is $22,050; such a family
can have household income as large as $88,200 and still qualify for a subsidy.
Douglas A. Kahn & Jeffrey H. Kahn, Free Rider: A Justification for Mandatory Medical
Insurance Under Health Care Reform, 109 MICH . L. REV . FIRST IMPRESSIONS 78, 83 (2011).
HHS has since raised the poverty level for 2011 to $22,350 for a family of four and
$10,890 for a single individual. 76 Fed. Reg. 3637, 3638 (Jan. 20, 2011). Thus, a single
individual can have a household income of as much as $43,560 and still be eligible for a federal
tax credit. A family of four can have a household income of as much as $89,400 and still be
eligible for a federal tax credit. See 42 U.S.C. § 18071(b).
39
sold through an Exchange in the silver level of coverage, and (2) have a household
income between 1 and 4 times the federal poverty level. 42 U.S.C. § 18071.
As noted earlier, the Exchanges, with significant federal tax credits and
subsidies, are predicted to make insurance available to 9 million in 2014 and 22
million by 2016.47 We now turn to the Act’s third component: the individual
mandate.
F. Individual Mandate
The individual mandate and its penalty are housed entirely in the Internal
Revenue Code, in subtitle D, labeled “Miscellaneous Excise Taxes.” 26 U.S.C.
§ 5000A et seq. The Act mandates that, after 2013, all “applicable individuals” (1)
shall maintain “minimum essential coverage” for themselves and their dependents,
or (2) pay a monetary penalty. Id. § 5000A(a)–(b). Taxpayers must include the
penalty on their annual federal tax return. Id. § 5000A(b)(2). Married taxpayers
filing a joint return are jointly liable for any penalty. Id. § 5000A(b)(3)(B).
47
CBO, Analysis, supra note 15, at 18 tbl.3. The CBO predicts that by 2019, 24 million
will be insured through the Exchanges, with at least four-fifths receiving “federal subsidies to
substantially reduce the cost of purchasing health insurance coverage,” on average $6,460 per
person. Id. at 2, 18–19 tbl.3.
The CBO estimates that this 9 million increase in 2014 will be partially offset by a 3
million decrease in individual-market coverage outside the Exchanges. Id. The number obtaining
coverage in the individual market outside the Exchanges is projected to decrease because the Act
incentivizes individuals—through premium tax credits, subsidies, and otherwise—to purchase
policies through the Exchanges. Similarly, the 22 million increase in Exchange-based coverage in
2016 will be partially offset by a 5 million decrease in those covered by individual-market
policies obtained outside the Exchanges. Id.
40
1. “Minimum Essential Coverage”
At first glance, the term “minimum essential coverage,” as used in the
Internal Revenue Code, sounds like it refers to a base level of benefits or services.
However, the Act uses a different term—the “essential health benefits package” in
Title 42—to describe health care benefits and services. 42 U.S.C. § 300gg-6(a)
(effective Jan. 1, 2014). In contrast, “minimum essential coverage” refers to a
broad array of plan types that will satisfy the individual mandate. 26 U.S.C.
§ 5000A(f)(1).
An individual can satisfy the mandate’s “minimum essential coverage”
requirement through: (1) any government-funded health plan such as Medicare
Part A, Medicaid, TRICARE, or CHIP; (2) any “eligible employer-sponsored
plan”; (3) any health plan in the individual market; (4) any grandfathered health
plan; or (5) as a catch-all, “such other health benefits coverage” that is recognized
by HHS in coordination with the Treasury. Id. The mandate provisions in § 5000A
do not specify what benefits must be in that plan. The listed plans, in many
instances, satisfy the mandate regardless of the level of benefits or coverage.
2. Government-Sponsored Programs
For example, a variety of government-sponsored programs will satisfy the
individual mandate. For individuals 65 or over, enrolling in Medicare Part A will
41
suffice. Id. § 5000A(f)(1)(A)(i). Individuals and families may satisfy the mandate
by enrolling in Medicaid, if eligible. Id. § 5000A(f)(1)(A)(ii). Qualifying children
under age 19 can satisfy the mandate by enrolling in CHIP. Id.
§ 5000A(f)(1)(A)(iii). Government-sponsored programs for veterans, active and
former military personnel and their families, active Peace Corps volunteers, and
active and retired civilian Defense Department personnel and their dependents
satisfy the mandate. Id. § 5000A(f)(1)(A)(iv), (v), (vi).
3. Eligible Employer-Sponsored Plans
Individuals may also satisfy the mandate by purchasing coverage through
any “eligible employer-sponsored plan.” Id. § 5000A(f)(1)(B). An “eligible
employer-sponsored plan” is a “group health plan or group health insurance
coverage” offered “by an employer to the employee,” which is defined broadly as:
(1) a governmental plan established by the federal, state, or local government for
its employees; (2) “any other plan or coverage offered in the small or large group
market within a State”; or (3) a grandfathered health plan offered in a group
market. Id. § 5000A(f)(2). Health plans of large employers satisfy the individual
mandate whatever the nature of the benefits offered to the employee.48
48
Because of these looser restrictions, some commentators have found it surprising that
employer-sponsored coverage qualifies as “minimum essential coverage” under the Act. See
Monahan & Schwarcz, supra note 37, at 157 (“Surprisingly, . . . [the Act] appears to define
employer-provided coverage as automatically constituting minimum essential coverage for
42
Whether a “self-insured health plan” of large employers satisfies the
mandate is another story.49 The mandate’s § 5000A(f)(2) refers to plans in the
“small or large group market.” Id. § 5000A(f)(2) (emphasis added). A “self-
insured health plan,” by definition, is not sold or offered in a “market.” It is thus
not clear whether large employers’ self-insured plans will constitute “eligible
employer-sponsored plans” in § 5000A(f)(2) and thereby satisfy the mandate. It
may be that HHS will later recognize “self-insured plans” under the “other
coverage” or “grandfathered plan” categories in the mandate’s § 5000A(f)(2).
4. Plans in the Individual Market
Individuals can also satisfy the mandate by purchasing insurance in the
individual market through Exchanges or directly from issuers. Id.
§ 5000A(f)(1)(C). The Act imposes the “essential health benefits package”
requirement on plans sold in the individual and small group markets. 42 U.S.C.
§ 300gg-6 (effective Jan. 1, 2014). However, in the individual market, insurers can
offer catastrophic plans to persons under age 30 or certain persons exempted from
the mandate. Id. § 18022(e).
individuals, despite the minimal requirements applicable to such plans.”).
49
The Act defines an “applicable self-insured health plan” to include self-insured plans
providing health care coverage where “any portion of such coverage is provided other than
through an insurance policy.” 26 U.S.C. § 4376(c).
43
5. Grandfathered Plans
An already-insured individual can fulfill the individual mandate by being
covered by any “grandfathered health plan,” 26 U.S.C. § 5000A(f)(1)(D), which is
any group health plan or health insurance coverage in which an individual was
enrolled on March 23, 2010.50 42 U.S.C. § 18011(a)(1), (e).
While not subject to many of the Act’s product reforms, grandfathered plans
must comply with some provisions, among them the extension of dependent
coverage until age 26, the medical-loss ratio requirements, and the prohibitions on
(1) preexisting condition exclusions, (2) lifetime limits on coverage, (3) excessive
waiting periods, and (4) unfair rescissions of coverage. Id. § 18011(a)(2)–(4), (e).
Under the “interim final regulations” issued by HHS, plans will lose their
grandfathered status if they choose to significantly (1) cut or eliminate benefits;
(2) increase copayments, deductibles, or out-of-pocket costs for their enrollees; (3)
decrease the share of premiums employers contribute for workers in group plans;
50
The Act also allows the enrollment of family members and newly hired employees in
grandfathered plans without losing the plans’ grandfathered status. 42 U.S.C. § 18011(b), (c).
Under the “interim final regulations” issued by HHS, “[a] group health plan or group health
insurance coverage does not cease to be grandfathered health plan coverage merely because one
or more (or even all) individuals enrolled on March 23, 2010 cease to be covered, provided that
the plan has continuously covered someone since March 23, 2010 (not necessarily the same
person, but at all times at least one person).” 45 C.F.R. § 147.140(a)(1)(i).
44
or (4) decrease annual limits.51 45 C.F.R. § 147.140(g).
6. “Other Coverage Recognized” by HHS
The individual mandate even provides a catch-all that leaves open the door
to other health coverage. The “minimum essential coverage” requirement may be
met by any other coverage that HHS, in coordination with the Treasury, recognizes
for purposes of meeting this requirement. 26 U.S.C. § 5000A(f)(1)(E).
7. Exemptions and Exceptions to Individual Mandate
The individual mandate, however, does not apply to eight broad categories
of persons, either by virtue of an exemption from the mandate or an exception to
the mandate’s penalty. The Act carves out these three exemptions from the
individual mandate: (1) persons with religious exemptions; (2) aliens not legally
present in the country; and (3) incarcerated persons. Id. § 5000A(d).
The Act also excepts five additional categories of persons from the
individual mandate penalty: (1) individuals whose required annual premium
contribution exceeds 8% of their household income for the taxable year;52 (2)
51
See also HealthReform.gov, Fact Sheet: Keeping the Health Plan You Have: The
Affordable Care Act and “Grandfathered” Health Plans,
http://www.healthreform.gov/newsroom/keeping_the_health_plan_you_have.html; Families
USA, Grandfathered Plans under the Patient Protection and Affordable Care Act (2010),
available at http://www.familiesusa.org/assets/pdfs/health-reform/Grandfathered-Plans.pdf.
52
The required contribution for coverage means, generally, the amount required to
maintain coverage either in an employer-sponsored health plan or in a bronze-level plan offered
on an Exchange. See 26 U.S.C. § 5000A(e)(1)(A).
45
individuals whose household income for the taxable year is below the federal
income tax filing threshold in 26 U.S.C. § 6012(a)(1); (3) members of Indian
tribes; (4) individuals whose gaps in health insurance coverage last less than three
months; and (5) as a catch-all, individuals who, as determined by HHS, have
suffered a “hardship” regarding their ability to obtain coverage under a qualified
health plan. Id. § 5000A(e).
8. Calculation of Individual Mandate Penalty
If an applicable individual fails to purchase an insurance plan in one of the
many ways allowed, the individual must pay a penalty. Id. § 5000A(b)(1). The
annual penalty will be either: (1) a flat dollar amount, or (2) a percentage of the
individual’s income if higher than the flat rate. Id. § 5000A(c)(1). However, the
percentage-of-income figure is capped at the national average premium amount for
bronze-level plans in the Exchanges.53 Id.
The flat dollar penalty amount, which sets the floor, is equal to $95 in 2014,
$325 in 2015, and $695 in 2016. Id. § 5000A(c)(2)(A), (c)(3)(A)–(C). Beyond
2016, it remains $695, except for inflation adjustments.54 Id. § 5000A(c)(3)(D).
53
If the individual fails to fulfill the mandate requirement for only certain months as
opposed to a full year, the penalty for each month of no coverage is equal to one-twelfth of the
greater of these figures. 26 U.S.C. § 5000A(c)(2)–(3).
54
The flat dollar amount applies to each individual and dependent in the taxpayer’s
household without minimum essential coverage, but will not exceed three times the flat dollar
amount (even if more than three persons are in the household). 26 U.S.C. § 5000A(c)(2)(A). A
46
The percentage-of-income number that will apply, if higher than the flat
dollar amount, is a set percentage of the taxpayer’s income that is in excess of the
tax-filing threshold (defined in 26 U.S.C. § 6012(a)(1)).55 Id. § 5000A(c)(2). In
any event, the total penalty for the taxable year cannot exceed the national average
premium of a bronze-level qualified health plan. Id. § 5000A(c)(1).
9. Collection of Individual Mandate Penalty
An individual who fails to pay the penalty is not subject to criminal or
additional civil penalties. Id. § 5000A(g)(2)(A), (B). The IRS’s authority to use
liens or levies does not apply to the penalty. Id. § 5000A(g)(2)(B). No interest
accrues on the penalty. The Act contains no enforcement mechanism. See id. All
the IRS, practically speaking, can do is offset any tax refund owed to the
uninsured taxpayer.56
We now review the Act’s fourth component aimed at reducing the number
of the uninsured: the employer penalty.
G. Employer Penalty
family’s flat dollar penalty in 2016 would not exceed $2,085 ($695 multiplied by 3).
55
The percentage by which the taxpayer’s household income exceeds the filing threshold
is phased in over three years: 1% in 2014, 2% in 2015, and 2.5% in 2016 and thereafter. 26
U.S.C. § 5000A(c)(2)(B)(i)–(iii).
56
Of course, the government can always file a civil lawsuit, but the cost of that suit would
exceed the modest penalty amount.
47
The Act imposes a penalty, also housed in the Internal Revenue Code, on
certain employers if they do not offer coverage, or offer inadequate coverage, to
their employees. Id. § 4980H(a), (b). The penalty applies to employers with an
average of at least 50 full-time employees. Id. § 4980H(a), (b), (c)(2). The
employer must pay a penalty if the employer: (1) does not offer its full-time
employees the opportunity to enroll in “minimum essential coverage” under an
“eligible employer-sponsored plan” as defined in § 5000A(f)(2); or (2) offers
minimum essential coverage (i) that is “unaffordable,” or (ii) that consists of a
plan whose share of the total cost of benefits is less than 60% (i.e., does not
provide “minimum value”); and (3) at least one full-time employee purchases a
qualified health plan through an Exchange and is allowed a premium tax credit or
a subsidy. Id. § 4980H(a), (c).
The employer penalty is tied to an employer’s failure to offer “minimum
essential coverage.” Id. § 4980H(a), (b). Recall that “minimum essential coverage”
is not the same thing as the “essential health benefits package.” Thus, a large
employer may avoid the penalty so long as it offers any plan in the large group
market in the state, and the plan is “affordable” and provides “minimum value.”
Id. § 4980H(b)(1), (c)(3).
A small employer’s plan, however, must include an “essential health
48
benefits package” and also be “affordable” and provide “minimum value.” 42
U.S.C. §§ 300gg-6(a) (effective Jan. 1, 2014), 18022(a)(1)–(3). The Act also
provides tax incentives for certain small employers (up to 25 employees) to
purchase health insurance for their workers. 26 U.S.C. § 45R.
1. Calculation of Penalty Amount
The penalty amount depends on whether the employee went to the
Exchange because the employer’s plan (1) was not “minimum essential coverage”
or (2) was either “unaffordable” or did not provide “minimum value.” The penalty
translates to $2,000 to $3,000 per employee annually. Id. § 4980H.
An employer that does not offer “minimum essential coverage” to all full-
time employees faces a tax penalty of $166.67 per month (one-twelfth of $2,000)
for each of its full-time employees, until the employer offers such coverage
(subject to an exemption for the first 30 full-time employees). Id. § 4980H(a),
(c)(1), (c)(2)(D). This particular penalty applies for as long as at least one
employee, eligible for a premium tax credit or a subsidy, enrolls in a qualified
health plan through an Exchange. Id.
In the “unaffordable coverage”57 or “no minimum value” scenarios, the
57
Employer-sponsored coverage that is not “affordable” is defined as coverage where the
employee’s required annual contribution to the premium is more than 9.5% of the employee’s
household income (as defined for purposes of the premium tax credits in the Exchanges). 26
U.S.C. § 36B(c)(2)(C)(i). This percentage of the employee’s income is indexed to the per capita
49
employer faces a tax penalty of $250 per month (one-twelfth of $3,000) for each
employee who (1) turns down the employer-sponsored plan; (2) purchases a
qualified health plan in an Exchange; and (3) is eligible for a federal premium tax
credit or subsidy in an Exchange.58 Id. § 4980H(b)(1).
2. Automatic Enrollment
An automatic enrollment requirement applies to employers who (1) have
more than 200 employees and (2) elect to offer coverage to their employees. Id.
§ 218a. Such employers must automatically enroll new and current full-time
employees, who do not opt out, in one of the employer’s plans. Id. The maximum
90-day waiting period rule applies, however. Id.; 42 U.S.C. § 300gg-7 (effective
Jan. 1, 2014).
3. Temporary Reinsurance Program for Employers’ Early Retirees
To reduce the number of the uninsured, the Act provides for immediate
coverage for even retired employees 55 years and older who are not yet eligible for
growth in premiums for the insurance market as determined by HHS. Id. § 36B(c)(2)(C)(iv).
Note that the definition of “unaffordable” for the purposes of obtaining a federal tax credit or
subsidy is not the same standard that is used to determine whether an individual is exempt from
the individual mandate because that individual cannot afford coverage. Compare id.
§ 36B(c)(2)(C)(i), with id. § 5000A(e)(1).
58
The employer’s penalty, in this instance, does not exceed the maximum penalty for
offering no coverage at all. The penalty for any month is capped at an amount equal to the
number of full-time employees during the month multiplied by one-twelfth of $2,000, or $166.67
(subject to the exemption for the first 30 full-time employees). See 26 U.S.C. § 4980H(b)(2), (c).
50
Medicare. A federal temporary reinsurance program will reimburse former
employers who allow their early retirees and the retirees’ dependents and spouses
to participate in their employment-based plans. The federal government will
reimburse a portion of the plan’s cost.59 42 U.S.C. § 18002(a)(1), (a)(2)(C).
We turn to the Act’s fifth component: the Medicaid expansion, which alone
will cover millions of the uninsured.
H. Medicaid Expansion
The Act expands Medicaid eligibility and subsidies by amending 42 U.S.C.
§ 1396a, the section of the Medicaid Act outlining what states must offer in their
coverage plans. The Act imposes these substantive requirements on the states’
plans, starting in 2014, unless otherwise noted:
(1) States will be required to cover adults under age 65 (who are not
pregnant and not already covered) with incomes up to 133% of the federal poverty
level (“FPL”). Id. § 1396a(a)(10)(A)(i)(VIII). This is a significant change, because
previously the Medicaid Act did not set a baseline income level for mandatory
eligibility. Thus, many states currently do not provide Medicaid to childless adults
59
The plan shall submit claims for reimbursement to HHS, and HHS shall reimburse the
plan for 80% of the costs of claims in excess of $15,000 but not greater than $90,000. 42 U.S.C.
§ 18002(c)(2). The reimbursements will be available until January 1, 2014. Id. § 18002(a)(1).
This federally-subsidized temporary program closes the gap between now and 2014, when the
Exchanges, with their federal tax credits and subsidies, become operational.
51
and cover parents only at much lower income levels.
(2) States will be required to provide Medicaid to all children whose
families earn up to 133% of the FPL, including children currently covered through
separate CHIP programs. Id. §§ 1396a(a)(10)(A)(i)(VII), 1396a(l)(1)(D),
1396a(l)(2)(C). States currently must provide Medicaid to children under age 6
with family income up to 133% of the FPL and children ages 6 through 18 with
family income up to 100% of the FPL. Id. §§ 1396a(a)(10)(A)(i)(IV), (VI), (VII),
1396a(l)(1)(B)–(D), 1396a(l)(2)(A)–(C).
(3) States are required to at least maintain existing Medicaid eligibility
levels for adults and children (that were in place as of March 23, 2010) until a
state’s Exchange is fully operational. Id. § 1396a(gg)(1). Whereas states
previously had the option to raise or lower their eligibility levels, states cannot
institute more restrictive eligibility standards until the new policies take place. Id.
(4) Children under age 26 who were receiving Medicaid but were “aged
out” of foster care will be newly eligible to continue receiving Medicaid. Id.
§ 1396a(a)(10)(A)(i)(IX) (effective Jan. 1, 2014).
(5) The new law will increase Medicaid payments for primary care services
provided by primary care doctors to 100% of the Medicare payment rates for 2013
and 2014. Id. § 1396a(a)(13)(C). States will receive 100% federal funding for the
52
cost of the increasing payment rates for 2013 and 2014.60 Id. § 1396d(dd).
Having covered the Act’s five major components, we examine the two
components challenged as unconstitutional: (1) the Medicaid expansion and (2)
the individual mandate.
III. CONSTITUTIONALITY OF MEDICAID EXPANSION
The state plaintiffs challenge the district court’s grant of summary judgment
in favor of the government on the state plaintiffs’ claim that the Act’s expansion of
the Medicaid program, enacted pursuant to the Spending Clause, is unduly
coercive under South Dakota v. Dole, 483 U.S. 203, 211, 107 S. Ct. 2793, 2798
(1987). For the reasons given below, we conclude that it is not.
A. History of the Medicaid Program
Medicaid is a long-standing partnership between the national and state
sovereigns that has been in place for nearly half a century. “In 1965, Congress
enacted the Medicaid Act, 42 U.S.C. § 1396 et seq., as Title XIX of the Social
Security Act.” Moore ex rel. Moore v. Reese, 637 F.3d 1220, 1232 (11th Cir.
2011); see also Harris v. McRae, 448 U.S. 297, 301, 100 S. Ct. 2671, 2680 (1980).
“Medicaid is a jointly financed federal-state cooperative program, designed to help
states furnish medical treatment to their needy citizens.” Reese, 637 F.3d at 1232.
60
See also Julie Stone, et al., Cong. Research Serv., R41210, Medicaid and the State
Children’s Health Insurance Program (CHIP) Provisions in the PPACA 2–4 (2010).
53
The Medicaid Act “prescribes substantive requirements governing the scope of
each state’s program.” Curtis v. Taylor, 625 F.2d 645, 649 (5th Cir. 1980).61
“Section 1396a provides that a ‘State plan for medical assistance’ must meet
various guidelines, including the provision of certain categories of care and
services.” Reese, 637 F.3d at 1232 (citing 42 U.S.C. § 1396a). “Some of these
categories are discretionary, while others are mandatory for participating states.”
Id. (citing 42 U.S.C. § 1396a(a)(10)).
Under the Act, the Medicaid program serves as a cornerstone for expanded
health care coverage. As explained above in Section II(H), the Act expands
Medicaid eligibility and provides significant Medicaid subsidies to the
impoverished. As a result of the Act’s Medicaid expansion, an estimated 9 million
of the 50 million uninsured will be covered for health care by 2014 (and 16
million by 2016 and 17 million by 2021).62
The federal government will pay 100% of the fees associated with the
increased Medicaid eligibility and subsidies beginning in 2014 and until 2016;
that percentage will then drop gradually each year until reaching 90% in 2020. 42
61
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), this
Court adopted as binding precedent all decisions of the former Fifth Circuit issued before the
close of business on September 30, 1981.
62
CBO, Analysis, supra note 15, at 18 tbl.3.
54
U.S.C. § 1396d(y)(1). The federal government will not cover administrative
expenses associated with implementing the new Medicaid policies. See id. Under
42 U.S.C. § 1396c, a state whose plan does not comply with the requirements
under § 1396a will be notified by HHS of its noncompliance, and “further
payments will not be made to the State (or, in [HHS’s] discretion . . . payments
will be limited to categories under or parts of the State plan not affected by such
failure), until [HHS] is satisfied that there will no longer be any such failure to
comply.” Id. § 1396c.
B. Congress’s Power under the Spending Clause
The Spending Clause provides that “Congress shall have Power . . . to pay
the Debts and provide for the common Defence and general Welfare of the United
States.” U.S. CONST. art. I, § 8, cl. 1. The Spending Clause permits Congress to
“fix the terms on which it shall disburse federal money to the States.” Pennhurst
State Sch. & Hosp. v. Halderman, 451 U.S. 1, 17, 101 S. Ct. 1531, 1539 (1981).
“[L]egislation enacted pursuant to the spending power is much in the nature of a
contract: in return for federal funds, the States agree to comply with federally
imposed conditions.” Id. at 17, 101 S. Ct. at 1540.
There are four primary restrictions on legislation enacted pursuant to the
Spending Clause. First, the exercise of the spending power must be in pursuit of
55
the general welfare. See Helvering v. Davis, 301 U.S. 619, 640, 57 S. Ct. 904, 908
(1937). Second, the conditions on the receipt of federal funds must be reasonably
related to the legislation’s stated goal. Dole, 483 U.S. at 207, 107 S. Ct. at 2796.
Third, Congress’s intent to condition funds on a particular action must be
unambiguous and must enable the states to knowingly exercise their choice
whether to participate. Pennhurst, 451 U.S. at 17, 101 S. Ct. at 1540. Finally, the
federal legislation cannot “induce the States to engage in activities that would
themselves be unconstitutional.” Dole, 483 U.S. at 210, 107 S. Ct. at 2798. The
state plaintiffs do not contend the Act’s Medicaid expansion violates any of these
restrictions.63
Rather, the state plaintiffs argue that the Medicaid expansion violates an
additional limitation on the use of the spending power to encourage state
legislation, one that derives not from the spending power alone, but also from the
63
The state plaintiffs suggest that the conditions imposed here violated the second Dole
restriction because they have no reasonable relationship to the size of the federal inducement.
States’ Opening Br. at 48, 53. In so arguing, the plaintiffs misinterpret Dole. The Supreme Court
made clear that the required relationship is between the conditions imposed and “the federal
interest in particular national projects or programs,” Dole, 483 U.S. at 207, 107 S. Ct. at 2796
(quotation marks omitted)—that is, “the purpose of federal spending.” New York v. United
States, 505 U.S. 144, 167, 122 S. Ct. 2408, 2423 (1992). The state plaintiffs mistakenly assert
that the required relationship is between the conditions imposed and “the size of the federal
inducement.” States’ Opening Br. at 53. The condition Congress imposes here on the receipt of
federal funds—requiring Medicaid coverage of certain newly eligible individuals—is undeniably
related to the purpose of the Medicaid Act, which is to “provid[e] federal financial assistance to
States that choose to reimburse certain costs of medical treatment for needy persons.” McRae,
448 U.S. at 301, 100 S. Ct. at 2680.
56
Tenth Amendment’s reservation of certain powers to the states. U.S. CONST.
amend. X; see Charles C. Steward Mach. Co. v. Davis, 301 U.S. 548, 585, 57 S.
Ct. 883, 890 (1937); West Virginia v. HHS, 289 F.3d 281, 286–87 (4th Cir. 2002).
Congress may not employ the spending power in such a way as to “coerce” the
states into compliance with the federal objective. See Dole, 483 U.S. at 211, 107 S.
Ct. at 2798; Steward Mach., 301 U.S. at 589–91, 57 S. Ct. at 892–93; cf. Coll. Sav.
Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 687, 119 S.
Ct. 2219, 2231 (1999) (holding that a state’s waiver of its sovereign immunity is
not voluntary where Congress has made it a condition of the state’s participation
in an otherwise lawful activity). This restriction is different from the restrictions
stemming from the spending power because it addresses whether the legislation,
while perhaps an appropriate use of the spending power, goes beyond the
Spending Clause by forcing the states to participate in a federal program. Cf.
Printz v. United States, 521 U.S. 898, 117 S. Ct. 2365 (1997) (holding that
Congress may not enact a law pursuant to one of its enumerated powers and then
compel state officers to execute those federal laws); see also Steward Mach., 301
U.S. at 585, 57 S. Ct. at 890. That is, the coercion test asks whether the federal
scheme removes state choice and compels the state to act because the state, in fact,
has no other option.
57
The coercion doctrine was first discussed at length by the Supreme Court in
Charles C. Steward Machine Co. v. Davis. In that case, a corporation challenged
the imposition of an employment tax under the newly enacted Social Security Act.
Addressing the corporation’s argument that the federal government improperly
coerced states into participation in the Social Security program, the Supreme Court
stated:
The difficulty with the petitioner’s contention is that it confuses motive
with coercion. Every tax is in some measure regulatory. To some extent
it interposes an economic impediment to the activity taxed as compared
with others not taxed. In like manner every rebate from a tax when
conditioned upon conduct is in some measure a temptation. But to hold
that motive or temptation is equivalent to coercion is to plunge the law
in endless difficulties. The outcome of such a doctrine is the acceptance
of a philosophical determinism by which choice becomes impossible.
Till now the law has been guided by a robust common sense which
assumes the freedom of the will as a working hypothesis in the solution
of its problems. . . . Nothing in the case suggests the exertion of a power
akin to undue influence, if we assume that such a concept can ever be
applied with fitness to the relations between state and nation. Even on
that assumption the location of the point at which pressure turns into
compulsion, and ceases to be inducement, would be a question of
degree, at times, perhaps, of fact.
301 U.S. at 589–90, 57 S. Ct. at 892 (quotation marks and citation omitted)
(emphasis added).
This discussion of the coercion doctrine was later revived by the Supreme
Court in South Dakota v. Dole. In Dole, the state of South Dakota challenged 23
U.S.C. § 158, which directed the Secretary of Transportation to withhold a
58
percentage of federal highway funds otherwise allocable to the states if states
failed to maintain a minimum drinking-age requirement of 21 years. 483 U.S. at
205, 107 S. Ct. at 2795. The Court noted that Congress may attach conditions on
the receipt of federal funds to meet certain policy objectives, including those that
Congress could not otherwise meet through direct regulation. Id. at 206–07, 107 S.
Ct. at 2795–96. After analyzing whether the minimum drinking-age condition met
the four restrictions on the Spending Clause discussed above, the Court noted,
“Our decisions have recognized that in some circumstances the financial
inducement offered by Congress might be so coercive as to pass the point at which
‘pressure turns into compulsion.’” Id. at 211, 107 S. Ct. at 2798 (quoting Steward
Mach., 301 U.S. at 590, 57 S. Ct. at 892). It further opined:
When we consider, for a moment, that all South Dakota would
lose if she adheres to her chosen course as to a suitable minimum
drinking age is 5% of the funds otherwise obtainable under specified
highway grant programs, the argument as to coercion is shown to be
more rhetoric than fact. . . .
Here Congress has offered relatively mild encouragement to the
States to enact higher minimum drinking ages than they would otherwise
choose. But the enactment of such laws remains the prerogative of the
States not merely in theory but in fact.
Id. (emphasis added). Thus, the Court once again recognized the coercion
doctrine, but found no violation.
The limited case law on the doctrine of coercion and the fact that the
59
Supreme Court has never devised a test to apply it has left many circuits with the
conclusion that the doctrine, twice recognized by the Supreme Court, is not a
viable defense to Spending Clause legislation. See, e.g., Pace v. Bogalusa City
Sch. Bd., 403 F.3d 272, 278 (5th Cir. 2005) (en banc) (“It goes without saying that,
because states have the independent power to lay and collect taxes, they retain the
ability to avoid the imposition of unwanted federal regulation simply by rejecting
federal funds.”); A.W. v. Jersey City Pub. Schs., 341 F.3d 234, 243–44 (3d Cir.
2003) (noting that the state’s freedom to tax makes it difficult to find a federal law
coercive, even when that law threatens to withhold all federal funding in a
particular area); Kansas v. United States, 214 F.3d 1196, 1201–02 (10th Cir. 2000)
(“The cursory statements in Steward Machine and Dole mark the extent of the
Supreme Court’s discussion of a coercion theory. The Court has never employed
the theory to invalidate a funding condition, and federal courts have been similarly
reluctant to use it.” (footnote omitted)); id. at 1202 (observing that the theory is
“unclear, suspect, and has little precedent to support its application”); California v.
United States, 104 F.3d 1086, 1092 (9th Cir. 1997) (noting in a Medicaid
expansion case that “to the extent that there is any viability left in the coercion
theory, it is not reflected in the facts of this record”); Nevada v. Skinner, 884 F.2d
445, 448 (9th Cir. 1989) (“The difficulty if not the impropriety of making judicial
60
judgments regarding a state’s financial capabilities renders the coercion theory
highly suspect as a method for resolving disputes between federal and state
governments.”); Oklahoma v. Schweiker, 655 F.2d 401, 414 (D.C. Cir. 1981)
(“The courts are not suited to evaluating whether the states are faced here with an
offer they cannot refuse or merely a hard choice. . . . We therefore follow the lead
of other courts that have explicitly declined to enter this thicket when similar
funding conditions have been at issue.”) (pre-Dole); N.H. Dep’t of Emp’t Sec. v.
Marshall, 616 F.2d 240, 246 (1st Cir. 1980) (“Petitioners argue, however, that this
option of the state to refuse to participate in the program is illusory, since the
severe financial consequences that would follow such refusal negate any real
choice. . . . We do not agree that the carrot has become a club because rewards for
conforming have increased. It is not the size of the stakes that controls, but the
rules of the game.”) (pre-Dole).
Even in those circuits that do recognize the coercion doctrine, it has had
little success. See West Virginia v. HHS, 289 F.3d at 290, 294–95 (rejecting a
coercion doctrine challenge to previous Medicaid Act amendments on the ground
that the Secretary may choose to withhold only some funds); Jim C. v. United
States, 235 F.3d 1079, 1081–82 (8th Cir. 2000) (en banc) (holding that loss of all
federal education funds, in that case amounting to 12% of the state’s education
61
budget, was “politically painful” but not coercive). Indeed, our review of the
relevant case law indicates that no court has ever struck down a law such as this
one as unduly coercive.
There are two cases in which the Supreme Court has struck down a statute
because it violated the Tenth Amendment’s prohibition on commandeering state
legislators and executive officials to perform the federal government’s work.
While not Spending Clause cases, these cases do give us an understanding of
when a law may be considered so coercive as to violate the Tenth Amendment. In
New York v. United States, the Court struck down as unduly coercive a portion of
the Low-Level Radioactive Waste Policy Amendments Act that required states to
“take title” to waste created within the state, noting that Congress has ample
opportunity to create incentives for states to act the way that Congress desires. 505
U.S. 144, 176–77, 112 S. Ct. 2408, 2428–29 (1992); see also Printz, 521 U.S. 898,
117 S. Ct. 2365 (holding, in accord with New York, that Congress cannot compel
states to enact or administer federal regulatory programs).64 It is clear from these
64
The Supreme Court has also briefly discussed coercion in another context. In Florida
Prepaid, the Court held that federal courts lack jurisdiction over a Lanham Act suit against a
state, despite a law purporting to abrogate the states’ sovereign immunity under the Lanham Act.
527 U.S. at 691, 119 S. Ct. at 2233. While the holding rested on Eleventh Amendment immunity
grounds, Justice Scalia noted: “[W]e think where the constitutionally guaranteed protection of
the States’ sovereign immunity is involved, the point of coercion is automatically passed—and
the voluntariness of waiver destroyed—when what is attached to the refusal to waive is the
exclusion of the State from otherwise lawful activity.” Id. at 687, 119 S. Ct. at 2231.
62
two cases that Congress cannot directly compel a state to act, nor can Congress
hinge the state’s right to regulate in an area that the state has a constitutional right
to regulate on the state’s participation in a federal program. Either act is clearly
unconstitutionally coercive.
If anything can be said of the coercion doctrine in the Spending Clause
context, however, it is that it is an amorphous one, honest in theory but
complicated in application. But this does not mean that we can cast aside our duty
to apply it; indeed, it is a mystery to us why so many of our sister circuits have
done so. To say that the coercion doctrine is not viable or does not exist is to
ignore Supreme Court precedent, an exercise this Court will not do. As the district
court noted, “The reluctance of some circuits to deal with this issue because of the
potential legal and factual complexities is not entitled to a great deal of weight,
because courts deal every day with the difficult complexities of applying
Constitutional principles set forth and defined by the Supreme Court.” Florida ex
rel. McCollum v. HHS, 716 F. Supp. 2d 1120, 1160 (N.D. Fla. 2010).65 If the
government is correct that Congress should be able to place any and all conditions
65
In Florida ex rel. McCollum v. HHS, 716 F. Supp. 2d 1120 (N.D. Fla. 2010), the district
court granted in part and denied in part the government’s motion to dismiss. In Florida ex rel.
Bondi v. HHS, No. 3:10-CV-91-RV/EMT, __ F. Supp. 2d __, 2011 WL 285683 (N.D. Fla. Jan.
31, 2011), the district court ruled that (1) the Medicaid expansion did not exceed Congress’s
Spending Clause powers and (2) the individual mandate is beyond Congress’s commerce powers
and is inseverable from the rest of the Act.
63
it wants on the money it gives to the states, then the Supreme Court must be the
one to say it.
For now, we find it a reasonable conclusion that Dole instructs that the
Tenth Amendment places certain limitations on congressional spending; namely,
that Congress cannot place restrictions so burdensome and threaten the loss of
funds so great and important to the state’s integral function as a state—funds that
the state has come to rely on heavily as part of its everyday service to its
citizens—as to compel the state to participate in the “optional” legislation. This is
the point where “‘pressure turns into compulsion.’” Dole, 483 U.S. at 211, 107 S.
Ct. at 2798 (quoting Steward Mach., 301 U.S. at 590, 57 S. Ct. at 892).
And so it is not without serious thought and some hesitation that we
conclude that the Act’s expansion of Medicaid is not unduly coercive under Dole
and Steward Machine. There are several factors, which, for us, are determinative.
First, the Medicaid-participating states were warned from the beginning of the
Medicaid program that Congress reserved the right to make changes to the
program. See 42 U.S.C. § 1304 (“The right to alter, amend, or repeal any provision
of this chapter is hereby reserved to the Congress.”); McRae, 448 U.S. at 301, 100
S. Ct. at 2680 (noting “[a]lthough participation in the Medicaid program is entirely
optional, once a State elects to participate, it must comply with the requirements”
64
that Congress sees fit to impose). Indeed, Congress has made numerous
amendments to the program since its inception in 1965. 42 U.S.C. § 1396a Note
(listing amendments).66 In each of these previous amendments, the states were
given the option to comply with the changes, or lose all or part of their funding. Id.
§ 1396c. None of these amendments has been struck down as unduly coercive.
Second, the federal government will bear nearly all of the costs associated
with the expansion. The states will only have to pay incidental administrative costs
associated with the expansion until 2016; after which, they will bear an increasing
percentage of the cost, capping at 10% in 2020.67 Id. § 1396d(y)(1). If states bear
little of the cost of expansion, the idea that states are being coerced into spending
66
The government discusses the various Medicaid expansions at length:
Congress has amended the Medicaid Act many times since its inception, and,
between 1966 and 2000, Medicaid enrollment increased from four million to 33
million recipients. Klemm, Medicaid Spending: A Brief History, 22 Health Care Fin.
Rev. 106 (Fall 2000). For example, in 1972, Congress required participating states
to extend Medicaid to recipients of Supplemental Security Income, thereby
significantly expanding Medicaid enrollment. Social Security Act Amendments of
1972, Pub. L. No. 92-603, 86 Stat. 1329 (1972). In 1989, Congress again expanded
enrollment by requiring states to extend Medicaid to pregnant women and children
under age six who meet certain income limits. Omnibus Budget Reconciliation Act
of 1989, Pub. L. No. 101-239, 103 Stat. 2106 (1989).
Government’s Reply Br. at 46–47.
67
At oral argument, the state plaintiffs expressed a concern that Medicaid costs would be
even larger because the individual mandate would greatly increase the number of persons in
Medicaid who are currently eligible but for one reason or another do not choose to participate.
This argument is not persuasive, however, as to whether the expansions themselves are coercive,
because the increase in enrollment would still occur if the mandate were upheld, even if the
Medicaid expansions were struck down.
65
money in an ever-growing program seems to us to be “more rhetoric than fact.”
Dole, 483 U.S. at 211, 107 S. Ct. at 2798.
Third, states have plenty of notice—nearly four years from the date the bill
was signed into law—to decide whether they will continue to participate in
Medicaid by adopting the expansions or not. This gives states the opportunity to
develop new budgets (indeed, Congress allocated the cost of the entire expansion
to the federal government initially, with the cost slowly shifting to the states over a
period of six years) to deal with the expansion, or to develop a replacement
program in their own states if they decide to do so. Fourth, like our sister circuits,
we cannot ignore the fact that the states have the power to tax and raise revenue,
and therefore can create and fund programs of their own if they do not like
Congress’s terms. See Pace, 403 F.3d at 278; Jersey City Pub. Schs., 341 F.3d at
243–44.
Finally, we note that while the state plaintiffs vociferously argue that states
who choose not to participate in the expansion will lose all of their Medicaid
funding, nothing in the Medicaid Act states that this is a foregone conclusion.
Indeed, the Medicaid Act provides HHS with the discretion to withhold all or
merely a portion of funding from a noncompliant state. 42 U.S.C. § 1396c; see
also West Virginia v. HHS, 289 F.3d at 291–92; Dole, 483 U.S. at 211, 107 S. Ct.
66
at 2798 (finding no coercion when “all South Dakota would lose if she adheres to
her chosen course as to a suitable minimum drinking age is 5% of the funds
otherwise obtainable under specified highway grant programs”).
Taken together, these factors convince us that the Medicaid-participating
states have a real choice—not just in theory but in fact—to participate in the Act’s
Medicaid expansion. See Dole, 483 U.S. at 211, 107 S. Ct. at 2798. Where an
entity has a real choice, there can be no coercion. See Steward Mach., 301 U.S. at
590, 57 S. Ct. at 892 (noting that in the absence of undue influence, “the law has
been guided by a robust common sense which assumes the freedom of the will as a
working hypothesis in the solution of its problems”).
Accordingly, the district court’s grant of summary judgment to the
government on the Medicaid expansion issue is affirmed.
We now turn to the constitutionality of the Act’s fourth component: the
individual mandate. We begin with the relevant constitutional clauses and
Supreme Court precedent.
IV. SUPREME COURT’S COMMERCE CLAUSE DECISIONS
Two constitutional provisions govern our analysis of whether Congress
acted within its commerce authority in enacting the individual mandate: the
Commerce Clause and the Necessary and Proper Clause. U.S. CONST. art. I, § 8,
67
cls. 3, 18.
Seven words in the Commerce Clause—“[t]o regulate Commerce . . . among
the several States,” id. art. I, § 8, cl. 3—have spawned a 200-year debate over the
permissible scope of this enumerated power. For many years, the Supreme Court
described Congress’s commerce power as regulating “traffic”—the “buying and
selling, or the interchange of commodities”—and “intercourse” among states,
including transportation. See Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 189–90
(1824). Under this early understanding of the Clause, Congress could not reach
commerce that was strictly internal to a state. See id. at 194–95 (“The enumeration
presupposes something not enumerated; and that something, if we regard the
language or the subject of the sentence, must be the exclusively internal commerce
of a State.”).
Ultimately, in recognition of a modern and integrated national economy and
society, the New Deal decisions of the Supreme Court charted an expansive
doctrinal path. See, e.g., United States v. Darby, 312 U.S. 100, 61 S. Ct. 451
(1941); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 57 S. Ct. 615 (1937).
These Supreme Court decisions adopted a broad view of the Commerce Clause, in
tandem with the Necessary and Proper Clause, and permitted Congress to regulate
purely local, intrastate economic activities that substantially affect interstate
68
commerce. The “substantial effects” doctrine, along with the related “aggregation”
doctrine, expanded the reach of Congress’s commerce power exponentially.
Nonetheless, the Supreme Court has staunchly maintained that the commerce
power contains outer limits which are necessary to preserve the federal-state
balance in the Constitution.
We therefore review the principal Commerce Clause precedents that inform
our analysis of the difficult question before us. Although extensive, this survey is
necessary to understanding the rudiments of the Supreme Court’s existing
Commerce Clause doctrines that we, as an inferior Article III court, must apply.
A. Wickard v. Filburn
One of the early “substantial effects” decisions is Wickard v. Filburn, 317
U.S. 111, 63 S. Ct. 82 (1942), where the Supreme Court held that Congress’s
wheat production quotas were constitutional as applied to a plaintiff farmer’s
home-grown and home-consumed wheat. The Agricultural Adjustment Act of
1938 (“AAA”) sought to control the volume of wheat in interstate and foreign
commerce by placing acreage limits on farmers. Id. at 115, 63 S. Ct. at 84. This
scheme was intended to prevent wheat surpluses and shortages, attendant price
instability, and obstructions to commerce. Id.
Plaintiff Filburn operated a small farm raising wheat. Id. at 114, 63 S. Ct. at
69
84. Filburn sold some of this wheat crop, allocated a portion as feed for livestock
and poultry on his farm, used another portion as flour for home consumption, and
preserved the remainder for future seedings. Id. Although his AAA allotment was
only 11.1 acres, Filburn sowed and harvested 23 acres of wheat—11.9 excess
acres that the Supreme Court treated as home-consumed wheat.68 Id. at 114–15, 63
S. Ct. at 84. This violation subjected him to a penalty of 49 cents a bushel.69 Id.
Filburn sued, claiming that Congress’s acreage quotas on his home-consumed
wheat exceeded its commerce power because the regulated activities were local in
nature and their effects upon interstate commerce were “indirect.” Id. at 119, 63 S.
Ct. at 86.
The Supreme Court examined the factors of home-consumed wheat that
impinged on interstate commerce—factors which could potentially frustrate
Congress’s regulatory scheme if not controlled. The Court declared that home-
consumed wheat “constitutes the most variable factor in the disappearance of the
wheat crop,” since “[c]onsumption on the farm where grown appears to vary in an
amount greater than 20 per cent of average production.” Id. at 127, 63 S. Ct. at 90.
68
See also Gonzales v. Raich, 545 U.S. 1, 20, 125 S. Ct. 2195, 2207 (2005) (noting that
Wickard Court treated Filburn’s wheat as home-consumed, not part of commercial farming
operation).
69
These penalties were levied regardless of “whether any part of the wheat either within
or without the quota, is sold or intended to be sold.” Wickard, 317 U.S. at 119, 63 S. Ct. at 86.
70
Filburn’s home-consumed wheat therefore “compete[d]” with wheat sold in
commerce, since “it supplies a need of the man who grew it which would
otherwise be reflected by purchases in the open market.” Id. at 128, 63 S. Ct. at 91.
The Wickard Court recognized that “the power to regulate commerce
includes the power to regulate the prices at which commodities in that commerce
are dealt in and practices affecting such prices” and “it can hardly be denied that a
factor of such volume and variability as home-consumed wheat would have a
substantial influence on price and market conditions.” Id. at 128, 63 S. Ct. at
90–91. Therefore, the objectives of the AAA acreage quotas—“to increase the
market price of wheat and to that end to limit the volume thereof that could affect
the market”— constituted appropriate regulatory goals. Id.
Despite the fact that Congress’s commerce power “has been held to have
great latitude,” id. at 120, 63 S. Ct. at 86, the Supreme Court recognized the
novelty of its decision, remarking that “there is no decision of this Court that such
activities may be regulated where no part of the product is intended for interstate
commerce or intermingled with the subjects thereof.” Id. at 120, 63 S. Ct. at
86–87. However, the Wickard Court concluded that “even if [Filburn’s] activity be
local and though it may not be regarded as commerce, it may still, whatever its
nature, be reached by Congress if it exerts a substantial economic effect on
71
interstate commerce and this irrespective of whether such effect is what might at
some earlier time have been defined as ‘direct’ or ‘indirect.’” Id. at 125, 63 S. Ct.
at 89. The Court declared that “questions of the power of Congress are not to be
decided by reference to any formula which would give controlling force to
nomenclature such as ‘production’ and ‘indirect’ and foreclose consideration of
the actual effects of the activity in question upon interstate commerce.” Id. at 120,
63 S. Ct. at 87; see also id. at 123–24, 63 S. Ct. at 88 (stating that “the relevance
of the economic effects in the application of the Commerce Clause . . . has made
the mechanical application of legal formulas no longer feasible”).
Even though Filburn’s own contribution to wheat demand “may be trivial by
itself,” this was “not enough to remove him from the scope of federal regulation
where, as here, his contribution, taken together with that of many others similarly
situated, is far from trivial.” Id. at 127–28, 63 S. Ct. at 90. Since Filburn’s home-
grown wheat slackened demand for market-based wheat and placed downward
pressures on price, “Congress may properly have considered that wheat consumed
on the farm where grown if wholly outside the scheme of regulation would have a
substantial effect in defeating and obstructing its purpose to stimulate trade therein
at increased prices.” Id. at 128–29, 63 S. Ct. at 91.
The Supreme Court noted that restricting Filburn’s acreage could have the
72
effect of forcing Filburn to buy wheat in the market: “It is said, however, that this
Act, forcing some farmers into the market to buy what they could provide for
themselves, is an unfair promotion of the markets and prices of specializing wheat
growers.” Id. at 129, 63 S. Ct. at 91. Rejecting this, the Supreme Court stated, “It
is of the essence of regulation that it lays a restraining hand on the self-interest of
the regulated and that advantages from the regulation commonly fall to others.” Id.
B. United States v. South-Eastern Underwriters Association
Although not concerning the “substantial effects” doctrine, the 1944 case
United States v. South-Eastern Underwriters Association, 322 U.S. 533, 64 S. Ct.
1162 (1944), is important to our analysis, as it marked the Supreme Court’s first
recognition that the insurance business is commerce—and where it is conducted
across state borders, it constitutes interstate commerce capable of being regulated
by Congress.70 Id. at 553, 64 S. Ct. at 1173. The Supreme Court emphasized the
interstate character of insurance business practices, which resulted in a
70
Prior to 1944, the Supreme Court consistently upheld the power of the states to regulate
insurance. During those early years, Congress had not regulated insurance, but the states had. The
operative question concerned whether Congress’s power to regulate interstate commerce
deprived states of the power to regulate the insurance business themselves. Since Congress had
not sought to regulate insurance, an invalidation of the states’ statutes would entail that insurance
companies could operate without any regulation. The earlier Supreme Court decisions held that
insurance is not commerce, thereby skirting any constitutional problem arising from the
Constitution’s grant of power to Congress to regulate interstate commerce. See Paul v. Virginia,
75 U.S. (8 Wall.) 168 (1868); see also N.Y. Life Ins. Co. v. Deer Lodge Cnty., 231 U.S. 495, 34
S. Ct. 167 (1913); Hooper v. California, 155 U.S. 648, 15 S. Ct. 207 (1895).
73
“continuous and indivisible stream of intercourse among the states composed of
collections of premiums, payments of policy obligations, and the countless
documents and communications which are essential to the negotiation and
execution of policy contracts.” Id. at 541, 64 S. Ct. at 1167. The defendants’
insurance policies “covered not only all kinds of fixed local properties, but also
. . . movable goods of all types carried in interstate and foreign commerce by every
media of transportation.” Id. at 542, 64 S. Ct. at 1168.
The South-Eastern Underwriters Court rejected the notion that, if any
components of the insurance business constitute interstate commerce, the states
may not exercise regulatory control over the industry. Id. at 548, 64 S. Ct. at 1171.
Nevertheless, the Court pronounced that “[n]o commercial enterprise of any kind
which conducts its activities across state lines has been held to be wholly beyond
the regulatory power of Congress under the Commerce Clause. We cannot make
an exception of the business of insurance.” Id. at 553, 64 S. Ct. at 1173.
C. Heart of Atlanta Motel v. United States
In another landmark Commerce Clause case, Heart of Atlanta Motel v.
United States, 379 U.S. 241, 85 S. Ct. 348 (1964), the Supreme Court held that
Congress acted within its commerce authority in enacting Title II of the Civil
Rights Act of 1964, which prohibited discrimination in public accommodations.
74
The plaintiff owned and operated a 216-room motel whose guests were primarily
out-of-state visitors. Id. at 243, 85 S. Ct. at 350–51. The motel refused to rent
rooms to black patrons. Id. at 243, 85 S. Ct. at 351.
The Supreme Court detailed the “overwhelming evidence that
discrimination by hotels and motels impedes interstate travel.” Id. at 253, 85 S. Ct.
at 355. The Court noted that it had “long been settled” that transportation of
persons in interstate commerce is within Congress’s regulatory power, regardless
of “whether the transportation is commercial in character.” Id. at 256, 85 S. Ct. at
357. Additionally, Supreme Court precedents confirmed that “the power of
Congress to promote interstate commerce also includes the power to regulate the
local incidents thereof . . . which might have a substantial and harmful effect upon
that commerce.” Id. at 258, 85 S. Ct. at 358. Thus, “Congress may—as it
has—prohibit racial discrimination by motels serving travelers, however ‘local’
their operations may appear.” Id.
The Heart of Atlanta Motel Court acknowledged that “Congress could have
pursued other methods to eliminate the obstructions it found in interstate
commerce caused by racial discrimination,” but the means employed in removing
such obstructions are “within the sound and exclusive discretion of the Congress”
and are “subject only to one caveat—that the means chosen by it must be
75
reasonably adapted to the end permitted by the Constitution.” Id. at 261–62, 85 S.
Ct. at 360. The means chosen by Congress in Title II clearly met this standard.71
D. United States v. Lopez
For the next thirty years, the Supreme Court applied an expansive
interpretation of Congress’s commerce power and upheld a wide variety of
statutes. See, e.g., Preseault v. ICC, 494 U.S. 1, 110 S. Ct. 914 (1990) (upholding
statute amending National Trails System Act in facial challenge); Hodel v. Va.
Surface Mining & Reclamation Ass’n, 452 U.S. 264, 101 S. Ct. 2352 (1981)
(sustaining Surface Mining Control and Reclamation Act in facial challenge);
Perez v. United States, 402 U.S. 146, 91 S. Ct. 1357 (1971) (sustaining Title II of
Consumer Credit Protection Act in as-applied challenge); Maryland v. Wirtz, 392
U.S. 183, 88 S. Ct. 2017 (1968) (upholding validity of amendments to Fair Labor
Standards Act of 1938 in facial challenge), overruled on other grounds, Nat’l
League of Cities v. Usery, 426 U.S. 833, 96 S. Ct. 2465 (1976), overruled by
Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 105 S. Ct. 1005 (1985).
These cases reflect a practical need to allow federal regulation of a growing and
unified national economy.
71
In Katzenbach v. McClung, 379 U.S. 294, 85 S. Ct. 377 (1964), a companion case, the
Court also upheld Title II’s prohibition on discrimination in restaurants serving food to interstate
travelers or serving food that had moved in interstate commerce.
76
In 1995, the Supreme Court decided United States v. Lopez, 514 U.S. 549,
115 S. Ct. 1624 (1995), the first Supreme Court decision since the 1930s to rule
that Congress had exceeded its commerce power. Lopez concerned the Gun-Free
School Zones Act of 1990, which made it a federal offense “for any individual
knowingly to possess a firearm at a place that the individual knows, or has
reasonable cause to believe, is a school zone.” 18 U.S.C. § 922(q)(1)(A) (1993).
The defendant Alfonso Lopez, a twelfth-grade student, was convicted of carrying
a concealed handgun to his Texas school. Lopez, 514 U.S. at 551, 115 S. Ct. at
1626.
In a 5–4 opinion, the Lopez Court invalidated § 922(q). The Lopez Court
first observed that the Constitution created a federal government of enumerated,
delegated, and thus limited powers. Id. at 552, 115 S. Ct. at 1626. Although the
Supreme Court’s New Deal precedents expanded Congress’s commerce power, the
Lopez Court recognized that “this power is subject to outer limits.” Id. at 557, 115
S. Ct. at 1628. The Lopez Court then enumerated the “three broad categories of
activity that Congress may regulate under its commerce power”: (1) “the use of the
channels of interstate commerce”; (2) “the instrumentalities of interstate
commerce, or persons or things in interstate commerce, even though the threat
may come only from intrastate activities”; and (3) “those activities that
77
substantially affect interstate commerce.”72 Id. at 558–59, 115 S. Ct. at 1629–30.
After determining that § 922(q) could be sustained only under this third category,
the Lopez Court identified four factors influencing its analysis of whether gun
possession in school zones substantially affects interstate commerce.
First, the Lopez Court differentiated between economic and non-economic
activity, stressing how prior cases utilizing the substantial effects test to reach
intrastate conduct had all involved economic activity. The Supreme Court stated
that “Section 922(q) is a criminal statute that by its terms has nothing to do with
‘commerce’ or any sort of economic enterprise” and was “not an essential part of a
larger regulation of economic activity, in which the regulatory scheme could be
undercut unless the intrastate activity were regulated.” Id. at 561, 115 S. Ct. at
1630–31. The Court opined that “[e]ven Wickard, which is perhaps the most far
reaching example of Commerce Clause authority over intrastate activity, involved
economic activity in a way that the possession of a gun in a school zone does not.”
Id. at 560, 115 S. Ct. at 1630 (emphasis added). The Lopez Court acknowledged
that “a determination whether an intrastate activity is commercial or
noncommercial may in some cases result in legal uncertainty,” yet “so long as
[Congress’s] enumerated powers are interpreted as having judicially enforceable
72
The “third Lopez prong is the broadest expression of Congress’ commerce power.”
United States v. Ballinger, 395 F.3d 1218, 1226 (11th Cir. 2005) (en banc).
78
outer limits, congressional legislation under the Commerce Clause always will
engender ‘legal uncertainty.’” Id. at 566, 115 S. Ct. at 1633.
Second, the Lopez Court found it significant that § 922(q) did not contain a
“jurisdictional element” to “ensure, through case-by-case inquiry, that the firearm
possession in question affects interstate commerce.” Id. at 561, 115 S. Ct. at 1631.
Instead, the Act penalized “mere possession” and lacked any requirement that
there be “an explicit connection with or effect on interstate commerce.”73 Id. at
562, 115 S. Ct. at 1631.
Third, the Court noted that Congress provided no legislative findings
demonstrating the purported nexus between gun possession around schools and its
effects on interstate commerce. Id. at 562–63, 115 S. Ct. at 1631–32.
Fourth, the Lopez Court examined the actual relationship between gun
possession in a school zone and its effects on interstate commerce. The
government posited three effects: (1) violent crime, even when purely local,
generates substantial costs that are spread to the wider populace through
73
In this respect, the Lopez Court contrasted the Gun-Free School Zones Act of 1990 with
the firearm possession statute at issue in United States v. Bass, 404 U.S. 336, 92 S. Ct. 515
(1971). In Bass, the Supreme Court construed legislation making it a federal crime for a felon to
“receiv[e], posses[s], or transpor[t] in commerce or affecting commerce . . . any firearm.” Lopez,
514 U.S. at 561–62, 115 S. Ct. at 1631 (emphasis added) (quoting former 18 U.S.C. § 1202(a)).
The Lopez Court stated that “[u]nlike the statute in Bass, § 922(q) has no express jurisdictional
element which might limit its reach to a discrete set of firearm possessions that additionally have
an explicit connection with or effect on interstate commerce.” Id. at 562, 115 S. Ct. at 1631.
79
insurance; (2) individuals are deterred from traveling to areas beset by violent
crime; and (3) guns in schools imperil the learning environment, which in turn
adversely impacts national productivity. Id. at 563–64, 115 S. Ct. at 1632.
The Lopez Court declared that the government’s arguments yielded no
limiting principles. For example, under the government’s proffered “costs of
crime” theory, “Congress could regulate not only all violent crime, but all
activities that might lead to violent crime, regardless of how tenuously they relate
to interstate commerce.” Id. at 564, 115 S. Ct. at 1632. Likewise, the “national
productivity” rationale afforded no bounds, either. If Congress could employ its
Commerce Clause authority to “regulate activities that adversely affect the
learning environment, then, a fortiori, it also can regulate the educational process
directly.” Id. at 566, 115 S. Ct. at 1633. Indeed, “Congress could regulate any
activity that it found was related to the economic productivity of individual
citizens,” including “marriage, divorce, and child custody.” Id. at 564, 115 S. Ct.
at 1632.
The Supreme Court pronounced that these links were too attenuated to
conclude that the regulated activity “substantially affects” interstate commerce:
“[I]f we were to accept the Government’s arguments, we are hard pressed to posit
any activity by an individual that Congress is without power to regulate.” Id. “To
80
uphold the Government’s contentions,” the Supreme Court continued, “we would
have to pile inference upon inference in a manner that would bid fair to convert
congressional authority under the Commerce Clause to a general police power of
the sort retained by the States.” Id. at 567, 115 S. Ct. at 1634.
Lastly, the Lopez Court acknowledged that some of the Supreme Court’s
precedents gave “great deference to congressional action” but refused to expand
the “broad language” of these precedents any further, since “[t]o do so would
require us to conclude that the Constitution’s enumeration of powers does not
presuppose something not enumerated.” Id. Such judicial abdication would
dissolve the “distinction between what is truly national and what is truly local”
and subvert constitutional notions of federalism. Id. at 567–68, 115 S. Ct. at 1634.
Although both joined the majority opinion in full, two justices wrote
separately and echoed the majority’s emphasis on the significance of the federal-
state balance in the structure of the Constitution, and the need for judicial
intervention when Congress has “tipped the scales too far.” See id. at 568–83, 115
S. Ct. at 1634–42 (Kennedy, J., concurring);74 id. at 584–602, 115 S. Ct. at
74
In a concurring opinion, Justice Kennedy explained why he joined the Lopez majority
opinion in full and what he characterized as its “necessary though limited holding.” 514 U.S. at
568, 115 S. Ct. at 1634 (Kennedy, J., concurring). Justice Kennedy noted “the imprecision of
content-based boundaries used without more to define the limits of the Commerce Clause,”
referring to earlier dichotomies that distinguished between “manufacturing and commerce,”
“direct and indirect effects,” and other formalistic categories. Id. at 574, 115 S. Ct. at 1637. He
stressed that the Supreme Court is “often called upon to resolve questions of constitutional law
81
1642–51 (Thomas, J., concurring).75
E. United States v. Morrison
In another 5–4 decision, the Supreme Court in United States v. Morrison,
529 U.S. 598, 120 S. Ct. 1740 (2000), reapplied the Lopez principles and
invalidated a section of the Violence Against Women Act of 1994 (“VAWA”), 42
U.S.C. § 13981, which provided a federal civil remedy for victims of gender-
motivated violence.76
In enacting the VAWA, Congress made specific findings about the
relationship between gender-motivated violence and its substantial effects on
interstate commerce. Congress declared its objectives were “to protect victims of
gender motivated violence” and “to promote public safety, health, and activities
not susceptible to the mechanical application of bright and clear lines.” Id. at 579, 115 S. Ct. at
1640.
Justice Kennedy found that § 922(q) “upsets the federal balance to a degree that renders it
an unconstitutional assertion of the commerce power, and our intervention is required.” Id. at
580, 115 S. Ct. at 1640. Much like the majority opinion, Justice Kennedy emphasized the far-
reaching implications of the government’s position: “In a sense any conduct in this
interdependent world of ours has an ultimate commercial origin or consequence, but we have not
yet said the commerce power may reach so far. If Congress attempts that extension, then at the
least we must inquire whether the exercise of national power seeks to intrude upon an area of
traditional state concern.” Id. Such an interference was present in Lopez, as “it is well established
that education is a traditional concern of the States.” Id. Justice Kennedy added that courts have a
“duty to recognize meaningful limits on the commerce power of Congress.” Id.
75
See discussion of Justice Thomas’s concurring opinion infra note 78.
76
The VAWA provided that a person who “commits a crime of violence motivated by
gender . . . shall be liable to the party injured, in an action for the recovery of compensatory and
punitive damages, injunctive and declaratory relief, and such other relief as a court may deem
appropriate.” 42 U.S.C. § 13981(c).
82
affecting interstate commerce.”77 Id. § 13981(a).
The Morrison Court observed that since the New Deal case of Jones &
Laughlin Steel, “Congress has had considerably greater latitude in regulating
conduct and transactions under the Commerce Clause than our previous case law
permitted.” Morrison, 529 U.S. at 608, 120 S. Ct. at 1748. Lopez clarified,
however, that “Congress’ regulatory authority is not without effective bounds.” Id.
The Supreme Court stated that “a fair reading of Lopez shows that the
noneconomic, criminal nature of the conduct at issue was central to our decision in
that case.” Id. at 610, 120 S. Ct. at 1750. The Morrison Court pointed out that
“[g]ender-motivated crimes of violence are not, in any sense of the phrase,
economic activity.” Id. at 613, 120 S. Ct. at 1751. “While we need not adopt a
categorical rule against aggregating the effects of any noneconomic activity in
order to decide these cases,” the Supreme Court reiterated that “our cases have
upheld Commerce Clause regulation of intrastate activity only where that activity
is economic in nature.” Id.
The Supreme Court next noted that § 13981 contained no jurisdictional
77
The Morrison plaintiff was a college student allegedly raped by two football players.
529 U.S. at 602, 120 S. Ct. at 1745–46. The plaintiff filed suit in federal court under § 13981(c).
Id. at 604, 120 S. Ct. at 1746. The defendant’s motion to dismiss argued that Congress lacked
authority to enact the VAWA’s federal civil remedy provision under either the Commerce Clause
or § 5 of the Fourteenth Amendment. Id. at 604, 120 S. Ct. at 1746–47.
83
element. It commented that another provision of the VAWA, which similarly
provided a federal remedy for gender-motivated crime, did contain a jurisdictional
hook. Id. at 613 n.5, 120 S. Ct. at 1752 n.5 (discussing 18 U.S.C. § 2261(a)(1),
which at the time applied only to an individual “who travels across a State line or
enters or leaves Indian country”).
Unlike § 922(q) in Lopez, § 13981 was “supported by numerous findings
regarding the serious impact that gender-motivated violence has on victims and
their families.” Id. at 614, 120 S. Ct. at 1752. Nonetheless, the Morrison Court
stated that congressional findings were not dispositive, echoing Lopez’s statement
that “[s]imply because Congress may conclude that a particular activity
substantially affects interstate commerce does not necessarily make it so.” Id.
(alteration in original) (quoting Lopez, 514 U.S. at 557 n.2, 115 S. Ct. at 1624 n.2).
The Morrison Court determined that “Congress’ findings are substantially
weakened by the fact that they rely so heavily on a method of reasoning that we
have already rejected as unworkable if we are to maintain the Constitution’s
enumeration of powers.” Id. at 615, 120 S. Ct. at 1752. The congressional findings
in Morrison asserted that gender-motivated violence deterred potential victims
from interstate travel and employment in interstate business, decreased national
productivity, and increased medical costs. Id. According to the Morrison Court,
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“[t]he reasoning that petitioners advance seeks to follow the but-for causal chain
from the initial occurrence of violent crime (the suppression of which has always
been the prime object of the States’ police power) to every attenuated effect upon
interstate commerce.” Id. The logical entailment of this “but-for causal chain” of
reasoning “would allow Congress to regulate any crime as long as the nationwide,
aggregated impact of that crime has substantial effects on employment,
production, transit, or consumption.” Id. at 615, 120 S. Ct. at 1752–53. Such
arguments suggested no stopping point, and Congress could thereby exercise
powers traditionally reposed in the states.78 Id. at 615–16, 120 S. Ct. at 1753.
F. Gonzales v. Raich
Next came Gonzales v. Raich, 545 U.S. 1, 125 S. Ct. 2195 (2005), where the
Supreme Court, in a 6–3 vote, concluded that Congress acted within its commerce
power in prohibiting the plaintiffs’ wholly intrastate production and possession of
marijuana, even though California state law approved the drug’s use for medical
78
Although joining the majority opinion in full in both Lopez and Morrison, Justice
Thomas wrote separately in both cases to reject the substantial effects doctrine. In Morrison,
Justice Thomas wrote “only to express my view that the very notion of a ‘substantial effects’ test
under the Commerce Clause is inconsistent with the original understanding of Congress’ powers
and with this Court’s early Commerce Clause cases.” 529 U.S. at 627, 120 S. Ct. at 1759
(Thomas, J., concurring). Characterizing the substantial effects test as a “rootless and malleable
standard,” Justice Thomas remarked that the Supreme Court’s present Commerce Clause
jurisprudence had encouraged the federal government to operate under the misguided belief that
the Clause “has virtually no limits.” Id. Unless the Supreme Court reverses its course, “we will
continue to see Congress appropriating state police powers under the guise of regulating
commerce.” Id.
85
purposes. The legislation at issue was the Controlled Substances Act (“CSA”), 21
U.S.C. § 801 et seq., in which Congress sought to “conquer drug abuse and to
control the legitimate and illegitimate traffic in controlled substances” and
“prevent the diversion of drugs from legitimate to illicit channels.” Raich, 545
U.S. at 12–13, 125 S. Ct. at 2203. Congress consequently “devised a closed
regulatory system making it unlawful to manufacture, distribute, dispense, or
possess any controlled substance except in a manner authorized by the CSA.” Id.
at 13, 125 S. Ct. at 2203. Under the CSA, marijuana is classified as a “Schedule I”
drug, meaning that the manufacture, distribution, or possession of marijuana
constitutes a criminal offense. Id. at 14, 125 S. Ct. at 2204.
In 1996, California voters passed Proposition 215, which exempted from
criminal prosecution physicians who recommend marijuana to a patient for
medical purposes, as well as patients and primary caregivers who possess and
cultivate marijuana for doctor-approved medical purposes.79 Id. at 5–6, 125 S. Ct.
at 2199. The two California plaintiffs, Angel Raich and Diane Monson, suffered
from serious medical conditions and used marijuana as medication for several
years, as recommended by their physicians. Id. at 6–7, 125 S. Ct. at 2199–2200.
Monson cultivated her own marijuana, while Raich relied upon two caregivers to
79
Proposition 215 is codified as the Compassionate Use Act of 1996, CAL. HEALTH &
SAFETY CODE § 11362.5.
86
provide her with locally grown marijuana at no cost. Id. at 7, 125 S. Ct. at 2200.
After federal agents seized and destroyed Monson’s cannabis plants, the
Raich plaintiffs sued. Id. They acknowledged that the CSA was within Congress’s
commerce authority and did not contend that any section of the CSA was
unconstitutional. Id. at 15, 125 S. Ct. at 2204. Instead, they argued solely that the
CSA was unconstitutional as applied to their manufacture, possession, and
consumption of cannabis for personal medical use. Id. at 7–8, 125 S. Ct. at 2200.
In rejecting the plaintiffs’ “quite limited” as-applied challenge, the Raich
Court stated that its case law “firmly establishes Congress’ power to regulate
purely local activities that are part of an economic ‘class of activities’ that have a
substantial effect on interstate commerce.” Id. at 15, 17, 125 S. Ct. at 2204–05.
The Supreme Court emphasized that, in assessing Congress’s commerce power, its
review was a “modest one”: “We need not determine whether respondents’
activities, taken in the aggregate, substantially affect interstate commerce in fact,
but only whether a ‘rational basis’ exists for so concluding.” Id. at 22, 125 S. Ct. at
2208. The Raich Court commented that “[w]hen Congress decides that the ‘total
incidence’ of a practice poses a threat to a national market, it may regulate the
entire class,” and it need not “legislate with scientific exactitude.” Id. at 17, 125 S.
Ct. at 2206 (quotation marks omitted). “[W]e have reiterated,” the Supreme Court
87
continued, “that when ‘a general regulatory statute bears a substantial relation to
commerce, the de minimis character of individual instances arising under that
statute is of no consequence.’” Id. (quotation marks omitted) (quoting Lopez, 514
U.S. at 558, 115 S. Ct. at 1629).
The Supreme Court found similar regulatory concerns underlying both the
CSA in Raich and the AAA wheat provisions in Wickard. Just as rising market
prices could draw wheat grown for home consumption into the interstate market
and depress prices, a “parallel concern making it appropriate to include marijuana
grown for home consumption in the CSA is the likelihood that the high demand in
the interstate market will draw such marijuana into that market.” Id. at 19, 125 S.
Ct. at 2207. In both cases, there was a threat of unwanted commodity diversion
that could disrupt Congress’s regulatory control over interstate commerce. Id.
According to the Raich Court, Wickard established that “Congress can
regulate purely intrastate activity that is not itself ‘commercial,’ in that it is not
produced for sale, if it concludes that failure to regulate that class of activity
would undercut the regulation of the interstate market in that commodity.” Id. at
18, 125 S. Ct. at 2206. Characterizing the similarities between the plaintiffs’ case
and Wickard as “striking,” the Raich Court explained that “[i]n both cases, the
regulation is squarely within Congress’ commerce power because production of
88
the commodity meant for home consumption, be it wheat or marijuana, has a
substantial effect on supply and demand in the national market for that
commodity.” Id. at 18–19, 125 S. Ct. at 2206–07.
The Raich Court opined that the failure to regulate intrastate production and
possession of marijuana would leave a “gaping hole” in the CSA’s regulatory
scheme: CSA enforcement would be frustrated by the difficulty in distinguishing
between locally cultivated marijuana and out-of-state marijuana, and the marijuana
authorized by state law could be diverted into “illicit channels.” Id. at 22, 125 S.
Ct. at 2209. The Raich Court rejected the notion that California had “surgically
excised a discrete activity that is hermetically sealed off from the larger interstate
marijuana market.” Id. at 30, 125 S. Ct. at 2213. Accordingly, even though the
CSA “ensnares some purely intrastate activity,” the Raich Court “refuse[d] to
excise individual components of that larger scheme.” Id. Instead, “congressional
judgment that an exemption for such a significant segment of the total market
would undermine the orderly enforcement of the entire regulatory scheme is
entitled to a strong presumption of validity.” Id. at 28, 125 S. Ct. at 2212.
The Raich Court concluded that the statutory challenges in Lopez and
Morrison were “markedly different” from the plaintiffs’ statutory challenge to the
CSA. Id. at 23, 125 S. Ct. at 2209. Whereas the Raich plaintiffs sought to “excise
89
individual applications of a concededly valid statutory scheme,” the Supreme
Court noted that “in both Lopez and Morrison, the parties asserted that a particular
statute or provision fell outside Congress’ commerce power in its entirety.” Id.
The Raich Court considered this distinction between facial and as-applied
challenges “pivotal” because “[w]here the class of activities is regulated and that
class is within the reach of federal power, the courts have no power to excise, as
trivial, individual instances of the class.” Id. (alteration in original) (quoting Perez,
402 U.S. at 154, 91 S. Ct. at 1361). Additionally, since the CSA was a “lengthy
and detailed statute creating a comprehensive framework,” its statutory scheme
was “at the opposite end of the regulatory spectrum” from the statutes in Lopez
and Morrison. Id. at 24, 125 S. Ct. at 2210.
Once again central to the Court’s analysis was whether the regulated
activities were economic or noneconomic. The Raich Court defined “[e]conomics”
as referring to “the production, distribution, and consumption of commodities.” Id.
at 25–26, 125 S. Ct. at 2211 (quoting WEBSTER’S THIRD NEW INT’L DICTIONARY
720 (1966)). In contrast to the activities regulated in Lopez and Morrison, the
Raich Court concluded that “the activities regulated by the CSA are
quintessentially economic.” Id. at 25, 125 S. Ct. at 2211. Indeed, the activities
engaged in by the plaintiffs themselves fit the Court’s definition of economic,
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since they involved the production, distribution, and consumption of marijuana.
Concurring in only the Raich judgment, Justice Scalia commented that
under his understanding of the commerce power, “the authority to enact laws
necessary and proper for the regulation of interstate commerce is not limited to
laws governing intrastate activities that substantially affect interstate commerce.
Where necessary to make a regulation of interstate commerce effective, Congress
may regulate even those intrastate activities that do not themselves substantially
affect interstate commerce.” Id. at 34–35, 125 S. Ct. at 2216 (Scalia, J.,
concurring).
Justice Scalia cited “two general circumstances” in which the regulation of
intrastate activities may be “necessary to and proper for the regulation of interstate
commerce.” Id. at 35, 125 S. Ct. at 2216. First, “the commerce power permits
Congress not only to devise rules for the governance of commerce between States
but also to facilitate interstate commerce by eliminating potential obstructions, and
to restrict it by eliminating potential stimulants.” Id. at 35, 125 S. Ct. at 2216. Yet,
“[t]his principle is not without limitation,” as the cases of Lopez and Morrison
made clear. Id. at 35–36, 125 S. Ct. at 2216–17. Second, Justice Scalia submitted
that “Congress may regulate even noneconomic local activity if that regulation is a
necessary part of a more general regulation of interstate commerce.” Id. at 37, 125
91
S. Ct. at 2217. The “relevant question” then becomes “whether the means chosen
are ‘reasonably adapted’ to the attainment of a legitimate end under the commerce
power.” Id.
In addition to relying on these Commerce Clause cases, both parties and the
district court conducted a separate analysis of the Necessary and Proper Clause’s
implications for the Act. We review some foundational principles relating to that
Clause, focusing our attention on United States v. Comstock, 560 U.S. __, 130 S.
Ct. 1949 (2010).
G. Necessary and Proper Clause: United States v. Comstock
Congress has the power “[t]o make all Laws which shall be necessary and
proper for carrying into Execution” its enumerated power. U.S. CONST. art. I, § 8,
cl. 18. The Necessary and Proper Clause is intimately tied to the enumerated
power it effectuates. The Supreme Court has recognized that the Necessary and
Proper Clause “is not the delegation of a new and independent power, but simply
provision for making effective the powers theretofore mentioned.” Kansas v.
Colorado, 206 U.S. 46, 88, 27 S. Ct. 655, 663 (1907). It is “merely a declaration,
for the removal of all uncertainty, that the means of carrying into execution those
[powers] otherwise granted are included in the grant.” Kinsella v. United States,
361 U.S. 234, 247, 80 S. Ct. 297, 304 (1960) (alterations in original) (quoting VI
92
WRITINGS OF JAMES MADISON 383 (Gaillard Hunt ed., 1906)). It reaffirms that
Congress has the incidental powers necessary to carry its enumerated powers into
effect.
The Supreme Court’s most definitive statement of the Necessary and Proper
Clause’s function remains Chief Justice Marshall’s articulation in McCulloch v.
Maryland: “Let the end be legitimate, let it be within the scope of the constitution,
and all means which are appropriate, which are plainly adapted to that end, which
are not prohibited, but consist with the letter and spirit of the constitution, are
constitutional.” 17 U.S. (4 Wheat.) 316, 421 (1819). Thus, when legislating within
its enumerated powers, Congress has broad authority: “the Necessary and Proper
Clause makes clear that the Constitution’s grants of specific federal legislative
authority are accompanied by broad power to enact laws that are ‘convenient, or
useful’ or ‘conducive’ to the authority’s ‘beneficial exercise.’” Comstock, 560 U.S.
at __, 130 S. Ct. at 1956 (quoting McCulloch, 17 U.S. at 413, 418).
As it relates to the commerce power, the Supreme Court has essentially
bound up the Necessary and Proper Clause with its substantial effects analysis.80
80
For instance, the Court formulated the question in Raich as “whether the power vested
in Congress by Article I, § 8, of the Constitution ‘to make all Laws which shall be necessary and
proper for carrying into Execution’ its authority to ‘regulate Commerce with foreign Nations, and
among the several States’ includes the power [asserted].” 545 U.S. at 5, 125 S. Ct. at 2198–99
(alteration omitted). Although the Wickard Court did not expressly invoke the Necessary and
Proper Clause, the Raich Court clearly assumed as much. See id. at 22, 125 S. Ct. at 2209.
93
As Justice Scalia noted in Raich, “Congress’s regulatory authority over intrastate
activities that are not themselves part of interstate commerce (including activities
that have a substantial effect on interstate commerce) derives from the Necessary
and Proper Clause.” 545 U.S. at 34, 125 S. Ct. at 2216 (Scalia, J., concurring).
Comstock represents the Supreme Court’s most recent, detailed application
of Necessary and Proper Clause doctrine. In Comstock, the Supreme Court held
that Congress acted pursuant to its Article I powers in enacting a federal civil-
commitment statute, 18 U.S.C. § 4248, that authorized the Department of Justice
to detain mentally ill, sexually dangerous prisoners beyond the term of their
sentences. The majority opinion enumerated five “considerations” that supported
the statute’s constitutional validity: “(1) the breadth of the Necessary and Proper
Clause, (2) the long history of federal involvement in this arena, (3) the sound
reasons for the statute’s enactment in light of the Government’s custodial interest
in safeguarding the public from dangers posed by those in federal custody, (4) the
statute’s accommodation of state interests, and (5) the statute’s narrow scope.”
Comstock, 560 U.S. at __, 130 S. Ct. at 1965.
On the breadth of the Necessary and Proper Clause, the Comstock Court
noted that (1) the federal government is a government of enumerated powers, but
(2) is also vested “‘with ample means’” for the execution of those powers. Id.
94
(quoting McCulloch, 17 U.S. at 408). The Supreme Court must determine whether
a federal statute “constitutes a means that is rationally related to the
implementation of a constitutionally enumerated power.” Id. “[T]he relevant
inquiry is simply ‘whether the means chosen are reasonably adapted to the
attainment of a legitimate end under the commerce power’ or under other powers
that the Constitution grants Congress the authority to implement.” Id. at __, 130 S.
Ct. at 1957 (quotation marks omitted) (quoting Raich, 545 U.S. at 37, 125 S. Ct. at
2217 (Scalia, J., concurring)).
Turning to the second factor—the history of federal involvement—the
Supreme Court recognized that, beginning in 1855, persons charged with or
convicted of federal offenses could be confined to a federal mental institution for
the duration of their sentences. Id. at __, 130 S. Ct. at 1959. Since 1949, Congress
had also “authorized the postsentence detention of federal prisoners who suffer
from a mental illness and who are thereby dangerous.” Id. at __, 130 S. Ct. at
1961. The Supreme Court observed that “[a]side from its specific focus on
sexually dangerous persons, § 4248 is similar to the provisions first enacted in
1949" and therefore represented “a modest addition to a longstanding federal
statutory framework, which has been in place since 1855.” Id.
As to the third factor—reasons for enactment in light of the government’s
95
interest—the Supreme Court concluded that “Congress reasonably extended its
longstanding civil-commitment system to cover mentally ill and sexually
dangerous persons who are already in federal custody, even if doing so detains
them beyond the termination of their criminal sentence.” Id. The federal
government: (1) is the custodian of its prisoners and (2) has the power to protect
the public from the threats posed by the prisoners in its charge. Id.
Turning to the fourth factor—accommodation of state interests—the
Comstock Court ruled that § 4248 “properly accounts for state interests.” Id. at __,
130 S. Ct. at 1962. The Supreme Court found persuasive that the statute required
the Attorney General (1) to allow (and indeed encourage) the state in which the
prisoner was domiciled or tried to take custody and (2) to immediately release the
prisoner if the state seeks to assert authority over him.81 Id.
On the fifth and final factor—the statute’s narrow scope—the Comstock
Court found the statute not “too sweeping in its scope” and the link between
§ 4248 and an enumerated Article I power “not too attenuated.” Id. at __, 130 S.
Ct. at 1963. The Supreme Court concluded that Lopez’s admonition that courts
81
The Attorney General must “make all reasonable efforts to cause” the state in which the
prisoner is domiciled or tried to “assume responsibility for his custody, care, and treatment.”
Comstock, 560 U.S. at __, 130 S. Ct. at 1954 (quoting 18 U.S.C. § 4248(d)). If the state consents,
the prisoner will be released to the appropriate official in that state. Id. at __, 130 S. Ct. at
1954–55. If the state declines to take custody, the Attorney General will “place the person for
treatment in a suitable facility” until the state assumes the role or until the person no longer poses
a sexually dangerous threat. Id. at __, 130 S. Ct. at 1955 (quoting 18 U.S.C. § 4248(d)).
96
should not “pile inference upon inference” did not present any problems with
respect to the civil-commitment statute. Id. (quoting Lopez, 514 U.S. at 567, 115
S. Ct. at 1634). Specifically, the Comstock Court discerned that “the same
enumerated power that justifies the creation of a federal criminal statute, and that
justifies the additional implied federal powers that the dissent considers legitimate,
justifies civil commitment under § 4248 as well.” Id. at __, 130 S. Ct. at 1964. The
Supreme Court rejected the notion that “Congress’s authority can be no more than
one step removed from a specifically enumerated power.” Id. at __, 130 S. Ct. at
1963.
Lastly, the Supreme Court emphasized that § 4248 had been applied to
“only a small fraction of federal prisoners.” Id. at __, 130 S. Ct. at 1964 (citing
evidence that “105 individuals have been subject to § 4248 out of over 188,000
federal inmates”). The Supreme Court concluded that “§ 4248 is a reasonably
adapted and narrowly tailored means of pursuing the Government’s legitimate
interest as a federal custodian in the responsible administration of its prison
system” and thus did not endow Congress with a general police power. Id. at __,
130 S. Ct. at 1965.
Although concurring in the judgment, Justice Kennedy and Justice Alito82
82
Justice Alito wrote separately to express “concern[] about the breadth of the Court’s
language, and the ambiguity of the standard that the Court applies.” 560 U.S. at __, 130 S. Ct. at
97
did not join the Court’s majority opinion. Because Justice Kennedy’s concurring
opinion focuses on Commerce Clause and federalism issues, we provide extended
treatment of it here.
Justice Kennedy’s primary disagreement with the majority concerned its
application of a “means-ends rationality” test. He advised that “[t]he terms
‘rationally related’ and ‘rational basis’ must be employed with care, particularly if
either is to be used as a stand-alone test.” Id. at __, 130 S. Ct. at 1966 (Kennedy,
J., concurring). Justice Kennedy observed that the phrase “rational basis” is
typically employed in Due Process Clause contexts, where the Court adopts a very
deferential review of congressional acts. Id. Under the Lee Optical test applied in
such due process settings, the Court merely asks whether “‘it might be thought that
the particular legislative measure was a rational way to correct’” an evil. Id.
(quoting Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 487–88, 75 S. Ct.
461, 464 (1955)). By contrast, Justice Kennedy asserted, “under the Necessary and
1968 (Alito, J., concurring) (citation omitted). Justice Alito stressed that “the Necessary and
Proper Clause does not give Congress carte blanche.” Id. at __, 130 S. Ct. at 1970. While the
word “necessary” need not connote that the means employed by Congress be “absolutely
necessary” or “indispensable,” “the term requires an ‘appropriate’ link between a power
conferred by the Constitution and the law enacted by Congress.” Id. It is the Supreme Court’s
duty, he declared, “to enforce compliance with that limitation.” Id. Like Justice Kennedy, Justice
Alito suggested that the Necessary and Proper Clause context of the case did not warrant an
analysis “in which it is merely possible for a court to think of a rational basis on which Congress
might have perceived an attenuated link between the powers underlying the federal criminal
statutes and the challenged civil commitment provision.” Id. In Comstock, by contrast, the
government had demonstrated “a substantial link to Congress’ constitutional powers.” Id.
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Proper Clause, application of a ‘rational basis’ test should be at least as exacting as
it has been in the Commerce Clause cases, if not more so.” Id.
The Commerce Clause precedents of Raich, Lopez, and Hodel “require a
tangible link to commerce, not a mere conceivable rational relation, as in Lee
Optical.” Id. at __, 130 S. Ct. at 1967. “The rational basis referred to in the
Commerce Clause context is a demonstrated link in fact, based on empirical
demonstration.” Id. Justice Kennedy reiterated Lopez’s admonition that “‘[s]imply
because Congress may conclude that a particular activity substantially affects
interstate commerce does not necessarily make it so.’” Id. (quoting Lopez, 514
U.S. at 557 n.2, 115 S. Ct. at 1629 n.2). In this regard, “[w]hen the inquiry is
whether a federal law has sufficient links to an enumerated power to be within the
scope of federal authority, the analysis depends not on the number of links in the
congressional-power chain but on the strength of the chain.” Id. at __, 130 S. Ct. at
1966.
In summary, these landmark Supreme Court decisions—Wickard, South-
Eastern Underwriters, Heart of Atlanta Motel, Lopez, Morrison, Raich, and
Comstock—together set forth the governing principles and analytical framework
we must apply to the commerce power issues presented here.
V. CONSTITUTIONALITY OF INDIVIDUAL MANDATE
UNDER THE COMMERCE POWER
99
With a firm understanding of the Act’s provisions, the congressional
findings, and the Supreme Court’s Commerce Clause precedents, we turn to the
central question at hand: whether the individual mandate is beyond the
constitutional power granted to Congress under the Commerce Clause and
Necessary and Proper Clause.
In this Section, we begin with first principles. We then examine the subject
matter the individual mandate seeks to regulate, and whether it can be readily
categorized under the classes of activity the Supreme Court has previously
identified. We follow with a discussion of the unprecedented nature of the
individual mandate. Next, we analyze whether the individual mandate is a valid
exercise of Congress’s power to regulate activities that substantially affect
interstate commerce. In this regard, we appraise whether the government’s
argument furnishes judicially enforceable limiting principles and address the
individual mandate’s far-reaching implications for our federalist structure. Lastly,
we consider the government’s alternative argument that the individual mandate is
an essential part of a larger regulation of economic activity.
We conclude that the individual mandate exceeds Congress’s commerce
power.
A. First Principles
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As the Supreme Court has observed, “The judicial authority to determine the
constitutionality of laws, in cases and controversies, is based on the premise that
the ‘powers of the legislature are defined and limited; and that those limits may
not be mistaken, or forgotten, the constitution is written.’” City of Boerne v.
Flores, 521 U.S. 507, 516, 117 S. Ct. 2157, 2162 (1997) (quoting Marbury v.
Madison, 5 U.S. (1 Cranch) 137, 176 (1803)). The judiciary is called upon not
only to interpret the laws, but at times to enforce the Constitution’s limits on the
power of Congress, even when that power is used to address an intractable
problem.
In enforcing these limits, we recognize that the Constitution established a
federal government that is “‘acknowledged by all to be one of enumerated
powers.’” Comstock, 560 U.S. at __, 130 S. Ct. at 1956 (quoting McCulloch, 17
U.S. at 405). In describing this constitutional structure, the Supreme Court has
emphasized James Madison’s exposition in The Federalist No. 45: “‘The powers
delegated by the proposed Constitution to the federal government are few and
defined. Those which are to remain in the State governments are numerous and
indefinite.’” Gregory v. Ashcroft, 501 U.S. 452, 458, 111 S. Ct. 2395, 2399 (1991)
(quoting THE FEDERALIST NO. 45, at 292–93 (James Madison) (Clinton Rossiter
ed., 1961)); see also Lopez, 514 U.S. at 552, 115 S. Ct. at 1626 (quoting same). In
101
that same essay, Madison noted that the commerce power was one such
enumerated power: “The regulation of commerce, it is true, is a new power; but
that seems to be an addition which few oppose, and from which no apprehensions
are entertained.” THE FEDERALIST NO. 45, at 289 (James Madison) (E.H. Scott ed.,
1898). The commerce power has since come to dominate federal legislation.
The power to regulate commerce is the power “to prescribe the rule by
which commerce is to be governed.” Gibbons, 22 U.S. at 196. As the Supreme
Court instructs us, “The power of Congress in this field is broad and sweeping;
where it keeps within its sphere and violates no express constitutional limitation it
has been the rule of this Court, going back almost to the founding days of the
Republic, not to interfere.” Katzenbach v. McClung, 379 U.S. 294, 305, 85 S. Ct.
377, 384 (1964). In fact, if the object of congressional legislation falls within the
sphere contemplated by the Commerce Clause, “[t]hat power is plenary and may
be exerted to protect interstate commerce no matter what the source of the dangers
which threaten it.” Jones & Laughlin Steel Corp., 301 U.S. at 37, 57 S. Ct. at 624
(citation and quotation marks omitted).
It is because of the breadth and depth of this power that even when the
Supreme Court has blessed Congress’s most expansive invocations of the
Commerce Clause, it has done so with a word of warning: “Undoubtedly the scope
102
of this power must be considered in the light of our dual system of government
and may not be extended so as to embrace effects upon interstate commerce so
indirect and remote that to embrace them, in view of our complex society, would
effectually obliterate the distinction between what is national and what is local and
create a completely centralized government.” Id. It is this dualistic nature of the
Commerce Clause power—necessarily broad yet potentially dangerous to the
fundamental structure of our government—that has led the Court to adopt a
flexible approach to its application, one that is often difficult to apply. As Chief
Justice Hughes noted,
Whatever terminology is used, the criterion is necessarily one of degree
and must be so defined. This does not satisfy those [who] seek for
mathematical or rigid formulas. But such formulas are not provided by
the great concepts of the Constitution such as ‘interstate commerce,’
‘due process,’ ‘equal protection.’ In maintaining the balance of the
constitutional grants and limitations, it is inevitable that we should
define their applications in the gradual process of inclusion and
exclusion.
Santa Cruz Fruit Packing Co. v. NLRB., 303 U.S. 453, 467, 58 S. Ct. 656, 660
(1938); see also Lopez, 514 U.S. at 566, 115 S. Ct. at 1633 (“But, so long as
Congress’ authority is limited to those powers enumerated in the Constitution, and
so long as those enumerated powers are interpreted as having judicially
enforceable outer limits, congressional legislation under the Commerce Clause
always will engender ‘legal uncertainty.’”).
103
Thus, it is not surprising that Lopez begins not with categories or substantial
effects tests, but rather “first principles,” reaffirming the “constitutionally
mandated division of authority [that] ‘was adopted by the Framers to ensure
protection of our fundamental liberties.’” 514 U.S. at 553, 115 S. Ct. at 1626
(citing Gregory, 501 U.S. at 458, 111 S. Ct. at 2400). While the substantial growth
and development of Congress’s power under the Commerce Clause has been well-
documented, the Court has often reiterated that the power therein granted remains
“subject to outer limits.” Id. at 557, 115 S. Ct. at 1628. When Congress oversteps
those outer limits, the Constitution requires judicial engagement, not judicial
abdication.
The Supreme Court has placed two broad limitations on congressional
power under the Commerce Clause. First, Congress’s regulation must
accommodate the Constitution’s federalist structure and preserve “a distinction
between what is truly national and what is truly local.” Id. at 567–68, 115 S. Ct. at
1634. Second, the Court has repeatedly warned that courts may not interpret the
Commerce Clause in a way that would grant to Congress a general police power,
“which the Founders denied the National Government and reposed in the States.”
Morrison, 529 U.S. at 618, 120 S. Ct. at 1754; see also Lopez, 514 U.S. at 584,
115 S. Ct. at 1642 (Thomas, J., concurring) (“[W]e always have rejected readings
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of the Commerce Clause and the scope of federal power that would permit
Congress to exercise a police power; our cases are quite clear that there are real
limits to federal power.”).
Therefore, in determining if a congressional action is within the limits of the
Commerce Clause, we must look not only to the action itself but also its
implications for our constitutional structure. See Lopez, 514 U.S. at 563–68, 115
S. Ct. at 1632–34. While these structural limitations are often discussed in terms of
federalism, their ultimate goal is the protection of individual liberty. See Bond v.
United States, 564 U.S. __, __, 131 S. Ct. 2355, 2363 (2011) (“Federalism secures
the freedom of the individual.”); New York v. United States, 505 U.S. at 181, 112
S. Ct. at 2431 (“The Constitution does not protect the sovereignty of States for the
benefit of the States or state governments as abstract political entities . . . . To the
contrary, the Constitution divides authority between federal and state governments
for the protection of individuals.”).
With this at stake, we examine whether Congress legislated within its
constitutional boundaries in enacting the individual mandate.83 We begin this
analysis with a “presumption of constitutionality,” meaning that “we invalidate a
83
As a preliminary matter, we note that the parties appear to agree that if the individual
mandate is to be sustained, it must be under the third category of activities that Congress may
regulate under its commerce power: i.e., “those activities that substantially affect interstate
commerce.” Lopez, 514 U.S. at 559, 115 S. Ct. at 1630.
105
congressional enactment only upon a plain showing that Congress has exceeded its
constitutional bounds.” Morrison, 529 U.S. at 607, 120 S. Ct. at 1748.
B. Dichotomies and Nomenclature
The parties contend that the answer to the question of the individual
mandate’s constitutionality is straightforward. The government emphasizes that
Congress intended to regulate the health insurance and health care markets to
ameliorate the cost-shifting problem created by individuals who forego insurance
yet at some time in the future seek health care for which they cannot pay. 42
U.S.C. § 18091(a)(1)(A), (H). One of the tools Congress employed to solve that
problem is an economic mandate requiring Americans to purchase and
continuously maintain health insurance. The government argues that the individual
mandate is constitutional because it regulates “quintessentially economic” activity
related to an industry of near universal participation, whereas the regulations in
Lopez and Morrison touched on criminal conduct, which is not “in any sense of
the phrase, economic activity.” Morrison, 529 U.S. at 613, 120 S. Ct. at 1751. The
government submits that Congress has mandated only how Americans finance
their inevitable health care needs.
The plaintiffs respond that the plain text of the Constitution and Supreme
Court precedent support the conclusion that “activity” is a prerequisite to valid
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congressional regulation under the commerce power. The plaintiffs stress that
Congress’s authority is to “regulate” commerce, not to compel individuals to enter
into commerce so that the federal government may regulate them. The plaintiffs
point out that by choosing not to purchase insurance, the uninsured are outside the
stream of commerce. Indeed, the nature of the conduct is marked by the absence of
a commercial transaction. Since they are not engaged in commerce, or activities
associated with commerce, they cannot be regulated pursuant to the Commerce
Clause. The plaintiffs emphasize that, in 220 years of constitutional history,
Congress has never exercised its commerce power in this manner.
Whereas the parties and many commentators have focused on this
distinction between activity and inactivity, we find it useful only to a point.
Beginning with the plain language of the text, the Commerce Clause gives
Congress the power to “regulate Commerce.” U.S. CONST. art. I, § 8, cl. 3. The
power to regulate commerce, of course, presupposes that something exists to
regulate. In its first comprehensive discussion of the Commerce Clause, the
Supreme Court in Gibbons attempted to define commerce, stating, “Commerce,
undoubtedly, is traffic, but it is something more: it is intercourse. It describes the
commercial intercourse between nations, and parts of nations, in all its branches,
and is regulated by prescribing rules for carrying on that intercourse.” Gibbons,
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22 U.S. at 189–90 (emphasis added). The nature of Chief Justice Marshall’s
formulation presaged the Supreme Court’s tendency to describe commerce in very
general terms, since an attempt to formulate a precise and all-encompassing
definition would prove impractical.
However, the Supreme Court has always described the commerce power as
operating on already existing or ongoing activity. The Gibbons Court stated, “If
Congress has the power to regulate it, that power must be exercised whenever the
subject exists. If it exists within the States, if a foreign voyage may commence or
terminate at a port within a State, then the power of Congress may be exercised
within a State.” Id. at 195 (emphasis added). In its recent cases, the Supreme Court
has continued to articulate Congress’s commerce authority in terms of “activity.”
In Lopez, the Court identified “three broad categories of activity that Congress
may regulate under its commerce power” and concluded that “possession of a gun
in a local school zone is in no sense an economic activity.” 514 U.S. at 558, 567,
115 S. Ct. at 1629, 1634 (emphasis added); see also Raich, 545 U.S. at 26, 125 S.
Ct. at 2211 (“[T]he CSA is a statute that directly regulates economic, commercial
activity.” (emphasis added)); Morrison, 529 U.S. at 611, 120 S. Ct. at 1750
(“Lopez’s review of Commerce Clause case law demonstrates that in those cases
where we have sustained federal regulation of intrastate activity based upon the
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activity’s substantial effects on interstate commerce, the activity in question has
been some sort of economic endeavor.” (emphasis added)).
As our extensive discussion of the Supreme Court’s precedent reveals,
Commerce Clause cases run the gamut of possible regulation. But the diverse fact
patterns of Wickard, South-Eastern Underwriters, Heart of Atlanta Motel, Lopez,
Morrison, and Raich share at least one commonality: they all involved attempts by
Congress to regulate preexisting, freely chosen classes of activities.
Nevertheless, we are not persuaded that the formalistic dichotomy of
activity and inactivity provides a workable or persuasive enough answer in this
case. Although the Supreme Court’s Commerce Clause cases frequently speak in
activity-laden terms, the Court has never expressly held that activity is a
precondition for Congress’s ability to regulate commerce—perhaps, in part,
because it has never been faced with the type of regulation at issue here.
We therefore must refine our understanding of the nature of the individual
mandate and the subject matter it seeks to regulate. The uninsured have made a
decision, either consciously or by default, to direct their financial resources to
some other item or need than health insurance. Congress described “the activity” it
sought to regulate as “economic and financial decisions about how and when
health care is paid for, and when health insurance is purchased.” 42 U.S.C.
109
§ 18091(a)(2)(A) (emphasis added). It deemed such decisions as activity that is
“commercial and economic in nature.” Id. Congress linked the individual mandate
to this decision: “In the absence of th[is] requirement, some individuals would
make an economic and financial decision to forego health insurance coverage and
attempt to self-insure . . . .” Id.
That Congress casts the individual mandate as regulating economic activity
is not surprising. In Morrison, the Supreme Court acknowledged that “thus far in
our Nation’s history our cases have upheld Commerce Clause regulation of
intrastate activity only where that activity is economic in nature.” 529 U.S. at 613,
120 S. Ct. at 1751. Raich confirmed the continued viability of this distinction
between economic and noneconomic activity in assessing Congress’s commerce
authority. See 545 U.S. at 25–26, 125 S. Ct. at 2210–11.
The parties here disagree about where the individual mandate falls within
this “economic versus noneconomic activity” framework. On one hand, a decision
not to purchase insurance and to self-insure for health care is a financial decision
that has more of an economic patina than the gun possession in Lopez or the
gender-motivated violence in Morrison. But whether such an economic decision
constitutes economic activity as previously conceptualized by the Supreme Court
is not so clear, nor do we find this sort of categorical thinking particularly helpful
110
in assessing the constitutionality of such an unprecedented congressional action.
After all, in choosing not to purchase health insurance, the individuals regulated
by the individual mandate are hardly involved in the “production, distribution, and
consumption of commodities,” which was the broad definition of economics
provided by the Raich Court.84 545 U.S. at 25, 125 S. Ct. at 2211 (citation and
quotation marks omitted). Rather, to the extent the uninsured can be said to be
“active,” their activity consists of the absence of such behavior, at least with
respect to health insurance.85 Simply put, the individual mandate cannot be neatly
classified under either the “economic activity” or “noneconomic activity”
headings.
This confirms the wisdom in the conclusion that the Court’s attempts
throughout history to define by “semantic or formalistic categories those activities
that were commerce and those that were not” are doomed to fail. Lopez, 514 U.S.
at 569, 115 S. Ct. at 1635 (Kennedy, J., concurring). Compare United States v.
84
The fact that conduct may be said to have economic effects does not, by that fact alone,
render the conduct “economic activity,” at least as defined by the Supreme Court. Lopez and
Morrison make this observation apparent. Even the fact that conduct in some way relates to
commerce does not, by itself, convert that conduct into economic activity. Indeed, the regulated
activity in Lopez (firearm possession) directly related to an article of commerce (the firearm
being possessed). The Supreme Court has emphasized that the relevant inquiry is the link
between the regulated activity and its effects on interstate commerce.
85
The government correctly notes that many of the uninsured do actively consume health
care, even though they are not participants in the health insurance market. We address this point
at length later.
111
E.C. Knight Co., 156 U.S. 1, 13, 15 S. Ct. 249, 254 (1895) (approving
manufacturing-commerce dichotomy), with Standard Oil Co. v. United States, 221
U.S. 1, 68–69, 31 S. Ct. 502, 519 (1911) (declaring manufacturing-commerce
dichotomy “unsound”). See also Lopez, 514 U.S. at 572, 115 S. Ct. at 1636
(Kennedy, J., concurring) (noting “the Court’s recognition of the importance of a
practical conception of the commerce power”); Wickard, 317 U.S. at 120, 63 S. Ct.
at 87 (stating that “questions of the power of Congress are not to be decided by
reference to any formula which would give controlling force to nomenclature such
as ‘production’ and ‘indirect’”); Swift & Co. v. United States, 196 U.S. 375, 398,
25 S. Ct. 276, 280 (1905) (observing that “commerce among the states is not a
technical legal conception, but a practical one, drawn from the course of
business”). Yet, confusing though these dichotomies and doctrinal vacillations
have been, they appear animated by one overarching goal: to provide courts with
meaningful, judicially administrable limiting principles by which to assess
Congress’s exercise of its Commerce Clause power.
Properly formulated, we perceive the question before us to be whether the
federal government can issue a mandate that Americans purchase and maintain
health insurance from a private company for the entirety of their lives.86 These
86
Whether one describes the regulated individual’s decision as the financing of health
care, self-insurance, or risk retention, the congressional mandate is to acquire and continuously
112
types of purchasing decisions are legion. Every day, Americans decide what
products to buy, where to invest or save, and how to pay for future contingencies
such as their retirement, their children’s education, and their health care. The
government contends that embedded in the Commerce Clause is the power to
override these ordinary decisions and redirect those funds to other purposes.
Under this theory, because Americans have money to spend and must inevitably
make decisions on where to spend it, the Commerce Clause gives Congress the
power to direct and compel an individual’s spending in order to further its
overarching regulatory goals, such as reducing the number of uninsureds and the
amount of uncompensated health care.
In answering whether the federal government may exercise this asserted
power to issue a mandate for Americans to purchase health insurance from private
companies, we next examine a number of issues: (1) the unprecedented nature of
the individual mandate; (2) whether Congress’s exercise of its commerce authority
affords sufficient and meaningful limiting principles; and (3) the far-reaching
implications for our federalist structure.
C. Unprecedented Nature of the Individual Mandate
Both parties have cited extensively to previous Supreme Court opinions
maintain health coverage. And unless the person is covered by a government-financed health
program, the mandate is to purchase insurance from a private insurer.
113
defining the scope of the Commerce Clause. Economic mandates such as the one
contained in the Act are so unprecedented, however, that the government has been
unable, either in its briefs or at oral argument, to point this Court to Supreme
Court precedent that addresses their constitutionality. Nor does our independent
review reveal such a precedent.
The Supreme Court has sustained Congress’s authority to regulate
steamboat traffic, Gibbons, 22 U.S. 1; trafficking of lottery tickets across state
lines, The Lottery Case, 188 U.S. 321, 23 S. Ct. 321 (1903); and carrying a woman
across state lines for “immoral purposes,” Hoke v. United States, 227 U.S. 308,
320, 33 S. Ct. 281, 283 (1913). Through the Commerce Clause, Congress may
prevent the interstate transportation of liquor, United States v. Simpson, 252 U.S.
465, 40 S. Ct. 364 (1920); punish an automobile thief who crosses state lines,
Brooks v. United States, 267 U.S. 432, 45 S. Ct. 345 (1925); and prevent diseased
herds of cattle from bringing their contagion from Georgia to Florida, Thornton v.
United States, 271 U.S. 414, 46 S. Ct. 585 (1926).
In the modern era, the Commerce Clause has been used to regulate labor
practices, Jones & Laughlin Steel Corp., 301 U.S. 1, 57 S. Ct. 615; impose
minimum working conditions, Darby, 312 U.S. 100, 61 S. Ct. 451; limit the
production of wheat for home consumption, Wickard, 317 U.S. 111, 63 S. Ct. 82;
114
regulate the terms of insurance contracts, South-Eastern Underwriters, 322 U.S.
533, 64 S. Ct. 1162; prevent discrimination in hotel accommodations, Heart of
Atlanta Motel, 379 U.S. 241, 85 S. Ct. 348, and restaurant services, Katzenbach,
379 U.S. 294, 85 S. Ct. 377; and prevent the home production of marijuana for
medical purposes, Raich, 545 U.S. 1, 125 S. Ct. 2195. What the Court has never
done is interpret the Commerce Clause to allow Congress to dictate the financial
decisions of Americans through an economic mandate.
Both the Congressional Budget Office (“CBO”) and the Congressional
Research Service (“CRS”) have commented on the unprecedented nature of the
individual mandate. When the idea of an individual mandate to purchase health
insurance was first floated in 1994, the CBO stated that a “mandate requiring all
individuals to purchase health insurance would be an unprecedented form of
federal action.” SPEC. STUDIES DIV., CONG. BUDGET OFFICE, THE BUDGETARY
TREATMENT OF AN INDIVIDUAL MANDATE TO BUY HEALTH INSURANCE 1 (1994)
[hereinafter CBO MANDATE MEMO]. The CBO observed that Congress “has never
required people to buy any good or service as a condition of lawful residence in
the United States,” noting that “mandates typically apply to people as parties to
economic transactions, rather than as members of society.” Id. at 1–2. Meanwhile,
in reviewing the present legislation in 2009, the CRS warned:
115
Despite the breadth of powers that have been exercised under the
Commerce Clause, it is unclear whether the clause would provide a solid
constitutional foundation for legislation containing a requirement to
have health insurance. Whether such a requirement would be
constitutional under the Commerce Clause is perhaps the most
challenging question posed by such a proposal, as it is a novel issue
whether Congress may use this clause to require an individual to
purchase a good or a service.
JENNIFER STAMAN & CYNTHIA BROUGHER, CONG. RESEARCH SERV., R. 40725,
REQUIRING INDIVIDUALS TO OBTAIN HEALTH INSURANCE: A CONSTITUTIONAL
ANALYSIS 3 (2009).
The fact that Congress has never before exercised this supposed authority is
telling. As the Supreme Court has noted, “the utter lack of statutes imposing
obligations on the States’ executive (notwithstanding the attractiveness of that
course to Congress), suggests an assumed absence of such power.” Printz, 521
U.S. at 907–08, 117 S. Ct. at 2371; see also Va. Office for Prot. & Advocacy v.
Stewart, 563 U.S. __, __, 131 S. Ct. 1632, 1641 (2011) (“Lack of historical
precedent can indicate a constitutional infirmity.”); Alden v. Maine, 527 U.S. 706,
743–44, 119 S. Ct. 2240, 2261 (1999). Few powers, if any, could be more
attractive to Congress than compelling the purchase of certain products. Yet even
if we focus on the modern era, when congressional power under the Commerce
Clause has been at its height, Congress still has not asserted this authority. Even in
the face of a Great Depression, a World War, a Cold War, recessions, oil shocks,
116
inflation, and unemployment, Congress never sought to require the purchase of
wheat or war bonds, force a higher savings rate or greater consumption of
American goods, or require every American to purchase a more fuel efficient
vehicle.87 See Printz, 521 U.S. at 905, 117 S. Ct. at 2370 (“[I]f . . . earlier
Congresses avoided use of this highly attractive power, we would have reason to
believe that the power was thought not to exist.”).
Traditionally, Congress has sought to encourage commercial activity it
favors while discouraging what it does not. This is instructive. Not only have prior
congressional actions not asserted the power now claimed, they “contain some
indication of precisely the opposite assumption.” Id. at 910, 117 S. Ct. at 2372.
Instead of requiring action, Congress has sought to encourage it. The instances of
such encouragement are ubiquitous, but the example of flood insurance provides a
particularly relevant illustration of how the individual mandate departs from
conventional exercises of congressional power.
In passing the National Flood Insurance Act of 1968, Congress recognized
that “from time to time flood disasters have created personal hardships and
economic distress which have required unforeseen disaster relief measures and
have placed an increasing burden on the Nation’s resources.” 42 U.S.C.
87
Compare the lack of legislation compelling activity to the long history of Congress
forbidding activity.
117
§ 4001(a)(1). Despite considerable expenditures on public programs designed to
prevent floods, those programs had “not been sufficient to protect adequately
against growing exposure to future flood losses.” Id. § 4001(a)(2). In response to
this problem, however, Congress did not require everyone who owns a house in a
flood plain to purchase flood insurance. In fact, Congress did not even require
anyone who chooses to build a new house in a flood plain to buy insurance.
Rather, Congress created a series of incentives designed to encourage voluntary
purchase of flood insurance. These incentives included requiring flood insurance
before the home owner could receive federal financial assistance or federally
regulated loans. See id. § 4012a(a), (b)(1).
Without an “individual mandate,” the flood insurance program has largely
been a failure. See Bryant J. Spann, Note, Going Down for the Third Time:
Senator Kerry’s Reform Bill Could Save the Drowning National Flood Insurance
Program, 28 GA. L. REV. 593, 597 (1994) (“One of the most astounding facts to
surface from the Midwestern flood of 1993 was that so few homeowners eligible
for flood insurance actually had it. Of the states impacted by the flood, Illinois had
the highest percentage of eligible households covered, with 8.7%.”). One key
reason for this low participation is not surprising. “Disaster relief, as a political
issue, is almost invincible. No politician wants to be on record as opposing
118
disaster relief, particularly for his or her own constituents.” Id. at 602. People
living in a flood plain know that even if they do not have insurance, they can count
on the virtually guaranteed availability of federal funds.88 Nevertheless, despite the
unpredictability of flooding, the inevitability that floods will strike flood plains,
and the cost shifting inherent in uninsured property owners seeking disaster relief
funds, Congress has never taken the obvious and expedient step of invoking the
power the government now argues it has and forcing all property owners in flood
plains to purchase insurance.89
Contrast flood insurance with the very few instances of activity in which
Congress has compelled Americans to engage solely as a consequence of being
citizens living in the United States. Given the attractiveness of the power to
compel behavior in order to solve important problems, we find it illuminating that
Americans have, historically, been subject only to a limited set of personal
mandates: serving on juries, registering for the draft, filing tax returns, and
responding to the census. These mandates are in the nature of duties owed to the
government attendant to citizenship, and they contain clear foundations in the
88
Compare this with the Emergency Medical Treatment and Active Labor Act
(“EMTALA”), 42 U.S.C. § 1395dd, which ensures public access to emergency medical services
without regard to one’s ability to pay.
89
The contrast with the individual mandate is even more stark when we consider that
property owners in flood plains have actually entered the housing market.
119
constitutional text.90 Additionally, all these mandates involve a citizen directly
interacting with the government, whereas the individual mandate requires an
individual to enter into a compulsory contract with a private company. In these
respects, the individual mandate is a sharp departure from all prior exercises of
federal power.
The draft is an excellent example of this sort of duty, particularly as it is one
upon which the Supreme Court has spoken. In the Selective Draft Law Cases, the
Supreme Court reviewed challenges to the draft instituted in 1917 upon the entry
of the United States into World War I. 245 U.S. 366, 38 S. Ct. 159 (1918). The
Court rejected these challenges on several grounds, primarily based on the long
history of the draft both in the United States and other nations. Id. at 379–87, 38 S.
Ct. at 162–64. But it also pointed to the relationship between citizens and
government: “It may not be doubted that the very [c]onception of a just
government and its duty to the citizen includes the reciprocal obligation of the
citizen to render military service in case of need and the right to compel it.” Id. at
378, 38 S. Ct. at 161.
90
See, e.g., U.S. CONST . art. I, § 2 (“[An] Enumeration shall be made within three Years
after the first Meeting of the Congress of the United States, and within every subsequent Term of
ten Years, in such Manner as they shall by Law direct.”); id. art. I, § 8, cl. 1 (“The Congress shall
have Power To lay and collect Taxes”); id. art. I, § 8, cl. 12 (providing Congress with power “[t]o
raise and support Armies”); id. art. III, § 2 (“The Trial of all Crimes, except in Cases of
Impeachment, shall be by Jury.”).
120
It is striking by comparison how very different this economic mandate is
from the draft. First, it does not represent the solution to a duty owed to the
government as a condition of citizenship. Moreover, unlike the draft, it has no
basis in the history of our nation, much less a long and storied one. Until Congress
passed the Act, the power to regulate commerce had not included the authority to
issue an economic mandate. Now Congress seeks not only the power to reach a
new class of “activity”—financial decisions whose effects are felt some time in the
future—but it wishes to do so through a heretofore untested power: an economic
mandate.
Having established the unprecedented nature of the individual mandate and
the lack of any Supreme Court case addressing this issue, we are left to apply some
basic Commerce Clause principles derived largely from Wickard, Lopez,
Morrison, and Raich.
D. Wickard and Aggregation
It is not surprising that Wickard, which the Lopez Court considered
“perhaps the most far reaching example of Commerce Clause authority over
intrastate activity,”91 514 U.S. at 560, 115 S. Ct. at 1630, provides perhaps the best
perspective on an economic mandate. Congress’s restrictions on Roscoe Filburn’s
91
Some have argued that Raich now represents the high-water mark of Congress’s
commerce authority. We discuss Raich in more detail below.
121
wheat acreage potentially forced him to purchase wheat on the open market. In
doing so, Congress was able to artificially inflate the price of wheat by
simultaneously decreasing supply and increasing demand. But Wickard is striking
not for its similarity to our present case, but in how different it is. Although
Wickard represents the zenith of Congress’s powers under the Commerce Clause,
the wheat regulation therein is remarkably less intrusive than the individual
mandate.
Despite the fact that Filburn was a commercial farmer92 and thus far more
amenable to Congress’s commerce power than an ordinary citizen, the legislative
act did not require him to purchase more wheat. Instead, Filburn had any number
of other options open to him. He could have decided to make do with the amount
of wheat he was allowed to grow. He could have redirected his efforts to
agricultural endeavors that required less wheat. He could have even ceased part of
his farming operations. The wheat-acreage regulation imposed by Congress, even
though it lies at the outer bounds of the commerce power, was a limitation—not a
mandate—and left Filburn with a choice. The Act’s economic mandate to purchase
92
In enacting the Agricultural Adjustment Act at issue in Wickard, Congress apparently
sought to avoid reaching subsistence farmers whose production did not leave surplus for sale.
Thus, it exempted small farms from the quota. See Wickard, 317 U.S. at 130 n.30, 63 S. Ct. at 92
n.30. In other words, Congress’s regulation only applied to suppliers operating in the stream of
commerce, even though some of those market suppliers also consumed a portion of wheat at
home.
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insurance, on the contrary, leaves no choice and is more far-reaching.
Although this distinction appears, at first blush, to implicate liberty
concerns not at issue on appeal,93 in truth it strikes at the heart of whether
Congress has acted within its enumerated power. Individuals subjected to this
economic mandate have not made a voluntary choice to enter the stream of
commerce, but instead are having that choice imposed upon them by the federal
government. This suggests that they are removed from the traditional subjects of
Congress’s commerce authority, in the same manner that the regulated actors in
Lopez and Morrison were removed from the traditional subjects of Congress’s
commerce authority by virtue of the noneconomic cast of their activity.
This departure from commerce power norms is made all the more salient
when we consider principles of aggregation, the chief addition of Wickard to the
Commerce Clause canon. Aggregation may suffice to bring otherwise non-
regulable, “trivial” instances of intrastate activity within Congress’s reach if the
cumulative effect of this class of activity (i.e., the intrastate activity “taken
together with that of many others similarly situated”) substantially affects
interstate commerce. Wickard, 317 U.S. at 127–28, 63 S. Ct. at 90. Aggregation is
93
Among other counts, the district court dismissed the plaintiffs’ substantive due process
challenge under the Fifth Amendment. Florida v. HHS, 716 F. Supp. 2d at 1161–62. That ruling
is not on appeal.
123
a doctrine that allows Congress to apply an otherwise valid regulation to a class of
intrastate activity it might not be able to reach in isolation.94
In Morrison and Lopez, the Supreme Court declined to apply aggregation to
the noneconomic activity at issue, reasoning that “in every case where we have
sustained federal regulation under the aggregation principle in [Wickard], the
regulated activity was of an apparent commercial character.” Morrison, 529 U.S.
at 611 n.4, 120 S. Ct. at 1750 n.4. The Court thereby resisted “additional
expansion” of the substantial effects and aggregation doctrines. Lopez, 514 U.S. at
567, 115 S. Ct. at 1634.
The question before us is whether Congress may regulate individuals
outside the stream of commerce, on the theory that those “economic and financial
decisions” to avoid commerce themselves substantially affect interstate commerce.
Applying aggregation principles to an individual’s decision not to purchase a
product would expand the substantial effects doctrine to one of unlimited scope.
Given the economic reality of our national marketplace, any person’s decision not
to purchase a good would, when aggregated, substantially affect interstate
94
Although not made explicit in Wickard, the courts have come to recognize aggregation
as flowing from Congress’s powers to enact laws necessary and proper to effectuate its power
under the Commerce Clause. See, e.g., Raich, 545 U.S. at 22, 125 S. Ct. at 2209; id. at 34, 125 S.
Ct. at 2216 (Scalia, J., concurring); Katzenbach, 379 U.S. at 301–302, 85 S. Ct. at 382.
124
commerce in that good.95 From a doctrinal standpoint, we see no way to cabin the
government’s theory only to decisions not to purchase health insurance. If an
individual’s mere decision not to purchase insurance were subject to Wickard’s
aggregation principle, we are unable to conceive of any product whose purchase
Congress could not mandate under this line of argument.96 Although any decision
not to purchase a good or service entails commercial consequences, this does not
warrant the facile conclusion that Congress may therefore regulate these decisions
pursuant to the Commerce Clause. See id. at 580, 115 S. Ct. at 1640 (Kennedy, J.,
concurring) (“In a sense any conduct in this interdependent world of ours has an
ultimate commercial origin or consequence, but we have not yet said the
commerce power may reach so far.”).
Thus, even assuming that decisions not to buy insurance substantially affect
interstate commerce, that fact alone hardly renders them a suitable subject for
95
Perhaps we can conceive of a purely intrastate good that is wholly insulated from the
interstate market and, therefore, whose purchase Congress may not mandate even under the
government’s sweeping extension of Wickard’s aggregation principle. To the extent such
hypothetical goods exist, their number is vanishingly small.
96
The CBO suggested the possibility of this perilous course when it warned that an
individual mandate to buy health insurance could “open the door to a mandate-issuing
government taking control of virtually any resource allocation decision that would otherwise be
left to the private sector . . . . In the extreme, a command economy, in which the President and
the Congress dictated how much each individual and family spent on all goods and services,
could be instituted without any change in total federal receipts or outlays.” CBO MANDATE
MEMO , supra p.115, at 9.
125
regulation. See, e.g., Morrison, 529 U.S. at 617, 120 S. Ct. at 1754 (“We
accordingly reject the argument that Congress may regulate noneconomic, violent
criminal conduct based solely on that conduct’s aggregate effect on interstate
commerce.” (emphasis added)). Instead, what matters is the regulated subject
matter’s connection to interstate commerce. That nexus is lacking here. It is
immaterial whether we perceive Congress to be regulating inactivity or a financial
decision to forego insurance. Under any framing, the regulated conduct is defined
by the absence of both commerce or even “the production, distribution, and
consumption of commodities”—the broad definition of economics in Raich. 545
U.S. at 25, 125 S. Ct. at 2211. To connect this conduct to interstate commerce
would require a “but-for causal chain” that the Supreme Court has rejected, as it
would allow Congress to regulate anything. Morrison, 529 U.S. at 615, 120 S. Ct.
at 1752.
E. Broad Scope of Congress’s Regulation
The scope of Congress’s regulation also affects the constitutional inquiry.
Indisputably, the health insurance and health care industries involve, and
substantially affect, interstate commerce, and Congress can regulate broadly in
both those realms. Nonetheless, Congress, in exercising its commerce authority,
must be careful not to sweep too broadly by including within the ambit of its
126
regulation activities that bear an insufficient nexus with interstate commerce. See
Morrison, 529 U.S. at 613 & n.5, 120 S. Ct. at 1751–52 & n.5 (distinguishing
invalidated statute from analogous statute requiring explicit interstate nexus);
Lopez, 514 U.S. at 561–62, 115 S. Ct. at 1631 (same).
In this regard, the individual mandate’s attempt to reduce the number of the
uninsured and correct the cost-shifting problem is woefully overinclusive. The
language of the mandate is not tied to those who do not pay for a portion of their
health care (i.e., the cost-shifters). It is not even tied to those who consume health
care. Rather, the language of the mandate is unlimited, and covers even those who
do not enter the health care market at all. Although overinclusiveness may not be
fatal for constitutional purposes, the Supreme Court has indicated that it is a factor
to be added to the constitutional equation.
For example, in Lopez the vast majority of the regulated behavior (firearm
possession) did possess an interstate character.97 However, the Supreme Court
97
A staggering proportion of the firearms in America have been transported across state
lines, and thus the possessions at issue in Lopez likely did have a sufficient nexus to interstate
commerce—and thus, were within Congress’s regulatory authority. In the wake of Lopez, many
defendants challenged their prosecutions under the felons-with-firearms statute—18 U.S.C.
§ 1202(a), later recodified as 18 U.S.C. § 922(g)—that the Supreme Court distinguished from
§ 922(q) by virtue of its jurisdictional element. In one such case, the government’s own expert
witness testified that 95% of the firearms in the United States were transported across state lines.
See Brent E. Newton, Felons, Firearms, and Federalism: Reconsidering Scarborough in Light of
Lopez, 3 J. APP . PRAC. & PROCESS 671, 681–82 & n.53 (2001).
Instructively, Congress took its cue from the Supreme Court after Lopez and amended the
Gun-Free School Zones Act to require an explicit interstate nexus on an individualized basis.
127
ultimately found this fact insufficient to save the statute. Rather, the Supreme
Court commented that an interstate-tying element in the statute itself “would
ensure, through case-by-case inquiry, that the [activity] in question affects
interstate commerce.”98 Lopez, 514 U.S. at 561, 115 S. Ct. at 1631.
Here, the decision to forego insurance similarly lacks an established
interstate tie or any “case-by-case inquiry.” See id. Aside from the categories of
exempted individuals, the individual mandate is applied across-the-board without
regard to whether the regulated individuals receive, or have ever received,
uncompensated care—or, indeed, seek any care at all, either now or in the future.99
Thus, the Act contains no language “which might limit its reach to a discrete set of
[activities] that additionally have an explicit connection with or effect on interstate
commerce.” See id. at 562, 115 S. Ct. at 1631.
The individual mandate sweeps too broadly in another way. Because the
Specifically, Congress added a jurisdictional element to ensure that the charged individual’s
particular firearm had moved in interstate or foreign commerce (or otherwise affected such
commerce). See 18 U.S.C. § 922(q)(2)(A) (“It shall be unlawful for any individual knowingly to
possess a firearm that has moved in or that otherwise affects interstate or foreign commerce at a
place that the individual knows, or has reasonable cause to believe, is a school zone.” (emphasis
added)).
98
The Lopez Court never stated that such an element was required, and nor do we.
However, it is clearly a relevant constitutional factor that the Supreme Court instructs us to
consider. The government’s argument ignores it completely.
99
Although health care consumption is pervasive, the plaintiffs correctly note that
participation in the market for health care is far less inevitable than participation in markets for
basic necessities like food or clothing.
128
Supreme Court’s prior Commerce Clause cases all deal with already-existing
activity—not the mere possibility of future activity (in this case, health care
consumption) that could implicate interstate commerce—the Court never had to
address any temporal aspects of congressional regulation. However, the premise of
the government’s position—that most people will, at some point in the future,
consume health care—reveals that the individual mandate is even further removed
from traditional exercises of Congress’s commerce power.100
It is true that Congress may, in some instances, regulate individuals who are
consuming health care but not themselves causing the cost-shifting problem. Cf.
Raich, 545 U.S. at 17, 125 S. Ct. at 2206 (“We have never required Congress to
legislate with scientific exactitude.”); id. at 22, 125 S. Ct. at 2209 (“That the
regulation ensnares some purely intrastate activity is of no moment.”). As the
plaintiffs acknowledged at oral argument, when the uninsured actually enter the
100
The dissent attempts to sidestep the temporal leap problem by citing Consolidated
Edison Co. v. NLRB for the proposition that Congress may take “reasonable preventive
measures” to avoid future disruptions to interstate commerce. 305 U.S. 197, 222, 59 S. Ct. 206,
213 (1938). Consolidated Edison, of course, is wholly inapposite to this case, since Congress was
regulating the labor practices of utility companies (1) fully engaged in the stream of commerce
and (2) presently supplying economic services to instrumentalities of interstate commerce, such
as railroads and steamships. Id. at 220–22, 59 S. Ct. at 213. Even so, the dissent’s argument
proves far too much. After all, by the dissent’s reasoning, Congress could clearly reach the gun
possession at issue in Lopez, since firearms are (1) objects of everyday commercial transactions
and (2) are daily used to disrupt interstate commerce. See Lopez, 514 U.S. at 602–03, 115 S. Ct.
at 1651 (Stevens, J., dissenting) (“Guns are both articles of commerce and articles that can be
used to restrain commerce. Their possession is the consequence, either directly or indirectly, of
commercial activity.”). Indeed, Antonio Lopez himself was paid $40 to traffic the gun for which
he was charged under § 922(q). United States v. Lopez, 2 F.3d 1342, 1345 (5th Cir. 1995).
129
stream of commerce and consume health care, Congress may regulate their activity
at the point of consumption.
But the individual mandate does not regulate behavior at the point of
consumption. Indeed, the language of the individual mandate does not truly
regulate “how and when health care is paid for.” 42 U.S.C. § 18091(a)(2)(A). It
does not even require those who consume health care to pay for it with insurance
when doing so. Instead, the language of the individual mandate in fact regulates a
related, but different, subject matter: “when health insurance is purchased.” Id. If
an individual’s participation in the health care market is uncertain, their
participation in the insurance market is even more so.
In sum, the individual mandate is breathtaking in its expansive scope. It
regulates those who have not entered the health care market at all. It regulates
those who have entered the health care market, but have not entered the insurance
market (and have no intention of doing so). It is overinclusive in when it regulates:
it conflates those who presently consume health care with those who will not
consume health care for many years into the future. The government’s position
amounts to an argument that the mere fact of an individual’s existence
substantially affects interstate commerce, and therefore Congress may regulate
them at every point of their life. This theory affords no limiting principles in
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which to confine Congress’s enumerated power.
F. Government’s Proposed Limiting Principles
“We pause to consider the implications of the Government’s arguments.”
Lopez, 514 U.S. at 564, 115 S. Ct. at 1632. The government clearly appreciates the
far-reaching implications of the individual mandate. The government has struggled
to avoid the conclusion that Congress may order Americans’ other economic
decisions through the use of economic mandates. At oral argument, the
government’s counsel specifically disclaimed the argument that Congress could
compel a person to purchase insurance solely on the basis of his financial decision
to spend his money elsewhere. Rather, the government seems to view an economic
mandate as an emergency tool of sorts, for use in extreme and unique situations
and only to the extent the underlying regulated conduct meets a number of fact-
based criteria.
The government submits that health care and health insurance are factually
unique and not susceptible of replication due to: (1) the inevitability of health care
need; (2) the unpredictability of need; (3) the high costs of health care; (4) the
federal requirement that hospitals treat, until stabilized, individuals with
emergency medical conditions, regardless of their ability to pay;101 (5) and
101
See EMTALA, 42 U.S.C. § 1395dd. In this regard, the plaintiffs point out that the
government’s contention amounts to a bootstrapping argument. Under the government’s theory,
131
associated cost-shifting.
The first problem with the government’s proposed limiting factors is their
lack of constitutional relevance.102 These five factual criteria comprising the
government’s “uniqueness” argument are not limiting principles rooted in any
constitutional understanding of the commerce power. Rather, they are ad hoc
factors that—fortuitously—happen to apply to the health insurance and health care
industries. They speak more to the complexity of the problem being regulated than
the regulated decision’s relation to interstate commerce. They are not limiting
principles, but limiting circumstances.
Apparently recognizing that these factors appear in many subjects worthy of
regulation, the government acknowledged at oral argument that the mere presence
of many of these factors is not sufficient. Presented with three examples of
Congress can enlarge its own powers under the Commerce Clause by legislating a market
externality into existence, and then claiming an extra-constitutional fix is required.
102
The Supreme Court has rejected similar calls for a reprieve from Commerce Clause
restraints based upon the ostensible uniqueness or gravity of the problem being regulated. For
instance, Justice Breyer’s dissent in Lopez attempted to deflect the majority’s focus on limiting
principles—specifically, its statement that upholding § 922(q) would enable the federal
government to “regulate any activity that it found was related to the economic productivity of
individual citizens,” 514 U.S. at 564, 115 S. Ct. at 1632—by arguing that § 922(q) “is aimed at
curbing a particularly acute threat” and that “guns and education are incompatible” in a “special
way.” Id. at 624, 115 S. Ct. at 1661 (Breyer, J., dissenting) (emphasis added). The dissent further
opined that gun possession in schools embodied “the rare case . . . [when] a statute strikes at
conduct that (when considered in the abstract) seems so removed from commerce, but which
(practically speaking) has so significant an impact upon commerce.” Id. at 624, 115 S. Ct. at
1662 (emphasis added). The majority dismissed these “suggested limitations,” however,
characterizing them as “devoid of substance.” Id. at 564, 115 S. Ct. at 1632 (majority opinion).
132
industries characterized by some or all of these market deficiencies—elder care,
other types of insurance, and the energy market—the government argued that an
economic mandate in these three settings is distinguishable.
However, virtually all forms of insurance entail decisions about timing and
planning for unpredictable events with high associated costs—insurance
protecting against loss of life, disability from employment, business interruption,
theft, flood, tornado, and other natural disasters, long-term nursing care
requirements, and burial costs. Under the government’s proposed limiting
principles, there is no reason why Congress could not similarly compel Americans
to insure against any number of unforeseeable but serious risks.103 High costs and
cost-shifting in premiums are simply not limited to hospital care, but occur when
individuals are disabled, cannot work, experience an accident, need nursing care,
die, and myriad other insurance-related contingencies.
This gives rise to a second fatal problem with the government’s proposed
limits: administrability. We are at a loss as to how such fact-based criteria can
serve as the sort of “judicially enforceable” limitations on the commerce power
103
The government essentially argues that anyone creates a cost-shifting risk by virtue of
being alive, since they may one day be injured or sick and seek care that they do not pay for.
Therefore, Congress can compel the purchase of health insurance, from birth to death, to protect
against such risks. This expansive theory could justify the compelled purchase of innumerable
forms of insurance, however. To give but one example, Congress could undoubtedly require
every American to purchase liability insurance, lest the consequences of their negligence or
inattention lead to unfunded costs (medical and otherwise) passed on to others in the future.
133
that the Supreme Court has repeatedly emphasized as necessary to that enumerated
power. Lopez, 514 U.S. at 566, 115 S. Ct. at 1633; see also Morrison, 529 U.S. at
608 n.3, 120 S. Ct. at 1749 n.3 (rejecting dissent’s “remarkable theory that the
commerce power is without judicially enforceable boundaries”). We are loath to
invalidate an act of Congress, and do so only after extensive circumspection. But
the role that the Court would take were we to adopt the position of the government
is far more troublesome. Were we to adopt the “limiting principles” proffered by
the government, courts would sit in judgment over every economic mandate issued
by Congress, determining whether the level of participation in the underlying
market, the amount of cost-shifting, the unpredictability of need, or the strength of
the moral imperative were enough to justify the mandate.
But the commerce power does not admit such limitations; rather it “is
complete in itself, may be exercised to its utmost extent, and acknowledges no
limitations, other than are prescribed in the constitution.” Gibbons, 22 U.S. at 196.
If Congress may compel individuals to purchase health insurance from a private
company, it may similarly compel the purchase of other products from private
industry, regardless of the “unique conditions” the government cites as warrant for
Congress’s regulation here. See Government’s Opening Br. at 19.
Moreover, the government’s insistence that we defer to Congress’s fact
134
findings underscores the lack of any judicially enforceable stopping point to the
government’s “uniqueness” argument. Presumably, a future Congress similarly
would be able to articulate a unique problem requiring a legislative fix that
entailed compelling Americans to purchase a certain product from a private
company. The government apparently seeks to set the terms of the limiting
principles courts should apply, and then asks that we defer to Congress’s judgment
about whether those conditions have been met. The Supreme Court has firmly
rejected such calls for judicial abdication in the Commerce Clause realm. See
Lopez, 514 U.S. at 557 n.2, 115 S. Ct. at 1629 n.2 (“‘[W]hether particular
operations affect interstate commerce sufficiently to come under the constitutional
power of Congress to regulate them is ultimately a judicial rather than a legislative
question, and can be settled finally only by this Court.’” (quoting Heart of Atlanta
Motel, 379 U.S. at 273, 85 S. Ct. at 366 (Black, J., concurring))).
At root, the government’s uniqueness argument relies upon a convenient
sleight of hand to deflect attention from the central issue in the case: what is the
nature of the conduct being regulated by the individual mandate, and may
Congress reach it? Because an individual’s decision to forego purchasing a
product is so incongruent with the “activities” previously reached by Congress’s
commerce power, the government attempts to limit the individual mandate’s far-
135
reaching implications. Accordingly, the government adroitly and narrowly re-
defines the regulated activity as the uninsured’s health care consumption and
attendant cost-shifting, or the timing and method of payment for such
consumption.104
The government’s reluctance to define the conduct being regulated as the
decision to forego insurance is understandable. After all, if the decision to forego
purchasing a product is deemed “economic activity” (merely because it is
inevitable that an individual in the future will consume in a related market), then
decisions not to purchase a product would be subject to the sweeping doctrine of
aggregation, and such no-purchase decisions of all Americans would fall within
the federal commerce power. Consequently, the government could no longer fall
back on “uniqueness” as a limiting factor, since Congress could enact purchase
mandates no matter how pedestrian the relevant product market.
As an inferior court, we may not craft new dichotomies—“uniqueness”
versus “non-uniqueness,” or “cost-shifting” versus “non-cost-shifting”—not
recognized by Supreme Court doctrine. To do so would require us to fabricate out
104
The dissent adopts the government’s position. See Dissenting Op. at 227 (describing
“the relevant conduct targeted by Congress” as “the uncompensated consumption of health care
services by the uninsured”); id. at 235 (stating that “many of the[] uninsured currently consume
health care services for which they cannot or do not pay” and “[t]his is, in every real and
meaningful sense, classic economic activity”); id. at 214 (“In other words, the individual mandate
is the means Congress adopted to regulate the timing and method of individuals’ payment for the
consumption of health care services.”).
136
of whole cloth a five-factor test that lacks any antecedent in the Supreme Court’s
Commerce Clause jurisprudence. Thus, not only do the “uniqueness” factors lack
judicial administrability, present Commerce Clause doctrine prohibits inferior
courts, like us, from applying them anyway.
Ultimately, the government’s struggle to articulate cognizable, judicially
administrable limiting principles only reiterates the conclusion we reach today:
there are none.
G. Congressional Findings
This brings us to the congressional findings. See 42 U.S.C.
§ 18091(a)(1)–(3). We look to congressional findings to help us “evaluate the
legislative judgment that the activity in question substantially affected interstate
commerce.” Lopez, 514 U.S. at 549, 115 S. Ct. at 1632.
Here, tracking the language of Supreme Court decisions, the congressional
findings begin with the statement that the individual insurance mandate “is
commercial and economic in nature” and “substantially affects interstate
commerce.” 42 U.S.C. § 18091(a)(1). Of course, the relevant inquiry is not
whether the regulation itself substantially affects interstate commerce but rather
whether the underlying activity being regulated substantially affects interstate
commerce.
137
Later on, the findings do ground the individual mandate in Congress’s effort
to address this multi-step cost-shifting scenario: (1) some uninsureds consume
health care; (2) in turn, some of them do not pay their full medical costs and
instead shift them to medical providers; (3) medical providers thereafter shift these
costs to “private insurers”; and (4) private insurers then shift them to insureds
through higher premiums.105 Id. § 18091(a)(2). The average annual premium
increase is $1,000 for insured families, id., and $400 for individuals.106 The
findings state that the mandate will reduce the number of the uninsured and the
$43 billion cost-shifting and thereby “lower health insurance premiums.”107 Id.
§ 18091(a)(2)(F).
Of course, “the existence of congressional findings is not sufficient, by
itself, to sustain the constitutionality of Commerce Clause legislation.” Morrison,
105
The parties and amici use the shorthand terms “cost-shifting,” “cost-shifters,” or “free-
riders” to describe these problems.
106
See Families USA, supra note 8.
107
Experts debate whether the Act will accomplish its premium-lowering objective.
According to even the CBO, “Under PPACA and the Reconciliation Act, premiums for health
insurance in the individual market will be somewhat higher than they would otherwise be . . .
mostly because the average insurance policy in that market will cover a larger share of enrollees’
costs for health care and provide a slightly wider range of benefits.” CONG . BUDGET OFFICE , AN
ANALYSIS OF HEALTH INSURANCE PREMIUMS UNDER THE PATIENT PROTECTION AND
AFFORDABLE CARE ACT 8 (2009).
The CBO estimates the Act will cause costs for health insurance in the individual market
to rise by 27% to 30% over current levels in 2016, due to the broadened coverage achieved by the
insurance market reforms. Id. at 6. For the purpose of our analysis, however, we accept the
congressional finding that cost-shifters lead to higher premiums.
138
529 U.S. at 614, 120 S. Ct. at 1752. Rather, the Supreme Court has insisted that
courts examine congressional findings regarding substantial effects. See Lopez,
514 U.S. at 557 n.2, 115 S. Ct. at 1629 n.2 (“‘[S]imply because Congress may
conclude that a particular activity substantially affects interstate commerce does
not necessarily make it so.’” (quoting Hodel, 452 U.S. at 311, 101 S. Ct. at 2391
(Rehnquist, J., concurring))).
As a preliminary matter, we recount what the record reveals regarding the
cost-shifting effects of the uninsured. To the extent the data show anything, the
data demonstrate that the cost-shifters are largely persons who either (1) are
exempted from the mandate, (2) are excepted from the mandate penalty, or (3) are
now covered by the Act’s Medicaid expansion.
For example, illegal aliens and other nonresidents are cost-shifters ($8.1
billion, or 18.9% of the $43 billion),108 but they are exempted from the individual
mandate entirely. 26 U.S.C. § 5000A(d)(3). Low-income persons are the largest
segment of cost-shifters ($15 billion, or 34.8% of the $43 billion),109 but they are
covered by the Act’s Medicaid expansion or excepted from the mandate penalty.
108
See Br. of Amici Curiae Economists in Support of Plaintiffs at 11 & app. A
(summarizing their calculations based on the MEPS data set).
109
See Br. of Amici Curiae Economists in Support of Plaintiffs at 11 & app. A
(summarizing their calculations based on the MEPS data set).
139
Id. § 5000A(e)(1), (2) (excepting individuals (1) whose premium contribution
exceeds 8% of household income or (2) whose household income is below the
specified income tax filing threshold). Previously, the uninsured with preexisting
health conditions sought, but were denied, coverage and ended up in the cost-
shifting pool ($8.7 billion, or 20.1%).110 However, the Act’s insurance reforms
now guarantee them coverage and move them out of the future cost-shifting pool.
Already-insured persons who do not pay their out-of-pocket costs (such as co-
payments and deductibles) are cost-shifters ($3.3 billion, or 7.6%),111 but they are
already covered by insurance without the mandate. In addition, the cost-shifter
uninsureds who cannot pay the average $2,000 medical bill also cannot pay the
average $4,500 premium,112 yielding another disconnect.
In reality, the primary persons regulated by the individual mandate are not
cost-shifters but healthy individuals who forego purchasing insurance. The Act
110
See Br. of Amici Curiae Economists in Support of Plaintiffs at 11 & app. A
(summarizing their calculations based on the MEPS data set).
111
See Br. of Amici Curiae Economists in Support of Plaintiffs at 11 & app. A
(summarizing their calculations based on the MEPS data set).
112
As noted earlier, the uninsureds’ average medical care costs were $2,000 in 2007 and
$1,870 in 2008. Some uninsureds incur a larger expense, some a smaller expense, and some no
expense at all. We use the average cited in the Brief of the Amici Curiae Economists in Support
of the Government, at 16, which is based on the MEPS tables. The CBO estimates that in 2016
the annual premium for a bronze level plan, even in the Exchanges, will average $4,500–5,000
for individuals and $12,000–12,500 for a family policy. Letter from Douglas Elmendorf,
Director, Cong. Budget Office, to Olympia Snowe, U.S. Senator (Jan. 11, 2010), available at
http://www.cbo.gov/ftpdocs/108xx/doc10884/01-11-Premiums_for_Bronze_Plan.pdf.
140
confirms as much. To help private insurers, the congressional findings
acknowledge that the individual mandate seeks to “broaden the health insurance
risk pool to include healthy individuals,” to “minimize adverse selection,”113 to
increase “the size of purchasing pools,” and to promote “economies of scale.” 42
U.S.C. § 18091(a)(2)(I), (J). The individual mandate forces healthy and voluntarily
uninsured individuals to purchase insurance from private insurers and pay
premiums now in order to subsidize the private insurers’ costs in covering more
unhealthy individuals under the Act’s reforms. Congress sought to mitigate its
reforms’ regulatory costs on private insurers114 by compelling healthy Americans
outside the insurance market to enter the private insurance market and buy the
insurers’ products. This starkly evinces how the Act is forcing market entry by
those outside the market.
Nevertheless, we need not, and do not, rely on the factual disparity between
the persons regulated by the individual mandate and the cost-shifting problem.
113
Distinguished economists have filed helpful briefs on both sides of the case. While
they disagree on some things, they agree about the theory of adverse selection. They agree some
relatively healthy people refrain from, or opt out of, buying health insurance more often than
people who are unhealthy or sick seek insurance. This results in a smaller and less healthy pool
of insured persons for private insurance companies. Br. of Amici Curiae Economists in Support
of the Government at 17–18; Br. of Amici Curiae Economists in Support of Plaintiffs at 13–16.
114
As explained above, the Act requires private insurers (1) to cover the unhealthy and (2)
to price that coverage, not on actuarial risks or basic economic pricing decisions, but on
community-rated premiums without regard to health status. 42 U.S.C. § 300gg-1(a).
141
After all, courts “need not determine whether respondents’ activities, taken in the
aggregate, substantially affect interstate commerce in fact, but only whether a
‘rational basis’ exists for so concluding.”115 Raich, 545 U.S. at 22, 125 S. Ct. at
2208 (emphasis added). The government would have this be the end of the
constitutional inquiry.
But the government skips important analytical steps. Rational basis review
is not triggered by the mere fact of Congress’s invocation of Article I power;
rather, the Supreme Court has applied rational basis review to a more specific
question under the Commerce Clause: whether Congress has a “rational basis” for
concluding that the regulated “activities, when taken in the aggregate,
substantially affect interstate commerce.”116 Id. (emphasis added). As discussed in
subsection D, supra, courts must initially assess whether the subject matter
115
Notably, the Lopez Court recognized the same “rational basis” level of review as
Raich. See Lopez, 514 U.S. at 557, 115 S. Ct. at 1629 (stating that, since the New Deal, the
Supreme Court has “undertaken to decide whether a rational basis existed for concluding that a
regulated activity sufficiently affected interstate commerce”). Raich did not adopt a more
deferential review of congressional legislation than prior cases, as the Supreme Court itself
acknowledged. See 545 U.S. at 22, 125 S. Ct. at 2208 (collecting cases).
116
Every case the Raich Court cited for rational basis review is a substantial effects case.
See 545 U.S. at 22, 125 S. Ct. at 2208 (citing Lopez, 514 U.S. at 557, 115 S. Ct. 1624; Hodel,
452 U.S. at 276–80, 101 S. Ct. 2352; Perez, 402 U.S. at 155–56, 91 S. Ct. 1357; Katzenbach,
379 U.S. at 299–301, 85 S. Ct. 377; Heart of Atlanta Motel, 379 U.S. at 252–53, 85 S. Ct. 348).
In such contexts, courts will accord significant deference to Congress’s assessment of whether an
activity’s cumulative effect on interstate commerce is “substantial” or some lesser quantum. This
is an altogether separate question from (1) whether a regulated activity is amenable to
aggregation analysis at all and (2) the extent of the inferential leap needed to connect the
regulated activity to the effects on interstate commerce.
142
targeted by the regulation is suitable for aggregation in the first place. Relatedly,
courts, in the rational basis inquiry, must also examine whether the link between
the regulated activity and interstate commerce is too attenuated, lest there be no
discernible stopping point to Congress’s commerce power.117 See Lopez, 514 U.S.
at 562–68, 115 S. Ct. at 1630–34.
The wholesale deference the government would have us apply here cannot
be squared with the Supreme Court’s decisions in Morrison and Lopez. Here,
“Congress’ findings are substantially weakened by the fact that they rely so
heavily on a method of reasoning that [courts] have already rejected as
unworkable if we are to maintain the Constitution’s enumeration of powers.”
Morrison, 529 U.S. at 615, 120 S. Ct. at 1752. It is highly instructive that the
Lopez and Morrison Courts rejected a similar cost-shifting theory now
propounded by the government. In examining the actual relationship between gun
117
Compare Raich, 545 U.S. at 22, 125 S. Ct. at 2209 (“[W]e have no difficulty
concluding that Congress had a rational basis for believing that failure to regulate the intrastate
manufacture and possession of marijuana would leave a gaping hole in the CSA.”), Heart of
Atlanta Motel, 379 U.S. at 253, 85 S. Ct. at 355 (referring to “overwhelming evidence that
discrimination by hotels and motels impedes interstate travel”), and Wickard, 317 U.S. at 128, 63
S. Ct. at 91 (“[A] factor of such volume and variability as home-consumed wheat would have a
substantial influence on price and market conditions.”), with Morrison, 529 U.S. at 615, 120 S.
Ct. at 1752 (rejecting the government’s invitation “to follow the but-for causal chain from the
initial occurrence of violent crime . . . to every attenuated effect upon interstate commerce”), and
Lopez, 514 U.S. at 564, 115 S. Ct. at 1632 (“[I]f we were to accept the Government’s arguments,
we are hard pressed to posit any activity by an individual that Congress is without power to
regulate.”).
143
possession and interstate commerce, the Lopez Court refused to accept what it
referred to as the government’s “cost of crime” theory. 514 U.S. at 564, 115 S. Ct.
at 1632. It did so despite the government’s argument that the “costs of violent
crime are substantial, and, through the mechanism of insurance, those costs are
spread throughout the population.” Id. at 563–64, 115 S. Ct. at 1632 (emphasis
added).
Similarly, in Morrison the Supreme Court considered a stockpile118 of
congressional findings attesting to the link between domestic violence and medical
costs frequently borne by third parties. See, e.g., 529 U.S. at 629–36, 120 S. Ct. at
1760–64 (Souter, J., dissenting); see also id. at 632, 120 S. Ct. at 1762 (“‘Over 1
million women in the United States seek medical assistance each year for injuries
sustained [from] their husbands or other partners.’” (quoting S. Rep. No. 101-545,
at 37 (1990))); id. (“‘[E]stimates suggest that we spend $5 to $10 billion a year on
health care, criminal justice, and other social costs of domestic violence.’”
(quoting S. Rep. No. 103-138, at 41 (1993))).
In Morrison, the Supreme Court also recounted Congress’s express finding
118
In Morrison, “[t]he congressional findings that accompanied VAWA were so
voluminous that they were removed from the text of the statute and placed in a conference report
to avoid cluttering the United States Code.” Melissa Irr, Note, United States v. Morrison; An
Analysis of the Diminished Effect of Congressional Findings in Commerce Clause Jurisprudence
and a Criticism of the Abandonment of the Rational Basis Test, 62 U. PITT . L. REV . 815, 824
(2001).
144
that gender-motivated violence substantially affected interstate commerce “‘by
deterring potential victims from traveling interstate, from engaging in employment
in interstate business, and from transacting with business, and in places involved
in interstate commerce; . . . by diminishing national productivity, increasing
medical and other costs, and decreasing the supply of and the demand for
interstate products.’” Id. at 615, 120 S. Ct. at 1752 (majority opinion) (emphasis
added) (quoting H.R. Conf. Rep. No. 103-711, at 385 (1994)). The Morrison
Court did not dispute the above figures about medical costs, but instead
considered them largely extraneous to the threshold question of whether the
subject matter of the regulation had a sufficient nexus to interstate commerce. See
id. at 617, 120 S. Ct. at 1754.
In both Lopez and Morrison, the Supreme Court determined that the
government’s cost-shifting argument provided too attenuated a link to Congress’s
commerce power. Under such a cost-shifting theory, “it is difficult to perceive any
limitation on federal power, even in areas such as criminal law enforcement or
education where States historically have been sovereign.” Lopez, 514 U.S. at 564,
115 S. Ct. at 1632.
For example, we harbor few doubts that an individual’s decisions about
“marriage, divorce, and child custody,” if aggregated, would have substantial
145
effects on interstate commerce. See id. at 564, 115 S. Ct. at 1632. Yet, the mere
fact of an activity’s substantial effects on interstate commerce does not thereby
render that activity an appropriate subject for Congress’s plenary commerce
authority. Such a holding would require the Supreme Court to overturn Lopez and
Morrison.
We see no reason why the inferential leaps in this case are any less
attenuated than those in Lopez and Morrison. The cost-shifting accompanying the
criminal acts of violence at issue in Lopez and Morrison—hospital bills borne by
third parties, property damage and insurance consequences, law enforcement
expenditures and incarceration costs—is at least as apparent as the multi-step cost-
shifting scenario associated with the medically uninsured. Meanwhile, in all three
cases, the regulated conduct giving rise to the cost-shifting is divorced from a
commercial transaction or the “production, distribution, and consumption of
commodities.” Raich, 545 U.S. at 26, 125 S. Ct. at 2211.
At best, we can say that the uninsured may, at some point in the
unforeseeable future, create that cost-shifting consequence. Yet this readily leads
to a scenario where we must “pile inference upon inference” to sustain Congress’s
legislation, a practice the Supreme Court admonishes us to avoid. See Lopez, 514
U.S. at 567, 115 S. Ct. at 1634. If anything, the temporal aspects present here, but
146
not in Lopez or Morrison, render the regulated “activity” even further remote.119
We next explain how the individual mandate impairs important federalism
concerns.
H. Areas of Traditional State Concern
Before examining the states’ traditional role in regulating insurance and
health care, we fully recognize that Congress has the power under the Commerce
Clause to regulate broadly in those arenas. In fact, Congress has legislated
expansively and constitutionally in the fields of insurance and health care. See,
e.g., Health Insurance Portability and Accountability Act of 1996 (“HIPAA”),
Pub. L. No. 104-191, 110 Stat. 1936 (1996); Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”), Pub. L. No. 99-272, 100 Stat. 82 (1986);
Employee Retirement Income Security Act of 1974 (“ERISA”), Pub. L. No. 93-
406, 88 Stat. 829 (1974); Social Security Amendments of 1965, Pub. L. No. 89-97,
119
The dissent identifies an economic effect—cost-shifting—and essentially defines that
as the activity being regulated. But the dissent’s conflation of activity and effect is sheer question
begging. It is no wonder, then, that the dissent makes the breathtaking assertion that there is not
even a single inferential step needed to link the regulated activity here to an impact on
commerce. As the dissent frames the issue, there is no lack of nexus between the regulated
activity and its effects on interstate commerce because they are one and the same!
To the extent the dissent describes the conduct being regulated as the uncompensated
consumption of health care services, the language of the mandate refers only to insurance and
contains no reference to health care services, much less how health care services are consumed or
paid for. The dissent can find no inferential leap because it has assumed away the very problem
in this case, effectively treating the mandate as operating at the point of consumption. Under the
dissent’s re-framing of the issue, the VAWA’s civil-remedy provision in Morrison could be
regarded as regulating the “consumption of health care services,” because such consumption
inevitably and empirically flows from gender-motivated violence.
147
79 Stat. 286 (1965) (establishing Medicare and Medicaid); Federal Food, Drug,
and Cosmetic Act, Pub. L. No. 75-717, 52 Stat. 1040 (1938). It is clear that
Congress has enacted comprehensive legislation regarding health insurance and
health care. The Act is another such example. Yet, the narrow constitutional
question here is whether one provision—§ 5000A—in that massive regulation
goes too far.
For the individual mandate to be sustained, it must be enacted pursuant to a
valid exercise of Article I power. It simply will not suffice to say that, because
Congress has regulated broadly in a field, it may regulate in any fashion it pleases.
The Constitution supplies Congress with various tools to effectuate its legislative
power, but it also denies others. In assessing Congress’s exercise of power, courts
recognize that the structural limits embedded in the Constitution are of equal
dignity to the express prohibitions—and may even be a more prevalent source of
limitation. See, e.g., Comstock, 560 U.S. at __, 130 S. Ct. at 1968 (Kennedy, J.,
concurring) (rejecting notion that “the Constitution’s express prohibitions” are
“the only, or even the principal, constraints on the exercise of congressional
power” (emphasis added)).120
120
The Supreme Court reminds us that “the federal structure serves to grant and delimit
the prerogatives and responsibilities of the States and the National Government vis-à-vis one
another” and “action that exceeds the National Government’s enumerated powers undermines the
sovereign interests of States.” Bond, 564 U.S. at __, __, 131 S. Ct. at 2364, 2366; see also
148
The Supreme Court’s Commerce Clause jurisprudence emphasizes that, in
assessing the constitutionality of Congress’s exercise of its commerce authority, a
relevant factor is whether a particular federal regulation trenches on an area of
traditional state concern. See Morrison, 529 U.S. at 611, 613, 615–16, 120 S. Ct.
at 1750–51, 1753; Lopez, 514 U.S. at 561 n.3, 564–68, 115 S. Ct. at 1631 n.3,
1632–34. The Supreme Court has expressed concern that “Congress might use the
Commerce Clause to completely obliterate the Constitution’s distinction between
national and local authority.” Morrison, 529 U.S. at 615, 120 S. Ct. at 1752; see
also Raich, 545 U.S. at 35–36, 125 S. Ct. at 2216–17 (Scalia, J., concurring);
Lopez, 514 U.S. at 557, 567–68, 115 S. Ct. at 1628–29, 1634; id. at 577, 115 S. Ct.
at 1638–39 (Kennedy, J., concurring) (stating that if Congress were to assume
control over areas of traditional state concern, “the boundaries between the
spheres of federal and state authority would blur and political responsibility would
become illusory. The resultant inability to hold either branch of the government
answerable to the citizens is more dangerous even than devolving too much
authority to the remote central power” (citation omitted)). Coupled with this
Gregory, 501 U.S. at 458, 111 S. Ct. at 2399 (“This federalist structure of joint sovereigns
preserves to the people numerous advantages. It assures a decentralized government that will be
more sensitive to the diverse needs of a heterogenous society; it increases opportunity for citizen
involvement in democratic processes; it allows for more innovation and experimentation in
government; and it makes government more responsive by putting the States in competition for a
mobile citizenry.”).
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consideration, the Supreme Court recognizes that the Constitution “withhold[s]
from Congress a plenary police power.” Lopez, 514 U.S. at 566, 115 S. Ct. at
1633; see also Morrison, 529 U.S. at 618–19, 120 S. Ct. at 1754; cf. Comstock,
560 U.S. at __, 130 S. Ct. at 1964; id. at __, 130 S. Ct. at 1967 (Kennedy, J.,
concurring) (stating that the police power “belongs to the States and the States
alone”).
In addition, whether the regulated subject matter is an area of traditional
state concern impacts three of the five Comstock factors pertinent to a Necessary
and Proper Clause analysis: (1) whether there is a long history of federal
involvement in this arena, (2) whether the statute accommodates or supplants state
interests, and (3) the statute’s narrow scope. 560 U.S. at __, 130 S. Ct. at 1965.
With these principles in mind, we examine whether insurance and health
care qualify as areas of traditional state concern. Prior to the Supreme Court’s
1944 decision in South-Eastern Underwriters, “the States enjoyed a virtually
exclusive domain over the insurance industry.” St. Paul Fire & Marine Ins. Co. v.
Barry, 438 U.S. 531, 539, 98 S. Ct. 2923, 2928 (1978). Thus, South-Eastern
Underwriters was “widely perceived as a threat to state power to tax and regulate
the insurance industry.” United States Dep’t of Treasury v. Fabe, 508 U.S. 491,
499–500, 113 S. Ct. 2202, 2207 (1993); see also Cantor v. Detroit Edison Co.,
150
428 U.S. 579, 608 n.4, 96 S. Ct. 3110, 3126 n.4 (1976) (Blackmun, J., concurring)
(“Congress’ expressed concern [was that the result in South-Eastern
Underwriters] would ‘greatly impair or nullify the regulation of insurance by the
States,’ bringing to a halt their ‘experimentation and investigation in the area.’”).
“To allay those fears, Congress moved quickly to restore the supremacy of the
States in the realm of insurance regulation.” Fabe, 508 U.S. at 500, 113 S. Ct. at
2207 (emphasis added).
In 1945, a year after South-Eastern Underwriters, Congress passed the
McCarran-Ferguson Act, 59 Stat. 33, ch. 20, 15 U.S.C. §§ 1011–1015.121 The
McCarran-Ferguson Act preserved state regulatory control over insurance, which
was largely considered by Congress to be a “local matter.” W. & S. Life Ins. Co. v.
State Bd. of Equalization, 451 U.S. 648, 653, 101 S. Ct. 2070, 2075 (1981)
(quoting H.R. Rep. No. 143, at 2 (1945)). The passage of the McCarran-Ferguson
Act signaled Congress’s recognition of the states’ historical role in regulating
insurance within their boundaries—and its unwillingness to supplant their vital
function as a source of experimentation. Prudential Ins. Co. v. Benjamin, 328 U.S.
121
The McCarran-Ferguson Act states: (1) “[t]he business of insurance, and every person
engaged therein, shall be subject to the laws of the several States which relate to the regulation or
taxation of such business,” 15 U.S.C. § 1012(a), and (2) “[n]o Act of Congress shall be construed
to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the
business of insurance, or which imposes a fee or tax upon such business, unless such Act
specifically relates to the business of insurance,” id. § 1012(b).
151
408, 429, 66 S. Ct. 1142, 1155 (1946) (“Obviously Congress’ purpose [in passing
the McCarran-Ferguson Act] was broadly to give support to the existing and
future state systems for regulating and taxing the business of insurance.”); see also
Ne. Bancorp, Inc. v. Bd. of Governors of Fed. Reserve Sys., 472 U.S. 159, 179,
105 S. Ct. 2545, 2556 (1985) (O’Connor, J., concurring) (“The business of
insurance is also of uniquely local concern . . . . [and] historically ha[s] been
regulated by the States in recognition of the critical part [it] play[s] in securing the
financial well-being of local citizens and businesses.” (citations omitted)). Our
Circuit has reached a similar conclusion. Blue Cross & Blue Shield v. Nielsen, 116
F.3d 1406, 1413 (11th Cir. 1997) (“Adjustment of the rights and interests of
insurers, health care providers, and insureds is a subject matter that falls squarely
within the zone of traditional state regulatory concerns.”).
Thus, insurance qualifies as an area of traditional state regulation. This
recognition counsels caution, and supplies reviewing courts with even greater
cause for doubt when faced with an unprecedented economic mandate of dubious
constitutional status. Cf. Lopez, 514 U.S. at 583, 115 S. Ct. at 1641 (Kennedy, J.,
concurring) (“The statute now before us forecloses the States from experimenting
and exercising their own judgment in an area to which States lay claim by right of
history and expertise, and it does so by regulating an activity beyond the realm of
152
commerce in the ordinary and usual sense of that term.”).
The health care industry also falls within the sphere of traditional state
regulation. A state’s role in safeguarding the health of its citizens is a
quintessential component of its sovereign powers. The Supreme Court has
declared that the “structure and limitations of federalism . . . allow the States great
latitude under their police powers to legislate as to the protection of the lives,
limbs, health, comfort, and quiet of all persons.” Gonzales v. Oregon, 546 U.S.
243, 270, 126 S. Ct. 904, 923 (2006) (quotation marks and citation omitted).
Numerous Supreme Court decisions have identified the regulation of health
matters as a core facet of a state’s police powers. See, e.g., Hill v. Colorado, 530
U.S. 703, 715, 120 S. Ct. 2480, 2489 (2000) (“It is a traditional exercise of the
States’ police powers to protect the health and safety of their citizens.” (quotation
marks and citation omitted)); Barnes v. Glen Theatre, Inc., 501 U.S. 560, 569, 111
S. Ct. 2456, 2462 (1991) (“The traditional police power of the States is defined as
the authority to provide for the public health, safety, and morals.”); Head v. N.M.
Bd. of Exam’rs in Optometry, 374 U.S. 424, 428, 83 S. Ct. 1759, 1762 (1963)
(“[T]he statute here involved is a measure directly addressed to protection of the
public health, and the statute thus falls within the most traditional concept of what
is compendiously known as the police power.”); Barsky v. Bd. of Regents, 347
153
U.S. 442, 449, 74 S. Ct. 650, 654 (1954) (“It is elemental that a state has broad
power to establish and enforce standards of conduct within its borders relative to
the health of everyone there. It is a vital part of a state’s police power.”); Jacobson
v. Massachusetts, 197 U.S. 11, 25, 25 S. Ct. 358, 360 (1905) (“According to
settled principles, the police power of a state must be held to embrace, at least,
such reasonable regulations established directly by legislative enactment as will
protect the public health and the public safety.”); see also Raich, 545 U.S. at 42,
125 S. Ct. at 2221 (O’Connor, J., dissenting) (“This case exemplifies the role of
States as laboratories. The States’ core police powers have always included
authority to define criminal law and to protect the health, safety, and welfare of
their citizens.”).122
Although the states and the federal government both play indispensable
roles in regulating matters of health, modern Supreme Court precedents have
confirmed the view that the health of a state’s citizens is predominantly a state-
based concern: “the regulation of health and safety matters is primarily, and
historically, a matter of local concern.” Hillsborough Cnty. v. Automated Med.
122
Gibbons, which represents one of the Supreme Court’s earliest articulations of the
states’ reserved police powers, also provides insight into the traditionally local nature of health
laws. In Gibbons, Chief Justice Marshall remarked that “[i]nspection laws, quarantine laws,
health laws of every description, as well as laws for regulating the internal commerce of a State”
together “form a portion of that immense mass of legislation, which embraces every thing within
the territory of a State, not surrendered to the general government: all which can be most
advantageously exercised by the States themselves.” 22 U.S. at 203 (emphasis added).
154
Labs., Inc., 471 U.S. 707, 719, 105 S. Ct. 2371, 2378 (1985). The Supreme Court
similarly has stated that the narrower category of “health care” is an area of
traditional state concern. See, e.g., Rush Prudential HMO, Inc. v. Moran, 536 U.S.
355, 387, 122 S. Ct. 2151, 2171 (2002) (referring to “‘the field of health care’” as
“‘a subject of traditional state regulation’” (quoting Pegram v. Herdrich, 530 U.S.
211, 237, 120 S. Ct. 2143, 2158 (2000))); N.Y. State Conf. of Blue Cross & Blue
Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 661, 115 S. Ct. 1671, 1680
(1995) (“[G]eneral health care regulation . . . historically has been a matter of local
concern.”).
Here, it is undisputed that the individual mandate supersedes a multitude of
the states’ policy choices in these key areas of traditional state concern.
Congress’s encroachment upon these areas of traditional state concern is yet
another factor that weighs in the plaintiffs’ favor, and strengthens the inference
that the individual mandate exceeds constitutional boundaries. The inference is
particularly compelling here, where Congress has used an economic mandate to
compel Americans to purchase and continuously maintain insurance from a private
company.
We recognize the argument that, if states can issue economic mandates,
Congress should be able to do so as well. Yes, some states have exercised their
155
general police power to require their citizens to buy certain products—most
pertinently, for our purposes, health insurance itself.123 But if anything, this gives
us greater constitutional concern, not less. Indeed, if the federal government
possesses the asserted power to compel individuals to purchase insurance from a
private company forever, it may impose such a mandate on individuals in states
that have elected not to employ their police power in this manner.124 After all, if
and when Congress actually operates within its enumerated commerce power,
Congress, by virtue of the Supremacy Clause, may ultimately supplant the states.
When this occurs, a state is no longer permitted to tailor its policymaking goals to
the specific needs of its citizenry. This is precisely why it is critical that courts
preserve constitutional boundaries and ensure that Congress only operates within
the proper scope of its enumerated commerce power.
In sum, the fact that Congress has enacted this insurance mandate in an area
123
See, e.g., MASS. GEN . LAWS ch. 111M § 2 (Massachusetts law requiring residents 18
years and older to “obtain and maintain creditable coverage so long as it is deemed affordable”);
N.J. STAT . ANN . § 26:15-2 (New Jersey law requiring residents 18 years and younger to “obtain
and maintain health care coverage that provides hospital and medical benefits”).
124
Some states have even passed legislation providing that their citizens may not be
required to obtain or maintain health insurance. See, e.g., Utah Code Ann. § 63M-1-2505.5; Va.
Code Ann. § 38.2-3430.1:1; see also ARIZ. CONST . Art. XXVII, § 2 (“A law or rule shall not
compel, directly or indirectly, any person, employer or health care provider to participate in any
health care system.”). The American Legislative Exchange Council, a nonprofit membership
association of state legislators, filed a helpful amicus brief documenting the diverse array of
policies implemented by states to provide their citizens with health coverage. See Br. of Amicus
Curiae American Legislative Exchange Council in Support of Plaintiffs at 21–28.
156
of traditional state concern is a factor that strengthens the inference of a
constitutional violation. When this federalism factor is added to the numerous
indicia of constitutional infirmity delineated above, we must conclude that the
individual mandate cannot be sustained as a valid exercise of Congress’s power to
regulate activities that substantially affect interstate commerce.
We do not reach this conclusion lightly, and we recognize that “[d]ue
respect for the decisions of a coordinate branch of Government demands that we
invalidate a congressional enactment only upon a plain showing that Congress has
exceeded its constitutional bounds.” Morrison, 529 U.S. at 607, 120 S. Ct. at
1748. But we believe a compelling showing has been made here, and “the federal
balance is too essential a part of our constitutional structure and plays too vital a
role in securing freedom for us to admit inability to intervene when one or the
other level of Government has tipped the scales too far.” Lopez, 514 U.S. at 578,
115 S. Ct. at 1639 (Kennedy, J., concurring) (citations omitted).
I. Essential to a Larger Regulatory Scheme
We lastly consider the government’s separate contention that the individual
mandate is a necessary and proper exercise of Congress’s commerce power
because it is essential to Congress’s broader regulation of the insurance and health
care markets.
157
The government’s argument derives from a Commerce Clause doctrine of
recent vintage. In 1995, the Lopez Court commented that the Gun-Free School
Zones Act was “not an essential part of a larger regulation of economic activity, in
which the regulatory scheme could be undercut unless the intrastate activity were
regulated.” Id. at 561, 115 S. Ct. at 1631 (majority opinion). Ten years later in
Raich, although plainly operating within the economic-noneconomic rubric
adopted in Lopez and Morrison, the Supreme Court adverted to the “essential part
of a larger regulation of economic activity” language in Lopez as a further reason
to sustain Congress’s action.125 However, several features of the individual
mandate materially distinguish this case from Raich and demonstrate why the
government’s “essential to a broader regulation of commerce” argument fails here.
First, the Supreme Court has implied that the “larger regulatory scheme”
doctrine primarily implicates as-applied challenges as opposed to the facial
challenge at issue here. For instance, the Supreme Court has employed the “larger
regulatory scheme” doctrine when a plaintiff asserts that, although Congress’s
statute is a permissible regulation within its commerce power, the statute cannot
125
In a concurring opinion, Justice Scalia stated that “Congress may regulate even
noneconomic local activity if that regulation is a necessary part of a more general regulation of
interstate commerce.” Raich, 545 U.S. at 37, 125 S. Ct. at 2217 (Scalia, J., concurring) (emphasis
added). As noted earlier, however, the majority opinion in Raich described the regulated activity
as “the production, distribution, and consumption of commodities” and thus “quintessentially
economic.” Id. at 26, 125 S. Ct. at 2211 (majority opinion).
158
be validly applied to his particular intrastate activity. Raich, 545 U.S. at 15, 23–24,
125 S. Ct. at 2204, 2209–10. In such an instance, the Supreme Court may
determine that the failure to reach a plaintiff’s intrastate activities would
undermine Congress’s efforts to police the interstate market. Id. at 28, 125 S. Ct. at
2212. However, the Supreme Court has to date never sustained a statute on the
basis of the “larger regulatory scheme” doctrine in a facial challenge, where
plaintiffs contend that the entire class of activity is outside the reach of
congressional power.126
On this facial versus as-applied point, the Raich Court declared that “the
statutory challenges at issue in [Lopez and Morrison] were markedly different
from the challenge respondents pursue in the case at hand. Here, respondents ask
us to excise individual applications of a concededly valid statutory scheme. In
contrast, in both Lopez and Morrison, the parties asserted that a particular statute
or provision fell outside Congress’ commerce power in its entirety.” Id. at 23, 125
S. Ct. at 2209. The Court deemed this facial versus as-applied distinction
126
Although the Lopez Court was the first to recognize the “larger regulatory scheme”
doctrine, it is arguable whether they actually applied it, in any real sense, in that case. Rather, the
Supreme Court summarily stated that § 922(q) did not implicate that doctrine at all and “cannot,
therefore, be sustained under our cases upholding regulations of activities that arise out of or are
connected with a commercial transaction, which viewed in the aggregate, substantially affects
interstate commerce.” Lopez, 514 U.S. at 561, 115 S. Ct. at 1631. Here, it would strain credulity
to suggest that the plaintiffs’ conduct “arises out of or is connected with a commercial
transaction,” since the very nature of their conduct is marked by the absence of a commercial
transaction.
159
“pivotal,” as “we have often reiterated that ‘[w]here the class of activities is
regulated and that class is within the reach of federal power, the courts have no
power to excise, as trivial, individual instances of the class.’” Id. (quoting Perez,
402 U.S. at 154, 91 S. Ct. at 1361). The plaintiffs here, of course, are not asking
for courts to excise, as trivial, individual instances of a class—rather, the plaintiffs
contend the mandate to purchase insurance from a private company falls outside of
Congress’s commerce power in its entirety.
But even accepting that this larger regulatory scheme doctrine fully applies
in facial challenges, the government’s argument still fails here. To see why, we
discuss how the Supreme Court utilized the doctrine in the as-applied setting of
Raich, the only instance in which a statute has been sustained by the larger
regulatory scheme doctrine. The Supreme Court in Raich observed that, in
enacting the CSA, “Congress devised a closed regulatory system making it
unlawful to manufacture, distribute, dispense, or possess any controlled substance
except in a manner authorized by the CSA.” Id. at 13, 125 S. Ct. at 2203 (emphasis
added). By classifying marijuana as a Schedule I drug, Congress sought to
eliminate all interstate traffic in the commodity. The Supreme Court concluded
that “the diversion of homegrown marijuana tends to frustrate the federal interest
in eliminating commercial transactions in the interstate market in their entirety.”
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Id. at 19, 125 S. Ct. at 2207 (emphasis added).
Additionally, the fungible nature of the commodity—i.e., the inability to
distinguish intrastate marijuana from interstate marijuana—also undermined
Congress’s ability to enforce its concededly valid total CSA ban on commercial
transactions in the interstate market. The Raich Court stated that “[g]iven the
enforcement difficulties that attend distinguishing between marijuana cultivated
locally and marijuana grown elsewhere, and concerns about diversion into illicit
channels, we have no difficulty concluding that Congress had a rational basis for
believing that failure to regulate the intrastate manufacture and possession of
marijuana would leave a gaping hole in the CSA.”127 Id. at 22, 125 S. Ct. at 2209
(citation omitted) (emphasis added). Consequently, the Raich Court determined
127
The “gaping hole” identified by the Supreme Court was thrown into sharp relief by the
Raich plaintiffs’ lack of limiting principles. If Congress could not reach intrastate marijuana used
for medical purposes, the Raich Court reasoned that it must also be true that intrastate marijuana
used for recreational purposes could not be regulated either. 545 U.S. at 28, 125 S. Ct. at 2212.
And if Congress could not reach intrastate marijuana authorized by state law, neither could it
reach intrastate marijuana unauthorized by state law. Id. Moreover, if Congress could not reach
intrastate marijuana when it is authorized by state law, then Congress’s ability to police the
interstate marijuana market would be wholly contingent on state decisions about whether or not
to authorize marijuana use. Congress would effectively be at the mercy of states, even though
“state action cannot circumscribe Congress’ plenary commerce power.” Id. at 29, 125 S. Ct. at
2213. It is easy to see how the Raich plaintiffs’ arguments threatened to completely undermine
the CSA’s regulation of the interstate marijuana market, not to mention “turn the Supremacy
Clause on its head.” Id. at 29 n.38, 125 S. Ct. at 2213 n.38.
This stands in marked contrast with the case before us, where neither state law nor the
plaintiffs’ uninsured status undermine the ability of Congress to enforce its regulation of
interstate commerce. Even without the mandate, the integrity of all other statutory provisions is
maintained, and Congress’s ability to enforce the Act is in no way jeopardized.
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that Congress’s regulation was justified by the possibility that the plaintiffs’
intrastate activities could frustrate or impede a validly enacted congressional
statute regulating interstate commerce.
In this case, the government contends that the individual mandate is
essential to its broader regulation of the insurance market. For example, the
government submits that Congress’s insurance industry reforms—specifically, its
community-rating and guaranteed-issue reforms—will encourage individuals to
delay purchasing private insurance until an acute medical need arises. Therefore,
the government argues that unless the individual mandate forces individuals into
the private insurance pool before they get sick or injured, Congress’s insurance
industry reforms will be unsustainable by the private insurance companies. The
government emphasizes that the congressional findings state that the individual
mandate “is essential to creating effective health insurance markets in which
improved health insurance products that are guaranteed issue and do not exclude
coverage of pre-existing conditions can be sold.” 42 U.S.C. § 18091(a)(2)(I).
We first note the truism that the mere placement of a particular regulation in
a broader regulatory scheme does not, ipso facto, somehow render that regulation
essential to that scheme. It would be nonsensical to suggest that, in announcing its
“larger regulatory scheme” doctrine, the Supreme Court gave Congress carte
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blanche to enact unconstitutional regulations so long as such enactments were part
of a broader, comprehensive regulatory scheme. We do not construe the Supreme
Court’s “larger regulatory scheme” doctrine as a magic words test, where
Congress’s statement that a regulation is “essential” thereby immunizes its
enactment from constitutional inquiry. Such a reading would eviscerate the
Constitution’s enumeration of powers and vest Congress with a general police
power.
Ultimately, we conclude that the Supreme Court’s “larger regulatory
scheme” doctrine embodies an observation put forth in the New Deal case of Jones
& Laughlin Steel Corp.: “Although activities may be intrastate in character when
separately considered, if they have such a close and substantial relation to
interstate commerce that their control is essential or appropriate to protect that
commerce from burdens and obstructions, Congress cannot be denied the power to
exercise that control.” 301 U.S. at 37, 57 S. Ct. at 624 (emphasis added). Justice
Scalia’s concurring opinion in Raich suggests a similar interpretation. There, he
stated that the “larger regulatory scheme” statement in Lopez “referred to those
cases permitting the regulation of intrastate activities ‘which in a substantial way
interfere with or obstruct the exercise of the granted power.’” Raich, 545 U.S. at
36, 125 S. Ct. at 2217 (Scalia, J., concurring) (emphasis added) (quoting United
163
States v. Wrightwood Dairy Co., 315 U.S. 110, 119, 62 S. Ct. 523, 526 (1942)). In
other words, the Necessary and Proper Clause enables Congress in some instances
to reach intrastate activities that markedly burden or obstruct Congress’s ability to
regulate interstate commerce.
In Raich, the plaintiffs’ intrastate activities—growing and consuming
marijuana—obstructed and burdened Congress’s total CSA ban on interstate
marijuana traffic, both because the fungible nature of marijuana frustrated
Congress’s ability to police the interstate market and because evidence indicated
that intrastate marijuana is often diverted into the interstate market. Yet it is
evident that the conduct regulated by the individual mandate—an individual’s
decision not to purchase health insurance and the concomitant absence of a
commercial transaction—in no way “burdens” or “obstructs” Congress’s ability to
enforce its regulation of the insurance industry. Congress’s statutory reforms of
health insurance products—such as guaranteed issue and community rating—do
not reference or make their implementation in any way dependent on the
individual mandate.
The individual mandate does not remove an obstacle to Congress’s
regulation of insurance companies. An individual’s uninsured status in no way
interferes with Congress’s ability to regulate insurance companies. The uninsured
164
and the individual mandate also do not prevent insurance companies’ regulatory
compliance with the Act’s insurance reforms. At best, the individual mandate is
designed not to enable the execution of the Act’s regulations, but to counteract the
significant regulatory costs on insurance companies and adverse consequences
stemming from the fully executed reforms. That may be a relevant political
consideration, but it does not convert an unconstitutional regulation (of an
individual’s decision to forego purchasing an expensive product) into a
constitutional means to ameliorate adverse cost consequences on private insurance
companies engendered by Congress’s broader regulatory reform of their health
insurance products.128
The government’s assertion that the individual mandate is “essential” to
Congress’s broader economic regulation is further undermined by components of
the Act itself. In Raich, Congress devised a “closed regulatory system,” id. at 13,
125 S. Ct. at 2203, designed to eliminate all interstate marijuana traffic. Here, by
contrast, Congress itself carved out eight broad exemptions and exceptions to the
128
The government argues that Congress has broad authority to select the means by which
it enforces its comprehensive regulatory scheme. But this hardly entails that Congress may
choose any and all means whatsoever. Indeed, Congress might have employed other
unconstitutional means to render its community-rating and guaranteed-issue reforms more
“effective.” For example, it might order unreasonable searches and seizures of corporate
documents to ensure that insurance companies were not discriminating against applicants with
preexisting conditions. Surely this action would not cease being a Fourth Amendment violation
merely because it is deemed essential to a broader regulatory scheme.
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individual mandate (and its penalty) that impair its scope and functionality. See 26
U.S.C. § 5000A(d)–(e). Even if the individual mandate remained intact, the
“adverse selection” problem identified by Congress would persist not only with
respect to these eight broad exemptions, but also with respect to those healthy
persons who choose to pay the mandate penalty. Those who pay the penalty one
year instead of purchasing insurance may still get sick the next year and then
decide to purchase insurance, for which they could not be denied.
Additionally, Congress has hamstrung its own efforts to ensure compliance
with the mandate by opting for toothless enforcement mechanisms. Eschewing the
IRS’s traditional enforcement tools, the Act waives all criminal penalties for
noncompliance and prevents the IRS from using liens or levies to collect the
penalty. Id. § 5000A(g)(2). Thus, to the extent the uninsureds’ ability to delay
insurance purchases would leave a “gaping hole” in Congress’s efforts to reform
the insurance market, Congress has seen fit to bore the hole itself.
J. Conclusion
For these reasons, we conclude that the individual mandate contained in the
Act exceeds Congress’s enumerated commerce power. This conclusion is limited
in scope. The power that Congress has wielded via the Commerce Clause for the
life of this country remains undiminished. Congress may regulate commercial
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actors. It may forbid certain commercial activity. It may enact hundreds of new
laws and federally-funded programs, as it has elected to do in this massive 975-
page Act. But what Congress cannot do under the Commerce Clause is mandate
that individuals enter into contracts with private insurance companies for the
purchase of an expensive product from the time they are born until the time they
die.
It cannot be denied that the individual mandate is an unprecedented exercise
of congressional power. As the CBO observed, Congress “has never required
people to buy any good or service as a condition of lawful residence in the United
States.” CBO MANDATE MEMO, supra p.115, at 1. Never before has Congress
sought to regulate commerce by compelling non-market participants to enter into
commerce so that Congress may regulate them. The statutory language of the
mandate is not tied to health care consumption—past, present, or in the future.
Rather, the mandate is to buy insurance now and forever. The individual mandate
does not wait for market entry.
Because the Commerce Clause is an enumerated power, the Supreme
Court’s decisions all emphasize the need for judicially enforceable limitations on
its exercise. The individual mandate embodies no such limitations, at least none
recognized by extant Commerce Clause doctrine. If an individual’s decision not to
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purchase an expensive product is subject to the sweeping doctrine of aggregation,
then that purchase decision will almost always substantially affect interstate
commerce. The government’s five factual elements of “uniqueness,” proposed as
constitutional limiting principles, are nowhere to be found in Supreme Court
precedent. Rather, they are ad hoc, devoid of constitutional substance, incapable
of judicial administration—and, consequently, illusory. The government’s fact-
based criteria would lead to expansive involvement by the courts in congressional
legislation, requiring us to sit in judgment over when the situation is serious
enough to justify an economic mandate.
This lack of limiting principles also implicates two overarching
considerations within the Supreme Court’s Commerce Clause jurisprudence: (1)
preserving the federal-state balance and (2) withholding from Congress a general
police power. Morrison, 529 U.S. at 617–19, 120 S. Ct. at 1754; Lopez, 514 U.S.
at 566–68, 115 S. Ct. at 1633–34; Jones & Laughlin Steel Corp., 301 U.S. at 30,
57 S. Ct. at 621. These concerns undergird the Constitution’s dual sovereignty
structure, ensuring that the federal government remains a government of
enumerated powers.
As demonstrated at length throughout our opinion, Congress has broad
power to deal with the problems of the uninsured, and it wielded that power
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pervasively in this comprehensive and sweeping Act. As to the individual mandate
provision, however, Congress exceeded its enumerated commerce power. The
structure of the Constitution interposes obstacles by design, in order to prevent the
arrogation of power by one branch or one sovereign. See Gregory, 501 U.S. at
458, 111 S. Ct. at 2400 (“Just as the separation and independence of the coordinate
branches of the Federal Government serve to prevent the accumulation of
excessive power in any one branch, a healthy balance of power between the States
and the Federal Government will reduce the risk of tyranny and abuse from either
front.”). We cannot ignore these structural limits on the Commerce Clause because
of the seriousness and intractability of the problem Congress sought to resolve in
the Act.
The Supreme Court has often found itself forced to strike down
congressional enactments even when the law is designed to address particularly
difficult and universally acknowledged problems. For instance, in Clinton v. City
of New York, 524 U.S. 417, 118 S. Ct. 2091 (1998), the Supreme Court addressed
a problem of Congress’s own creation—deficit spending. The Line Item Veto Act
was “of first importance, for it seems undeniable the Act will tend to restrain
persistent excessive spending.” Id. at 449, 118 S. Ct. at 2108 (Kennedy, J.,
concurring). The problem the act addressed was momentous: “A nation cannot
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plunder its own treasury without putting its Constitution and its survival in peril.”
Id.
Nevertheless, the Supreme Court invalidated the Line Item Veto Act,
recognizing that the Constitution establishes restraints on the power of Congress
to act, even in regards to the mechanism by which it withholds or allocates
funding. The fact that constitutional tools sometimes “prove insufficient[] cannot
validate an otherwise unconstitutional device” because “[t]he Constitution’s
structure requires a stability which transcends the convenience of the moment.” Id.
at 453, 118 S. Ct. at 2110; see also New York v. United States, 505 U.S. at 178,
112 S. Ct. at 2429 (noting that “[n]o matter how powerful the federal interest
involved, the Constitution simply does not give Congress the authority” to
supersede its constitutionally imposed boundaries); INS v. Chadha, 462 U.S. 919,
958–59, 103 S. Ct. 2764, 2788 (1983) (“In purely practical terms, it is obviously
easier for action to be taken by one House without submission to the President; but
it is crystal clear from the records of the Convention, contemporaneous writings
and debates, that the Framers ranked other values higher than efficiency.”).
In the same way, the difficulties posed by the insurance market and health
care cannot justify extra-constitutional legislation. See Printz, 521 U.S. at 935, 117
S. Ct. at 2385 (“It matters not whether policymaking is involved, and no
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case-by-case weighing of the burdens or benefits is necessary; such [federal]
commands are fundamentally incompatible with our constitutional system of dual
sovereignty.”).
The federal government’s assertion of power, under the Commerce Clause,
to issue an economic mandate for Americans to purchase insurance from a private
company for the entire duration of their lives is unprecedented, lacks cognizable
limits, and imperils our federalist structure. We recognize that “[t]hese are not
precise formulations, and in the nature of things they cannot be.” Lopez, 514 U.S.
at 567, 115 S. Ct. at 1634. That an economic mandate to purchase insurance from
a private company is an expedient solution to pressing public needs is not
sufficient. As the Supreme Court counseled in New York v. United States,
The result may appear ‘formalistic’ in a given case to partisans of the
measure at issue, because such measures are typically the product of the
era’s perceived necessity. But the Constitution protects us from our own
best intentions: It divides power among sovereigns and among branches
of government precisely so that we may resist the temptation to
concentrate power in one location as an expedient solution to the crisis
of the day.
505 U.S. at 187, 112 S. Ct. at 2434. Although courts must give due consideration
to the policy choices of the political branches, the judiciary owes its ultimate
deference to the Constitution.129
129
We are at a loss as to why the dissent spends a considerable portion of its opinion on
the Fifth and Tenth Amendments. As mentioned earlier, the district court dismissed the
171
VI. CONSTITUTIONALITY OF INDIVIDUAL MANDATE UNDER THE
TAX POWER
The government claims in the alternative that the individual mandate is a tax
validly enacted pursuant to the Taxing and Spending Clause. The Clause provides
in relevant part that “Congress shall have Power To lay and collect Taxes, Duties,
Imposts and Excises, to pay the Debts and provide for the common Defence and
general Welfare of the United States.” U.S. CONST. art. 1, § 8, cl. 1. The
government claims that the taxing power is comprehensive and plenary, and the
fact that the individual mandate also has a concededly regulatory purpose is
irrelevant, because “a tax ‘does not cease to be valid merely because it regulates,
discourages, or even definitely deters the activities taxed.’” Government’s
Opening Br. at 50 (quoting United States v. Sanchez, 340 U.S. 42, 44, 71 S. Ct.
plaintiffs’ Fifth Amendment claim. Florida v. HHS, 716 F. Supp. 2d at 1161–62. That ruling is
not on appeal.
Furthermore, the plaintiffs’ briefs on appeal raise no free-standing Tenth Amendment
claim as to the individual mandate. Although the state plaintiffs’ brief makes a single passing
reference to the Tenth Amendment in the introduction, see States’ Opening Br. at 3, the fact
remains that the Tenth Amendment is not once cited or argued in the state plaintiffs’ individual
mandate discussion. See States’ Opening Br. at 19–47. The private plaintiffs’ brief also makes a
single passing reference to the Tenth Amendment, but only in relation to how principles of
federalism inform a Necessary and Proper Clause analysis. See Private Plaintiffs’ Br. at 46.
Accordingly, we cannot consider a free-standing Tenth Amendment claim. See, e.g.,
Tanner Adver. Grp., L.L.C. v. Fayette Cnty., 451 F.3d 777, 785 (11th Cir. 2006) (“‘The law is by
now well settled in this Circuit that a legal claim or argument that has not been briefed before the
court is deemed abandoned and its merits will not be addressed.’” (quoting Access Now, Inc. v.
Sw. Airlines Co., 385 F.3d 1324, 1330 (11th Cir. 2004)) (brackets omitted)); United States v.
Jernigan, 341 F.3d 1273, 1283 n.8 (11th Cir. 2003) (finding issue waived, despite “four passing
references” in Appellant’s brief, because “a party seeking to raise a claim or issue on appeal must
plainly and prominently so indicate”).
172
108, 110 (1950)). The government claims that as long as a statute is “productive of
some revenue,” Congress may enact it under its taxing power. Id. (quoting
Sonzinsky v. United States, 300 U.S. 506, 514, 57 S. Ct. 554, 556 (1937)).
Furthermore, the government contends our review is limited because “the
constitutional restraints on taxing are few” and “[t]he remedy for excessive
taxation is in the hands of Congress, not the courts.” United States v. Kahriger,
345 U.S. 22, 28, 73 S. Ct. 510, 513 (1953), overruled on other grounds by
Marchetti v. United States, 390 U.S. 39, 88 S. Ct. 697 (1968); see also Kahriger,
345 U.S. at 31, 73 S. Ct. at 515 (“Unless there are provisions, extraneous to any
tax need, courts are without authority to limit the exercise of the taxing power.”).
Like every other court that has addressed this claim, we remain unpersuaded.
It is not surprising to us that all of the federal courts, which have otherwise
reached sharply divergent conclusions on the constitutionality of the individual
mandate, have spoken on this issue with clarion uniformity. Beginning with the
district court in this case, all have found, without exception, that the individual
mandate operates as a regulatory penalty, not a tax. Florida v. HHS, 716 F. Supp.
2d at 1143–44 (“I conclude that the individual mandate penalty is not a ‘tax.’ It is
(as the Act itself says) a penalty.”); U.S. Citizens Ass’n v. Sebelius, 754 F. Supp.
2d 903, 909 (N.D. Ohio 2010) (concluding that the individual mandate is a
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penalty, “agree[ing] with the thoughtful and careful analysis of Judge Vinson”);
Liberty Univ., Inc. v. Geithner, 753 F. Supp. 2d 611, 629 (W.D. Va. 2010) (“After
considering the prevailing case law, I conclude that the better characterization of
the exactions imposed under the Act for violations of the employer and individual
coverage provisions is that of regulatory penalties, not taxes.”); Virginia v.
Sebelius, 728 F. Supp. 2d 768, 782–88 (E.D. Va. 2010) (concluding that the
individual mandate “is, in form and substance, a penalty as opposed to a tax”);
Goudy-Bachman v. HHS, 764 F. Supp. 2d 684, 695 (M.D. Pa. 2011) (“The court
finds that the individual mandate itself is not a tax . . . .”); Mead v. Holder, 766 F.
Supp. 2d 16, 41 (D.D.C. 2011) (“[T]he Court concludes that Congress did not
intend [the individual mandate] to operate as a tax, and therefore Defendants
cannot rely on the General Welfare Clause as authority for its enactment.”).
For good reason. The breadth of the taxing power, well noted by the
government and its amici, fails to resolve the question we face: whether the
individual mandate is a tax in the first place. The plain language of the statute and
well-settled principles of statutory construction overwhelmingly establish that the
individual mandate is not a tax, but rather a penalty. The legislative history of the
Act further supports this conclusion. And as the Supreme Court has repeatedly
recognized, there is a firm distinction between a tax and a penalty. See, e.g.,
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United States v. La Franca, 282 U.S. 568, 572, 51 S. Ct. 278, 280 (1931) (“The
two words are not interchangeable one for the other.”).
The government would have us ignore all of this and instead hold that any
provision found in the Internal Revenue Code that will produce revenue may be
characterized as a tax. This we are unwilling to do.
A. Repeated Use of the Term “Penalty” in the Individual Mandate
“As in any case involving statutory construction, we begin with the plain
language of the statute.” Hemispherx Biopharma, Inc. v. Johannesburg Consol.
Invs., 553 F.3d 1351, 1362 (11th Cir. 2008) (citing Consumer Prod. Safety
Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 108, 100 S. Ct. 2051, 2056 (1980)).
The plain language of the individual mandate is clear that the individual mandate
is not a tax, but rather, as the statute itself repeatedly states, a “penalty” imposed
on an individual for failing to maintain a minimum level of health insurance
coverage in any month beginning in 2014. Title 26 U.S.C. § 5000A(a) requires
“[a]n applicable individual” to “ensure that the individual . . . is covered under
minimum essential coverage.” 26 U.S.C. § 5000A(a). In order to enforce this
requirement, Congress stated that “[i]f a taxpayer who is an applicable individual
. . . fails to meet the requirement of subsection (a) for 1 or more months, then . . .
there is hereby imposed on the taxpayer a penalty with respect to such failures.”
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Id. § 5000A(b)(1) (emphasis added).
Nor could we construe Congress’s choice of language as a careless one-time
invocation of the word “penalty,” because the remainder of the relevant provisions
in § 5000A uses the same term over and over again, without exception and without
ever describing the penalty as a “tax.” See, e.g., id. § 5000A(b)(3)(B) (individual
“with respect to whom a penalty is imposed by this section” who files joint tax
return “shall [along with individual’s spouse] be jointly liable for such penalty”
(emphasis added)); id. § 5000A(c)(1) (describing “[t]he amount of the penalty
imposed by this section on any taxpayer for any taxable year” (emphasis added));
id. § 5000A(c)(2) (describing “the monthly penalty amount with respect to any
taxpayer” (emphasis added)); id. § 5000A(g)(1) (“The penalty provided by this
section shall be paid upon notice and demand by the Secretary . . . .” (emphasis
added)); id. § 5000A(g)(2)(A) (providing that taxpayer “shall not be subject to any
criminal prosecution or penalty” for failure “to timely pay any penalty imposed by
this section” (emphasis added)); id. § 5000A(g)(2)(B) (providing that the Secretary
shall not “file notice of lien” or “levy” on “any property of a taxpayer by reason of
any failure to pay the penalty imposed by this section” (emphasis added)).
Thus, the text of the individual mandate unambiguously provides that it
imposes a penalty. The penalty encourages compliance with the Act’s requirement
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to obtain “minimum essential coverage” by imposing a monetary sanction on
conduct that violates that requirement. The text is not unclear and was carefully
selected to denote a specific meaning. As the Supreme Court most recently
recognized in United States v. Reorganized CF & I Fabricators of Utah, Inc., 518
U.S. 213, 116 S. Ct. 2106 (1996), “‘[a] tax is an enforced contribution to provide
for the support of government; a penalty . . . is an exaction imposed by statute as
punishment for an unlawful act.’” Id. at 224, 116 S. Ct. at 2113 (quoting La
Franca, 282 U.S. at 572, 51 S. Ct. at 280). The Court further expounded upon La
Franca: “We take La Franca’s statement of the distinction [between a tax and
penalty] to be sufficient for the decision of this case; if the concept of penalty
means anything, it means punishment for an unlawful act or omission. . . .” Id.; see
also Dep’t of Revenue of Mont. v. Kurth Ranch, 511 U.S. 767, 779–80, 114 S. Ct.
1937, 1946 (1994) (“Whereas fines, penalties, and forfeitures are readily
characterized as sanctions, taxes are typically different because they are usually
motivated by revenue-raising, rather than punitive, purposes.”). It is clear that the
terms “tax” and “penalty” “are not interchangeable one for the other . . . . and if an
exaction be clearly a penalty it cannot be converted into a tax by the simple
expedient of calling it such.” La Franca, 282 U.S. at 572, 51 S. Ct. at 280.
B. Designation of Numerous Other Provisions in the Act as “Taxes”
177
We add the truism that Congress knows full well how to enact a tax when it
chooses to do so. And the Act contains several provisions that are unmistakably
taxes. The point is amply made by simply looking at four different provisions: (1)
an Excise Tax on Medical Device Manufacturers, 26 U.S.C. § 4191(a) (“There is
hereby imposed on the sale of any taxable medical device by the manufacturer,
producer, or importer a tax equal to 2.3 percent of the price for which so sold.”
(emphasis added)); (2) an Excise Tax on High Cost Employer-Sponsored Health
Coverage, id. § 4980I(a)(1)–(2) (if an employee receives “excess benefit,” as
defined in the statute, from employer-sponsored health coverage, “there is hereby
imposed a tax equal to 40 percent of the excess benefit” (emphasis added)); (3) an
Additional Hospital Insurance Tax for High-Income Taxpayers, amending id.
§ 3101(b) (as part of Federal Insurance Contributions Act, providing that “there is
hereby imposed on the income of every individual a tax equal to 1.45 percent of the
wages . . . received by him with respect to employment” (emphasis added));130 and
(4) an Excise Tax on Indoor Tanning Services, id. § 5000B(a) (“There is hereby
imposed on any indoor tanning service a tax equal to 10 percent of the amount paid
130
Indeed, this provision, which takes effect in 2013, is a 0.9% flat tax increase on an
individual’s wages, applicable to those earning annual wages over $200,000 ($250,000 in the
case of a jointly-filed return, or $125,000 in the case of a married taxpayer filing a separate tax
return). Act §§ 9015(a)(1), 10906(a), (c); HCERA, Pub. L. No. 111-152, § 1402(b)(1)(A), (3),
124 Stat. 1029, 1063 (2010), to be codified in 26 U.S.C. § 3101(b) (effective Jan. 1, 2013).
178
for such service . . . whether paid by insurance or otherwise” (emphasis added)).
It is an unremarkable matter of statutory construction that we presume
Congress did not indiscriminately use the term “tax” in some provisions but not in
others. See Duncan v. Walker, 533 U.S. 167, 173, 121 S. Ct. 2120, 2125 (2001) (“It
is well settled that where Congress includes particular language in one section of a
statute but omits it in another section of the same Act, it is generally presumed that
Congress acts intentionally and purposely in the disparate inclusion or exclusion.”
(quotation marks and alteration omitted)). We have little difficulty concluding that
Congress intended § 5000A to operate as a penalty.
The very nature of congressional findings about the individual mandate
further amplifies that Congress designed and intended to design a penalty for the
failure to comply and not a tax. The source of the power, asserted by Congress, to
create the mandate is directly pegged to the Commerce Clause. See, e.g., 42 U.S.C.
§ 18091(a)(1) (“The individual responsibility requirement provided for in this
section . . . is commercial and economic in nature, and substantially affects
interstate commerce . . . .”); id. § 18091(a)(2)(B) (“Health insurance and health care
services are a significant part of the national economy. . . . Private health insurance
spending . . . pays for medical supplies, drugs, and equipment that are shipped in
interstate commerce. Since most health insurance is sold by national or regional
179
health insurance companies, health insurance is sold in interstate commerce and
claims payments flow through interstate commerce.”).
Indeed, the findings make clear that the goal of the individual mandate is not
to raise revenue for the public fisc, but rather to, among other things, reduce the
number of the uninsured and to create what Congress perceived to be effective
health insurance markets that make health insurance more widely available. Id.
§ 18091(a)(2)(C)–(I); see also id. § 18091(a)(2)(J) (“The requirement is essential to
creating effective health insurance markets that do not require underwriting and
eliminate its associated administrative costs.”).
The argument that Congress need not employ the label of “tax” or expressly
invoke the Taxing and Spending Clause in order to enact a valid tax is surely true,
insofar as it goes. See Woods v. Cloyd W. Miller Co., 333 U.S. 138, 144, 68 S. Ct.
421, 424 (1948) (“[T]he constitutionality of action taken by Congress does not
depend on recitals of the power which it undertakes to exercise.”). The problem
with the claim, however, is not that Congress simply failed to use the term “tax,” or
declined to invoke the Taxing and Spending Clause when explaining the
constitutional basis for enacting the individual mandate. Rather, Congress
repeatedly told us that the individual mandate is a “penalty” and expressly invoked
its Commerce Clause power as the foundation for the mandate. The two are not the
180
same thing. Ultimately, we are hard pressed to construe the statute in a manner that
would require us to ignore the plain text of the statute, the words repeatedly
employed by Congress, well-settled principles of statutory construction, and well-
settled law emphasizing the substantive distinction between a tax and a penalty.
C. Legislative History of the Individual Mandate
Even if the text were unclear—although it is not—and we were to resort to
an examination of the legislative history, we would still find more of the same
thing: Congress intended to impose a penalty for the failure to maintain health
insurance.
Prior to the passage of the Act, earlier bills in both houses of Congress
proposed an individual mandate accompanied by a “tax,” as the district court noted.
See Florida v. HHS, 716 F. Supp. 2d at 1134. Thus, for example, Section 401 of the
“America’s Affordable Choices Act of 2009,” H.R. 3200, 111th Cong. (2009),
which was introduced in the House of Representatives on July 14, 2009, provided
that “there is hereby imposed a tax” on “any individual who does not meet the
requirements of [maintaining minimum health insurance coverage] at any time
during the taxable year.” A later version of the House bill, the “Affordable Health
Care for America Act,” H.R. 3962, 111th Cong. § 501 (2009), passed the House of
Representatives on November 7, 2009, and similarly referred to the individual
181
mandate’s enforcement mechanism as a “tax.” On the Senate side, the “America’s
Healthy Future Act,” a precursor to the Act, also used the term “tax.” See S. 1796,
111th Cong. § 1301 (2009) (“If an applicable individual fails to [maintain
minimum health insurance coverage] there is hereby imposed a tax. . . .”).
Notably, however, the final version of the Act abandoned the term “tax” in
favor of the term “penalty.” This is no mere semantic distinction, as “[f]ew
principles of statutory construction are more compelling than the proposition that
Congress does not intend sub silentio to enact statutory language that it has earlier
discarded in favor of other language.” INS v. Cardoza-Fonseca, 480 U.S. 421,
442–43, 107 S. Ct. 1207, 1218 (1987) (emphasis added) (quotation marks omitted).
The government relies on different pieces of the legislative history,
particularly the statements of individual legislators, speaking both for and against
the Act, who at various times referred to the individual mandate as a “tax.” See
Government’s Opening Br. at 54 (citing 156 Cong. Rec. H1854, H1882 (daily ed.
Mar. 21, 2010) (statement of Rep. Miller); 156 Cong. Rec. H1824, H1826 (daily
ed. Mar. 21, 2010) (statement of Rep. Slaughter); 155 Cong. Rec. S13,751,
S13,753 (daily ed. Dec. 22, 2009) (statement of Sen. Leahy); 155 Cong. Rec.
S13,558, S13,581–82 (daily ed. Dec. 20, 2009) (statement of Sen. Baucus); 155
Cong. Rec. S12,768 (daily ed. Dec. 9, 2009) (statement of Sen. Grassley)). These
182
assorted statements of individual legislators are of precious little value, because
they are in conflict with the plain text of the statute and with more reliable
indicators of congressional intent. See Huff v. DeKalb Cnty., Ga., 516 F.3d 1273,
1280 (11th Cir. 2008) (“‘The best evidence of [legislative] purpose is the statutory
text adopted by both Houses of Congress and submitted to the President. Where
that contains a phrase that is unambiguous—that has a clearly accepted meaning in
both legislative and judicial practice—we do not permit it to be expanded or
contracted by the statements of individual legislators or committees during the
course of the enactment process.’” (alteration in original) (quoting W. Va. Univ.
Hosps., Inc. v. Casey, 499 U.S. 83, 98–99, 111 S. Ct. 1138, 1147 (1991))).
The government argues nevertheless that the individual mandate is still “a
tax in both administration and effect.” Government’s Opening Br. at 54. It claims
that in “passing on the constitutionality of a tax law,” we should be “concerned
only with its practical operation, not its definition or the precise form of descriptive
words which may be applied to it.” Id. (quoting Nelson v. Sears, Roebuck & Co.,
312 U.S. 359, 363, 61 S. Ct. 586, 588 (1941)). That the individual mandate will
produce some revenue and will be enforced by the Internal Revenue Service is
enough, they say, to transmute the individual mandate’s penalty provision into a
tax.
183
We remain unpersuaded. Even on the government’s own terms, the
individual mandate does not in “practical operation” act as a tax. See Nelson, 312
U.S. at 363, 61 S. Ct. at 588. The government specifically claims that the individual
mandate has the character of a tax because it will produce revenue. This
argument—which relies on undisputed projections by the CBO that the individual
mandate will generate some four to five billion dollars in annual revenue by the
end of this decade131—does little to address the distinction between a penalty and a
tax. This is because “[c]riminal fines, civil penalties, civil forfeitures, and taxes all
share certain features: They generate government revenues, impose fiscal burdens
on individuals, and deter certain behavior.” Kurth Ranch, 511 U.S. at 778, 114 S.
Ct. at 1945. The Supreme Court has thus recognized, as indeed we must, that in our
world of less than perfect compliance, penalties generate revenue just as surely as
taxes.
Nor does the amount of projected revenue that will be collected under the
individual mandate—a significant sum, to be sure—render the mandate a tax. The
Supreme Court has never understood the amount of revenue generated by a
statutory provision to have definitional value. In Sonzinsky, the Court considered a
131
CBO, Payments of Penalties for Being Uninsured Under the Patient Protection and
Affordable Care Act 3 (rev. Apr. 30, 2010) [hereinafter CBO, Payments], available at
http://www.cbo.gov/ftpdocs/113xx/doc11379/Individual_Mandate_ Penalties-04-30.pdf.
184
converse of the situation we face here, where a provision imposing a “$200 annual
license tax” on firearms dealers was challenged as “not a true tax, but a penalty
imposed for the purpose of suppressing traffic in a certain noxious type of
firearms.” 300 U.S. at 511–12, 57 S. Ct. at 554–55. The tax was “productive of
some revenue,” but not much. Id. at 514 & n.1, 57 S. Ct. at 556 & n.1 (observing
that 27 dealers paid the tax in 1934, and 22 paid in 1935). That did not stop the
Supreme Court from upholding the provision as a tax. The Supreme Court later
interpreted Sonzinsky as standing for the proposition that “a tax does not cease to
be valid merely because it regulates, discourages, or even definitely deters the
activities taxed,” and that proposition “applies even though the revenue obtained is
obviously negligible.” Sanchez, 340 U.S. at 44, 71 S. Ct. at 110 (emphasis added).
While the government views these cases as supportive of its argument,
because they demonstrate the breadth of Congress’s taxing power, the cases merely
hold “that an Act of Congress which on its face purports to be an exercise of the
taxing power is not any the less so because the tax is burdensome or tends to
restrict or suppress the thing taxed.” Sonzinsky, 300 U.S. at 513, 57 S. Ct. at 556
(emphasis added). Thus, once Congress has expressly and unmistakably indicated
that a provision is a tax, courts will not “[i]nquir[e] into the hidden motives which
may move Congress to exercise a power constitutionally conferred upon it.” Id. at
185
513–14; 57 S. Ct. at 556. But that is not this case. Here we confront a statute that is
not “on its face” a tax, but rather a penalty. What’s more, the district court correctly
noted that the government lacks any case precedent squarely on point. Florida v.
HHS, 716 F. Supp. 2d at 1140.
Even ignoring Congress’s deliberate choice of the term “penalty,” the
individual mandate on its face imposes a monetary sanction on an individual who
“fails to meet the requirement” to maintain “minimum essential coverage.” 26
U.S.C. § 5000A(b)(1). As we see it, such an exaction appears in every important
respect to be “punishment for an unlawful act or omission,” which defines the very
“concept of penalty.” CF & I Fabricators, 518 U.S. at 224, 116 S. Ct. at 2113; see
also Virginia v. Sebelius, 728 F. Supp. 2d at 786 (“The only revenue generated
under the [individual mandate] is incidental to a citizen’s failure to obey the law by
requiring the minimum level of insurance coverage. The resulting revenue is
‘extraneous to any tax need.’” (quoting Kahriger, 345 U.S. at 31, 73 S. Ct. at 515)).
The government also suggests that the individual mandate operates as a tax
because it is housed in the Internal Revenue Code and is collected through
taxpayers’ annual returns. It is true that the individual mandate is located under the
section of the Code titled “Miscellaneous Excise Taxes.” Yet the Code itself makes
clear that Congress’s choice of where to place a provision in the Internal Revenue
186
Code has no interpretive value: “No inference, implication, or presumption of
legislative construction shall be drawn or made by reason of the location or
grouping of any particular section or provision or portion of this title. . . .” 26
U.S.C. § 7806(b); see also Florida v. HHS, 716 F. Supp. 2d at 1137 (citing same).
More significantly, not every provision in the Internal Revenue Code is a
tax. Indeed, Congress placed in Chapter 68 of the Internal Revenue Code a panoply
of civil penalties, running the gamut from broadly applicable (filing frivolous tax
returns132 or making unreasonable erroneous claims for a tax refund or credit133) to
highly industry-specific (tampering with or failing to maintain security
requirements for mechanical dye injection systems,134 or selling or reselling
adulterated diesel fuel that violates environmental standards135). In addition, the
132
See 26 U.S.C. § 6702(a) (imposing “penalty of $5,000" on person who files “what
purports to be a return of a tax imposed by this title” which either lacks “information on which
the substantial correctness of the self-assessment may be judged” or “contains information that
on its face indicates that the self-assessment is substantially incorrect”).
133
See 26 U.S.C. § 6676(a) (“If a claim for refund or credit with respect to income tax . . .
is made for an excessive amount, unless it is shown that the claim for such excessive amount has
a reasonable basis, the person making such claim shall be liable for a penalty in an amount equal
to 20 percent of the excessive amount.”).
134
See 26 U.S.C. § 6715A(a)(1) (“If any person tampers with a mechanical dye injection
system used to indelibly dye fuel . . . such person shall pay a penalty in addition to the tax (if
any).”). The penalty is the greater of $25,000 or $10 for each gallon of fuel involved. Id.
§ 6715A(b)(1).
135
See 26 U.S.C. § 6720A (imposing “penalty of $10,000" for each violation, “in addition
to the tax on such [fuel]”).
187
mandate’s penalty is not treated like a tax because, as noted above, the IRS may not
place liens, or levy or initiate criminal prosecution or impose any interest or
criminal sanctions. All the IRS, practically speaking, may do is to offset the penalty
against a tax refund. 26 U.S.C. § 5000A(g)(2)(A)–(B).
Although it is irrelevant for our purposes precisely where in the Internal
Revenue Code Congress decided to place the individual mandate, id. § 7806(b), we
observe that other chapters of the Internal Revenue Code include penalty
provisions as well. See, e.g., id. § 5761(a) (imposing “a penalty of $1,000" on any
person—primarily manufacturers, importers, and retailers—who willfully fails to
comply with a variety of statutory duties and taxes under Chapter 52 of the Internal
Revenue Code related to tobacco products and cigarettes). And Chapter 75 of the
Internal Revenue Code sets forth criminal penalties, which permit courts to impose
substantial fines. Id. § 7206 (providing that those who commit tax fraud in a variety
of ways “shall be guilty of a felony and, upon conviction thereof, shall be fined not
more than $100,000 ($500,000 in the case of a corporation), or imprisoned not
more than 3 years, or both, together with the costs of prosecution”). While the
entire list of penalties in the Internal Revenue Code is far too long to exhaust here,
it is apparent that the placement of the individual mandate in the Internal Revenue
Code is far from sufficient to convert the individual mandate into a “tax” and has
188
limited value, if any at all, in determining whether the individual mandate is a tax
or a penalty.
After careful review of the statute, we conclude that the individual mandate
is a civil regulatory penalty and not a tax. As a regulatory penalty, the individual
mandate must therefore find justification in a different enumerated power. See
Sunshine Anthracite Coal Co. v. Adkins, 310 U.S. 381, 393, 60 S. Ct. 907, 912
(1940) (“Congress may impose penalties in aid of the exercise of any of its
enumerated powers.”); Virginia v. Sebelius, 728 F. Supp. 2d at 788; Florida v.
HHS, 716 F. Supp. 2d at 1143–44.
The individual mandate as written cannot be supported by the tax power.
VII. SEVERABILITY
We now turn to whether the individual mandate, found in 26 U.S.C.
§ 5000A, can be severed from the remainder of the 975-page Act.
A. Governing Principles
In analyzing this question, we start with the settled premise that severability
is fundamentally rooted in a respect for separation of powers and notions of judicial
restraint. See Ayotte v. Planned Parenthood of N. New Eng., 546 U.S. 320, 329–30,
126 S. Ct. 961, 967–68 (2006). Courts must “strive to salvage” acts of Congress by
severing any constitutionally infirm provisions “while leaving the remainder
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intact.” Id. at 329, 126 S. Ct. at 967–68. “[T]he presumption is in favor of
severability.” Regan v. Time, Inc., 468 U.S. 641, 653, 104 S. Ct. 3262, 3269
(1984).
In the overwhelming majority of cases, the Supreme Court has opted to sever
the constitutionally defective provision from the remainder of the statute. See, e.g.,
Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. __, __, 130 S. Ct.
3138, 3161–62 (2010) (holding tenure provision severable from Sarbanes-Oxley
Act); New York v. United States, 505 U.S. at 186–187, 112 S. Ct. at 2434 (holding
take-title provision severable from Low-Level Radioactive Waste Policy
Amendments Act of 1985); Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 684–97,
107 S. Ct. 1476, 1479–86 (1987) (holding legislative veto provision severable from
Airline Deregulation Act of 1978); Chadha, 462 U.S. at 931–35, 103 S. Ct. at
2774–76 (holding legislative veto provision severable from Immigration and
Nationality Act); Buckley v. Valeo, 424 U.S. 1, 108–09, 96 S. Ct. 612, 677 (1976)
(holding campaign expenditure limits severable from public financing provisions in
Federal Election Campaign Act of 1971).136
136
The paucity of case law supporting the plaintiffs’ severability position is underscored
by the lack of citation to any modern case where the Supreme Court found a legislative act
inseverable. Indeed, the most recent such case cited by the plaintiffs was decided over 75 years
ago, before modern severability law had even been established. See Private Plaintiffs’ Br. at
59–62 (citing R.R. Ret. Bd. v. Alton R. Co., 295 U.S. 330, 55 S. Ct. 758 (1935); Williams v.
Standard Oil Co., 278 U.S. 235, 49 S. Ct. 115 (1929); Pollock v. Farmers’ Loan & Trust Co.,
158 U.S. 601, 15 S. Ct. 912 (1895), superseded by U.S. CONST . amend. XVI).
190
Indeed, in the Commerce Clause context, the Supreme Court struck down an
important provision of a statute and left the remainder of the statute intact. In
Morrison, the Court invalidated only one provision—the civil remedies provision
for victims of gender-based violence. Morrison, 529 U.S. at 605, 627, 120 S. Ct. at
1747, 1759. The Supreme Court did not invalidate the entire VAWA—or the
omnibus Violent Crime Control and Law Enforcement Act of 1994, of which it was
part—even though the text of the two bills did not contain a severability clause.
As these cases amply demonstrate, the Supreme Court has declined to
invalidate more of a statute than is absolutely necessary. Rather, “when confronting
a constitutional flaw in a statute, we try to limit the solution to the problem.”
Ayotte, 546 U.S. at 328, 126 S. Ct. at 967. Because “[a] ruling of
unconstitutionality frustrates the intent of the elected representatives of the
people,” courts should “act cautiously” and “refrain from invalidating more of the
statute than is necessary.” Regan, 468 U.S. at 652, 104 S. Ct. at 3269.
The Supreme Court’s test for severability is “well-established”: “Unless it is
evident that the Legislature would not have enacted those provisions which are
within its power, independently of that which is not, the invalid part may be
dropped if what is left is fully operative as a law.” Alaska Airlines, 480 U.S. at 684,
107 S. Ct. at 1480 (quotation marks omitted) (emphasis added). As the Supreme
191
Court remarked in Chadha, divining legislative intent in the absence of a
severability or non-severability clause can be an “elusive” enterprise. 462 U.S. at
932, 103 S. Ct. at 2774.
B. Wholesale Invalidation
Applying these principles, we conclude that the district court erred in its
decision to invalidate the entire Act. Excising the individual mandate from the Act
does not prevent the remaining provisions from being “fully operative as a law.” As
our exhaustive review of the Act’s myriad provisions in Appendix A demonstrates,
the lion’s share of the Act has nothing to do with private insurance, much less the
mandate that individuals buy insurance. While such wholly unrelated provisions
are too numerous to bear repeating, representative examples include provisions
establishing reasonable break time for nursing mothers, 29 U.S.C. § 207(r);
epidemiology-laboratory capacity grants, 42 U.S.C. § 300hh-31; an HHS study on
urban Medicare-dependent hospitals, id. § 1395ww note; restoration of funding for
abstinence education, id. § 710; and an excise tax on indoor tanning salons, 26
U.S.C. § 5000B.
In invalidating the entire Act, the district court placed undue emphasis on the
Act’s lack of a severability clause. See Florida ex rel. Bondi v. HHS, No. 3:10-CV-
91-RV/EMT, __ F. Supp. 2d __, 2011 WL 285683, at *35–36 (N.D. Fla. Jan. 31,
192
2011). Supreme Court precedent confirms that the “ultimate determination of
severability will rarely turn on the presence or absence of such a clause.” United
States v. Jackson, 390 U.S. 570, 585 n.27, 88 S. Ct. 1209, 1218 n.27 (1968).
Rather, “Congress’ silence is just that—silence—and does not raise a presumption
against severability.” Alaska Airlines, 480 U.S. at 686, 107 S. Ct. at 1481.
Nevertheless, the district court emphasized that an early version of
Congress’s health reform bill did contain a severability clause. Congress’s failure
to include such a clause in the final bill, the district court reasoned, “can be viewed
as strong evidence that Congress recognized the Act could not operate as intended
without the individual mandate.” Florida v. HHS, 2011 WL 285683, at *36. The
district court pushes this inference too far.
First, both the Senate and House legislative drafting manuals state that, in
light of Supreme Court precedent in favor of severability, severability clauses are
unnecessary unless they specifically state that all or some portions of a statute
should not be severed. See Office of Legislative Counsel, U.S. Senate, Legislative
Drafting Manual, § 131 (Feb. 1997) (providing that “a severability clause is
unnecessary” but distinguishing a “nonseverability clause,” which “provides that if
a specific portion of an Act is declared invalid, the whole Act or some portion of
the Act shall be invalid”); Office of Legislative Counsel, U.S. House of
193
Representatives, House Legislative Counsel’s Manual on Drafting Style, § 328
(Nov. 1995) (stating that “a severability clause is unnecessary unless it provides in
detail which related provisions are to fall, and which are not to fall, if a specified
key provision is held invalid”).
Second, the clause present in one early version of the Act was a general
severability clause, not a non-severability clause. See H.R. Rep. No 111-299, pt. 3,
at 17 § 155 (2009), reprinted in 2010 U.S.C.C.A.N. 474, 537 (“If any provision of
this Act . . . is held to be unconstitutional, the remainder of the provisions of this
Act . . . shall not be affected.”). Thus, according to Congress’s own drafting
manuals, the severability clause was unnecessary, and its removal should not be
read as any indicator of legislative intent against severability. Rather, the removal
of the severability clause, in short, has no probative impact on the severability
question before us.
In light of the stand-alone nature of hundreds of the Act’s provisions and
their manifest lack of connection to the individual mandate, the plaintiffs have not
met the heavy burden needed to rebut the presumption of severability. We therefore
conclude that the district court erred in its wholesale invalidation of the Act.
C. Severability of Individual Mandate from Two Insurance Reforms
The severability inquiry is not so summarily answered, however, with
194
respect to two of the private insurance industry reforms.137 The two reforms are:
guaranteed issue, 42 U.S.C. § 300gg-1 (effective Jan. 1, 2014); and the prohibition
on preexisting condition exclusions, id. § 300gg-3.
Our pause over the severability of these two reforms is due to the fact that
the congressional findings speak in broad, general terms except in one place that
states, as noted earlier, that the individual mandate “is essential to creating
effective health insurance markets in which improved health insurance products
that are guaranteed issue and do not exclude coverage of pre-existing conditions
can be sold.” Id. § 18091(a)(2)(I). The findings in that paragraph add that if there
were no mandate, “many individuals would wait to purchase health insurance until
they needed care.”138 Id.
As discussed earlier, a significant number of the uninsured with preexisting
conditions voluntarily tried to buy insurance but were denied coverage or had those
137
For ease of discussion, we refer to those two provisions collectively as the “two
reforms.”
138
Section 18091(a)(2)(I) provides, in its entirety:
Under sections 2704 and 2705 of the Public Health Service Act (as added by section
1201 of this Act) [to be codified in 42 U.S.C. §§ 300gg-3, 300gg-4], if there were no
requirement, many individuals would wait to purchase health insurance until they
needed care. By significantly increasing health insurance coverage, the requirement,
together with the other provisions of this Act, will minimize this adverse selection
and broaden the health insurance risk pool to include healthy individuals, which will
lower health insurance premiums. The requirement is essential to creating effective
health insurance markets in which improved health insurance products that are
guaranteed issue and do not exclude coverage of pre-existing conditions can be sold.
42 U.S.C. § 18091(a)(2)(I).
195
conditions excluded, resulting in uncompensated health care consumption and cost-
shifting. Congress also found that insurers’ $90 billion in underwriting costs in
identifying unhealthy entrants represented 26% to 30% of premium costs. Id.
§ 18091(a)(2)(J). The two reforms reduce the number of the uninsured and
underwriting costs by guaranteeing issue and prohibiting preexisting condition
exclusions. To benefit consumers, Congress has improved health insurance
products and required insurers to cover consumers who need their products the
most.
It is not uncommon that government regulations beneficial to consumers
impose additional costs on the industry regulated. These two reforms obviously
have significant negative effects on the business costs of insurers because they
require insurers to accept unhealthy entrants, raising insurers’ costs. The individual
mandate, in part, seeks to mitigate the reforms’ costs on insurers by requiring the
healthy to buy insurance and pay premiums to insurers to subsidize the insurers’
costs in covering the unhealthy. Further, if there were no mandate, the argument
goes, the healthy people can wait until they are sick to obtain insurance, knowing
they could not then be turned away.139
139
When a medical need arises, individuals cannot literally purchase insurance on the way
to the hospital. Rather, the Act permits insurers to restrict enrollment to a specific open or special
enrollment period. 42 U.S.C. § 300gg-1(b) (effective Jan. 1, 2014). Individuals therefore must
wait for an enrollment period. And once an individual applies for insurance, the Act allows up to
196
In this regard, our severability concern is not over whether the two reforms
can “fully operate as a law.” They can. Rather, our severability concern is only
whether “it is evident” that Congress “would not have enacted” the two insurance
reforms without the individual mandate. Alaska Airlines, 480 U.S. at 684, 107 S.
Ct. at 1480.
At the outset, we note that Congress could easily have included in the Act a
non-severability clause stating that the individual mandate should not be severed
from the two reforms. Under the legislative drafting manuals, the one instance in
which a severability clause is important is where “it provides in detail which
related provisions are to fall, and which are not to fall, if a specified key provision
is held invalid.” Office of Legislative Counsel, U.S. House of Representatives,
House Legislative Counsel’s Manual on Drafting Style, § 328; accord Office of
Legislative Counsel, U.S. Senate, Legislative Drafting Manual, § 131. Congress
did not include any such non-severability clause in the Act, however.
It is also telling that none of the insurance reforms, including even
guaranteed issue and coverage of preexisting conditions, contain any cross-
reference to the individual mandate or make their implementation dependent on the
mandate’s continued existence. See United States v. Booker, 543 U.S. 220, 260,
a 90-day waiting period for group coverage eligibility. Id. § 300gg-7 (effective Jan. 1, 2014). We
can find no limit in the Act on the waiting period insurers can have in the individual market.
197
125 S. Ct. 738, 765 (2005) (stating that 18 U.S.C. § 3742(e) “contains critical
cross-references to the (now-excised) § 3553(b)(1) and consequently must be
severed and excised for similar reasons”); Alaska Airlines, 480 U.S. at 688–89, 107
S. Ct. at 1482 (“Congress did not link specifically the operation of the first-hire
provisions to the issuance of regulations.”). Indeed, § 300gg-3's prohibition on
preexisting condition exclusions was implemented in 2010 with respect to enrollees
under 19, despite the individual mandate not taking effect until 2014. This is a far
cry from cases where the Supreme Court has ruled provisions inseverable because
it would require courts to engage in quasi-legislative functions in order to preserve
the provisions. See, e.g., Randall v. Sorrell, 548 U.S. 230, 262, 126 S. Ct. 2479,
2500 (2006) (declining to sever Vermont’s campaign finance contribution limits
because doing so “would require [the Court] to write words into the statute”); see
also Free Enter. Fund, 561 U.S. at __, 130 S. Ct. at 3162 (cautioning courts against
“blue-pencil[ing]”).
“[T]he remedial question we must ask” is “which alternative adheres more
closely to Congress’ original objective” in passing the Act: (1) the Act without the
individual mandate but otherwise intact; or (2) the Act without the individual
mandate and also without these two insurance reforms. See Booker, 543 U.S. at
263, 125 S. Ct. at 766–67.
198
As discussed earlier, a basic objective of the Act is to make health insurance
coverage accessible and thereby to reduce the number of uninsured persons. See,
e.g., 42 U.S.C. § 18091(a)(2) (stating the Act will “increase the number and share
of Americans who are insured” and “significantly reduc[e] the number of the
uninsured”). Undoubtedly, the two reforms seek to achieve those objectives. All
other things being equal, then, a version of the Act that contains these two reforms
would hew more closely to Congress’s likely intent than one that lacks them.
But without the individual mandate, not all things are equal. We must
therefore look to the consequences of the individual mandate’s absence on the two
reforms. See Booker, 543 U.S. at 260, 125 S. Ct. at 765 (considering whether
excision of one part of statute would “pose a critical problem”); Regan, 468 U.S. at
653, 104 S. Ct. at 3269 (asking whether “the policies Congress sought to advance
by enacting § 504 can be effectuated even though the purpose requirement is
unenforceable”). In doing so, several factors loom large.
First, the Act retains many other provisions that help to accomplish some of
the same objectives as the individual mandate. See Booker, 543 U.S. at 264, 125 S.
Ct. at 767 (“The system remaining after excision, while lacking the mandatory
features that Congress enacted, retains other features that help to further these
objectives.”); New York v. United States, 505 U.S. at 186, 112 S. Ct. at 2434
199
(“Common sense suggests that where Congress has enacted a statutory scheme for
an obvious purpose, and where Congress has included a series of provisions
operating as incentives to achieve that purpose, the invalidation of one of the
incentives should not ordinarily cause Congress’ overall intent to be frustrated.”).
For example, Congress included other provisions in the Act, apart from and
independent of the individual mandate, that also serve to reduce the number of the
uninsured by encouraging or facilitating persons (including the healthy) to
purchase insurance coverage. These include: (1) the extensive health insurance
reforms; (2) the new Exchanges; (3) federal premium tax credits, 26 U.S.C. § 36B;
(4) federal cost-sharing subsidies, 42 U.S.C. § 18071; (5) the requirement that
Exchanges establish an Internet website to provide consumers with information on
insurers’ plans, id. § 18031(d)(4)(D); (6) the requirement that employers offer
insurance or pay a penalty, 26 U.S.C. § 4980H; and (7) the requirement that certain
large employers automatically enroll new and current employees in an employer-
sponsored plan unless the employee opts out, 29 U.S.C. § 218A, just to name a few.
Second, the individual mandate has a comparatively limited field of
operation vis-à-vis the number of the uninsured. In Alaska Airlines, the Supreme
Court found that the unconstitutional legislative veto provision of the Airline
Deregulation Act (permitting Congress to veto the Labor Secretary’s implementing
200
regulations) was severable because, among other things, the statute left “little of
substance to be subject to a veto.” 480 U.S. at 687, 107 S. Ct. at 1481. The
Supreme Court noted the “ancillary nature” of the Labor Secretary’s obligations
and the “limited substantive discretion” afforded the Secretary.140 Id. at 688, 107 S.
Ct. at 1482. Thus, the limited field of operation of an unconstitutional statutory
provision furnishes evidence that Congress likely would have enacted the statute
without it. Cf. Booker, 543 U.S. at 249, 125 S. Ct. at 759 (considering whether “the
scheme that Congress created” would be “so transform[ed] . . . that Congress likely
would not have intended the Act as so modified to stand”).
Here, as explained above, the operation of the individual mandate is limited
by its three exemptions, its five exceptions to the penalty, and its stripping the IRS
of tax liens, interests, or penalties and leaving virtually no enforcement mechanism.
Even with the mandate, a healthy individual can pay a penalty and wait until
becoming sick to purchase insurance.
Further, the individual mandate’s operation and effectiveness are limited by
140
The Supreme Court stated:
With this subsidiary role allotted to the Secretary, the veto provision could affect only
the relatively insignificant actions he might take in connection with the duty-to-hire
program. There is thus little reason to believe that Congress contemplated the
possibility of vetoing any of these actions and one can infer that Congress would
have been satisfied with the duty-to-hire provisions even without preserving the
opportunity to veto the DOL’s regulations.
Alaska Airlines, 480 U.S. at 688, 107 S. Ct. at 1482 (footnote omitted).
201
the fact that, although the individual mandate requires individuals to obtain
insurance coverage, the mandate itself does not require them to obtain the
“essential health benefits package” or, indeed, any particular level of benefits at all.
Although the chosen term “minimum essential coverage” appears to suggest
otherwise, when the lofty veneer of the term is stripped away, one finds that the
actual “coverage” the individual mandate deems “essential” is nothing more than
coverage “essential” to satisfying the individual mandate.
The multiple features of the individual mandate all serve to weaken the
mandate’s practical influence on the two insurance product reforms.141 They also
weaken our ability to say that Congress considered the individual mandate’s
existence to be a sine qua non for passage of these two reforms. There is tension, at
least, in the proposition that a mandate engineered to be so porous and toothless is
such a linchpin of the Act’s insurance product reforms that they were clearly not
intended to exist in its absence.
We are not unmindful of Congress’s findings about the individual mandate.
But in the end, they do not tip the scale away from the presumption of severability.
As observed above, the findings in § 18091(a)(2) track the language of the
141
Studies by the CBO bear this out. Even with the individual mandate, the CBO
estimates that in 2016, there will still be more than 21 million non-elderly persons who remain
uninsured, the majority of whom will not be subject to the penalty. See CBO, Payments, supra
note 131, at 1.
202
Supreme Court’s Commerce Clause decisions. But the severability inquiry is
separate, and very different, from the constitutional analysis. The congressional
language respecting Congress’s constitutional authority does not govern, and is not
particularly relevant to, the different question of severability (which focuses on
whether Congress would have enacted the Act’s other insurance market reforms
without the individual mandate).
An example makes the point. Section 18091(a)(2)(H) of the same
congressional findings provides:
Under the Employee Retirement Income Security Act of 1974 (29 U.S.C.
1001 et seq.), the Public Health Service Act (42 U.S.C. 201 et seq.), and
this Act, the Federal Government has a significant role in regulating
health insurance. The requirement is an essential part of this larger
regulation of economic activity, and the absence of the requirement
would undercut Federal regulation of the health insurance market.
42 U.S.C. § 18091(a)(2)(H). By its text, § 18091(a)(2)(H) states that the individual
mandate is essential to “this larger regulation of economic activity”—that is,
“regulating health insurance,” which it does through ERISA and the Public Health
Service Act. If applied to severability, this would mean that Congress intended the
individual mandate to be “essential” to, and thus inseverable from, ERISA (enacted
in 1974) and the entire Public Health Service Act (or at least all parts of those
statutes that regulate health insurance). This is an absurd result for which no party
203
argues.142
These congressional findings do not address the one question that is relevant
to our severability analysis: whether Congress would not have enacted the two
reforms but for the individual mandate. Just because the invalidation of the
individual mandate may render these provisions less desirable, it does not
ineluctably follow that Congress would find the two reforms so undesirable
without the mandate as to prefer not enacting them at all. The fact that one
provision may have an impact on another provision is not enough to warrant the
inference that the provisions are inseverable. This is particularly true here because
the reforms of health insurance help consumers who need it the most.
In light of all these factors, we are not persuaded that it is evident (as
opposed to possible or reasonable) that Congress would not have enacted the two
reforms in the absence of the individual mandate.143 In so concluding, we are
142
A second illustration of the danger in relying too much on these statements in isolation
is that the same congressional findings also state—not once, but six times—that the individual
mandate operates “together with the other provisions of this Act” to reduce the number of the
uninsured, lower health insurance premiums, improve financial security for families, minimize
adverse selection, and reduce administrative costs. See 42 U.S.C. § 18091(a)(2)(C), (E), (F), (G),
(I), (J) (emphasis added). Congress itself states that all the provisions of the Act operate together
to achieve its goals. On this reasoning, the entire Act would be invalidated along with the
individual mandate. As discussed above, this conclusion is invalid.
143
While we discuss the two reforms specifically, our conclusion—that the individual
mandate is severable—is the same as to the other insurance product reforms, such as community
rating and discrimination based on health status.
204
mindful of our duty to “refrain from invalidating more of the statute than is
necessary.”144 Regan, 468 U.S. at 652, 104 S. Ct. at 3269; see also Booker, 543
U.S. at 258–59, 125 S. Ct. at 764 (“[W]e must retain those portions of the Act that
are (1) constitutionally valid, (2) capable of functioning independently, and (3)
consistent with Congress’ basic objectives in enacting the statute.” (quotation
marks and citations omitted)). And where it is not evident Congress would not have
enacted a constitutional provision without one that is unconstitutional, we must
allow any further—and perhaps even necessary—alterations of the Act to be
rendered by Congress as part of that branch’s legislative and political prerogative.
See Free Enter. Fund, 561 U.S. at __, 130 S. Ct. at 3162 (“[S]uch editorial
freedom—far more extensive than our holding today—belongs to the Legislature,
not the Judiciary. Congress of course remains free to pursue any of these options
going forward.”). We therefore sever the individual mandate from the remaining
sections of the Act.
VIII. CONCLUSION
144
We acknowledge that the government, in arguing for the individual mandate’s
constitutionality, stated summarily that the individual mandate cannot be severed from the Act’s
guaranteed issue and community rating provisions because the individual mandate “is integral to
those sections that . . . provide that insurers must extend coverage and set premiums without
regard to pre-existing medical conditions.” Government’s Reply Br. at 58. But as explained
above, whether a statutory provision is “integral” or “essential” to other provisions for
Commerce Clause analytical purposes is a question distinct from severability. And in any event,
the touchstone of severability analysis is legislative intent, not arguments made during litigation.
205
We first conclude that the Act’s Medicaid expansion is constitutional.
Existing Supreme Court precedent does not establish that Congress’s inducements
are unconstitutionally coercive, especially when the federal government will bear
nearly all the costs of the program’s amplified enrollments.
Next, the individual mandate was enacted as a regulatory penalty, not a
revenue-raising tax, and cannot be sustained as an exercise of Congress’s power
under the Taxing and Spending Clause. The mandate is denominated as a penalty in
the Act itself, and the legislative history and relevant case law confirm this reading
of its function.
Further, the individual mandate exceeds Congress’s enumerated commerce
power and is unconstitutional. This economic mandate represents a wholly novel
and potentially unbounded assertion of congressional authority: the ability to
compel Americans to purchase an expensive health insurance product they have
elected not to buy, and to make them re-purchase that insurance product every
month for their entire lives. We have not found any generally applicable, judicially
enforceable limiting principle that would permit us to uphold the mandate without
obliterating the boundaries inherent in the system of enumerated congressional
powers. “Uniqueness” is not a constitutional principle in any antecedent Supreme
Court decision. The individual mandate also finds no refuge in the aggregation
206
doctrine, for decisions to abstain from the purchase of a product or service,
whatever their cumulative effect, lack a sufficient nexus to commerce.145
The individual mandate, however, can be severed from the remainder of the
Act’s myriad reforms. The presumption of severability is rooted in notions of
judicial restraint and respect for the separation of powers in our constitutional
system. The Act’s other provisions remain legally operative after the mandate’s
excision, and the high burden needed under Supreme Court precedent to rebut the
presumption of severability has not been met.
Accordingly, we affirm in part and reverse in part the judgment of the district
court.
AFFIRMED in part and REVERSED in part.
145
Our respected dissenting colleague says that the majority: (1) “has ignored the broad
power of Congress”; (2) “has ignored the Supreme Court’s expansive reading of the Commerce
Clause”; (3) “presume[s] to sit as a superlegislature”; (4) “misapprehends the role of a reviewing
court”; and (5) ignores that “as nonelected judicial officers, we are not afforded the opportunity
to rewrite statutes we don’t like.” See Dissenting Op. at 208–209, 243. We do not respond to
these contentions, especially given (1) our extensive and exceedingly careful review of the Act,
Supreme Court precedent, and the parties’ arguments, and (2) our holding that the Act, despite
significant challenges to this massive and sweeping federal regulation and spending, falls within
the ambit and prerogative of Congress’s broad commerce power, except for one section, §
5000A. We do, however, refuse to abdicate our constitutional duty when Congress has acted
beyond its enumerated Commerce Clause power in mandating that Americans, from cradle to
grave, purchase an insurance product from a private company.
207
MARCUS, Circuit Judge, concurring in part and dissenting in part1:
Today this Court strikes down as unconstitutional a central piece of a
comprehensive economic regulatory scheme enacted by Congress. The majority
concludes that Congress does not have the commerce power to require uninsured
Americans to obtain health insurance or otherwise pay a financial penalty. The
majority does so even though the individual mandate was designed and intended to
regulate quintessentially economic conduct in order to ameliorate two large,
national problems: first, the substantial cost shifting that occurs when uninsured
individuals consume health care services -- as virtually all of them will, and many
do each year -- for which they cannot pay; and, second, the unavailability of health
insurance for those who need it most -- those with pre-existing conditions and
lengthy medical histories.
In the process of striking down the mandate, the majority has ignored many
years of Commerce Clause doctrine developed by the Supreme Court. It has
ignored the broad power of Congress, in the words of Chief Justice Marshall, “to
prescribe the rule by which commerce is to be governed.” Gibbons v. Ogden, 22
U.S. (9 Wheat.) 1, 196 (1824). It has ignored the undeniable fact that Congress’
commerce power has grown exponentially over the past two centuries, and is now
1
I concur only in Parts I (standing), III (Medicaid expansion), and VI (taxing
power) of the majority opinion.
208
generally accepted as having afforded Congress the authority to create rules
regulating large areas of our national economy. It has ignored the Supreme Court’s
expansive reading of the Commerce Clause that has provided the very foundation
on which Congress already extensively regulates both health insurance and health
care services. And it has ignored the long-accepted instruction that we review the
constitutionality of an exercise of commerce power not through the lens of formal,
categorical distinctions, but rather through a pragmatic one, recognizing, as Justice
Holmes put it over one hundred years ago, that “commerce among the states is not
a technical legal conception, but a practical one, drawn from the course of
business.” Swift & Co. v. United States, 196 U.S. 375, 398 (1905).
The approach taken by the majority has also disregarded the powerful
admonitions that acts of Congress are to be examined with a heavy presumption of
constitutionality, that the task at hand must be approached with caution, restraint,
and great humility, and that we may not lightly conclude that an act of Congress
exceeds its enumerated powers. The circumspection this task requires is
underscored by recognizing, in the words of Justice Kennedy, the long and difficult
“history of the judicial struggle to interpret the Commerce Clause during the
transition from the economic system the Founders knew to the single, national
market still emergent in our own era.” United States v. Lopez, 514 U.S. 549, 568
209
(1995) (Kennedy, J., concurring).
The plaintiffs and, indeed, the majority have conceded, as they must, that
Congress has the commerce power to impose precisely the same mandate
compelling the same class of uninsured individuals to obtain the same kind of
insurance, or otherwise pay a penalty, as a necessary condition to receiving health
care services, at the time the uninsured seek these services. Nevertheless, the
plaintiffs argue that Congress cannot do now what it plainly can do later. In other
words, Congress must wait until each component transaction underlying the cost-
shifting problem occurs, causing huge increases in costs both for those who have
health care insurance and for health care providers, before it may constitutionally
act. I can find nothing in logic or law that so circumscribes Congress’ commerce
power and yields so anomalous a result.
Although it is surely true that there is no Supreme Court decision squarely on
point dictating the result that the individual mandate is within the commerce power
of Congress, the rationale embodied in the Court’s Commerce Clause decisions
over more than 75 years makes clear that this legislation falls within Congress’
interstate commerce power. These decisions instruct us to ask whether the target of
the regulation is economic in nature and whether Congress had a rational basis to
conclude that the regulated conduct has a substantial effect on interstate commerce.
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It cannot be denied that Congress has promulgated a rule by which to
comprehensively regulate the timing and means of payment for the virtually
inevitable consumption of health care services. Nor can it be denied that the
consumption of health care services by the uninsured has a very substantial impact
on interstate commerce -- the shifting of substantial costs from those who do not
pay to those who do and to the providers who offer care. I therefore respectfully
dissent from the majority’s opinion insofar as it strikes down the individual
mandate.
I.
A.
A considerable portion of the American population -- estimated at 50 million
-- lacks any form of health care insurance.2 The individual mandate was designed
2
In 2009, the total number of uninsured was estimated at 50.7 million, or about
16.7% of the total population. U.S. Census Bureau, U.S. Dep’t of Commerce, Income,
Poverty, and Health Insurance Coverage in the United States: 2009, at 23 tbl.8 (2010),
available at http://www.census.gov/prod/2010pubs/p60-238.pdf. What’s more, the
population of uninsured is not confined to those with low incomes. The Census Bureau
found that the estimated income brackets for the uninsured are as follows:
(1) less than $25,000: 15.5 million uninsured, about 26.6% of the total
population in this income bracket;
(2) $25,000 to $49,999: 15.3 million, about 21.4%;
(3) $50,000 to $74,999: 9.4 million, about 16.0%;
(4) $75,000 or more: 10.6 million, about 9.1%.
Id.
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to ameliorate twin problems related to the uninsured as a class: (1) huge cost
shifting from the uninsured, who often don’t pay for their health care services, to
those with health insurance and to health care providers; and (2) the inability of
many uninsured individuals to obtain much-needed health insurance coverage
because they are effectively blacklisted on account of their pre-existing conditions
or medical histories. Congress sought to address these problems by requiring non-
exempted individuals to pay a penalty, or “shared responsibility payment,” on their
tax returns for any month, beginning in 2014, in which they fail to maintain
“minimum essential coverage.” 26 U.S.C. § 5000A(a)-(b). And while remaining
uninsured is not an option under the Act (at least to avoid paying a penalty),
individuals are offered a variety of choices when it comes to satisfying the
individual mandate’s “minimum essential coverage” requirement. Many insurance
plans will satisfy the individual mandate. These plans fall into five general
categories, some of which are further divided into subcategories: (1) government-
sponsored programs; (2) eligible employer-sponsored plans; (3) plans purchased on
the individual market; (4) grandfathered health plans; or (5) any “other coverage”
recognized by the Secretary of Health and Human Services (“HHS”) in
coordination with the Secretary of the Treasury. Id. § 5000A(f)(1).
As for the first problem Congress sought to address, it is undeniable that,
212
despite lacking health insurance, the uninsured are still substantial participants in
the market for health care services. And when the uninsured do seek medical care,
they often fail to pay all or even most of their costs. On average -- and these
figures are not disputed -- the uninsured pay only 37% of their health care costs out
of pocket, while third parties pay another 26% on their behalf.3 The remaining
costs are uncompensated -- they are borne by health care providers and are passed
on in the form of increased premiums to individuals who already participate in the
insurance market.
Congress’ findings reflect its determination that this problem -- the
uncompensated consumption of health care services by the uninsured -- has
national economic consequences that require a national solution through
comprehensive federal regulation. See 42 U.S.C. § 18091. As part of the empirical
foundation for the individual mandate, Congress quantified the costs associated
with the free-riding and cost-shifting problems that result from the provision of
uncompensated health care to the uninsured:
3
These figures come from a study cited by both the plaintiffs and the government:
Families USA, Hidden Health Tax: Americans Pay a Premium 2 (2009) [hereinafter
Hidden Health Tax], available at http://familiesusa2.org/assets/pdfs/hidden-health-
tax.pdf. And again, the problem of uncompensated care is not confined to those of
limited means. Even in households at or above the median income, people without health
insurance pay, on average, less than half the cost of the medical care they consume. See
Bradley Herring, The Effect of the Availability of Charity Care to the Uninsured on the
Demand for Private Health Insurance, 24 J. Health Econ. 225, 229-31 (2005).
213
The cost of providing uncompensated care to the uninsured was
$43,000,000,000 [$43 billion] in 2008. To pay for this cost, health
care providers pass on the cost to private insurers, which pass on the
cost to families. This cost-shifting increases family premiums by on
average over $1,000 a year. By significantly reducing the number of
the uninsured, the [individual mandate], together with the other
provisions of this Act, will lower health insurance premiums.
Id. § 18091(a)(2)(F) (emphases added).
The Act thus seeks to regulate the payment for health care consumption
through the mechanism of health insurance. As Congress found, the individual
mandate “regulates activity that is commercial and economic in nature: economic
and financial decisions about how and when health care is paid for, and when
health insurance is purchased.” Id. § 18091(a)(2)(A) (emphasis added). In other
words, the individual mandate is the means Congress adopted to regulate the timing
and method of individuals’ payment for the consumption of health care services.
As for the second problem of millions of uninsured individuals’ being unable
to obtain health insurance, Congress sought to dramatically reform the health
insurance market by regulating the insurers themselves. The Act bars insurers from
using many of the tools they had previously employed to protect themselves against
the large costs imposed by high-risk individuals. Thus, insurers may no longer
deny coverage or charge higher premiums because of an individual’s pre-existing
conditions or medical history. Id. §§ 300gg(a)(1), 300gg-3(a), 300gg-4(a); Act §
214
2702(a) (to be codified at 42 U.S.C. § 300gg-1(a)). Under the “community rating”
provision, insurers may only vary premiums based on (i) whether the plan covers
an individual or a family, (ii) rating area, (iii) age, and (iv) tobacco use. 42 U.S.C.
§ 300gg(a)(1). And under the “guaranteed issue” provisions, insurers must accept
every employer or individual who applies for coverage through the individual or
group markets. Act § 2702(a) (to be codified at 42 U.S.C. § 300gg-1(a)). Notably,
insurers may no longer offer plans that limit or exclude benefits for individuals’
pre-existing conditions, 42 U.S.C. § 300gg-3(a), nor may they refuse to cover
individuals on the basis of (i) health status, (ii) medical condition (including both
physical and mental illnesses), (iii) claims experience, (iv) receipt of health care,
(v) medical history, (vi) genetic information, (vii) evidence of insurability
(including conditions arising out of acts of domestic violence), (viii) disability, or
(ix) any other health status factor recognized by the Secretary of HHS, id. § 300gg-
4(a).
Congress determined that the individual mandate was essential to the
effective implementation of the Act’s insurer regulations -- that is, “to creating
effective health insurance markets in which improved health insurance products
that are guaranteed issue and do not exclude coverage of pre-existing conditions
can be sold.” Id. § 18091(a)(2)(I). Congress further found that waiting until the
215
uninsured actually consume health care services before regulating them would
effectively be a day late and a dollar short. See id. (“[I]f there were no [individual
mandate], many individuals would wait to purchase health insurance until they
needed care.”); Liberty Univ., Inc. v. Geithner, 753 F. Supp. 2d 611, 634-35 (W.D.
Va. 2010) (“As Congress stated in its findings, the individual coverage provision is
‘essential’ to th[e] larger regulatory scheme because without it, individuals would
postpone [acquiring] health insurance until they need substantial care, at which
point the Act would obligate insurers to cover them at the same cost as everyone
else. This would increase the cost of health insurance and decrease the number of
insured individuals -- precisely the harms that Congress sought to address . . . .”);
Gov’t Br. at 19 (citing testimony before Congress that a “health insurance market
could never survive or even form if people could buy their insurance on the way to
the hospital” (internal quotation marks omitted)).
Congress also made findings supporting the proposition that the markets for
health insurance and health care services are deeply and inextricably bound
together and indicated clearly that it sought to regulate across them both. Congress
understood that health insurance and health care consumption are linked as a
factual matter. Health insurance is the means by which most of our national health
care costs are paid for; in 2009, private and government insurance financed
216
approximately 75% of health care spending. Gov’t Br. at 9 (citing non-disputed
data from the Centers for Medicare and Medicaid Services (“CMS”)). Moreover,
Congress expressly connected the increased participation in the health insurance
market that it expected to result from the individual mandate with “increasing the
supply of, and demand for, health care services.” 42 U.S.C. § 18091(a)(2)(C). On
a more basic level, Congress also understood that “[h]ealth insurance is not bought
for its own sake; it is bought to pay for medical expenses.” Gov’t Br. at 39 (citing
M. Moshe Porat et al., Market Insurance Versus Self Insurance: The Tax-
Differential Treatment and Its Social Cost, 58 J. Risk & Ins. 657, 668 (1991);
Martin S. Feldstein, The Welfare Loss of Excess Health Insurance, 81 J. Pol. Econ.
251, 253 (1973) [hereinafter Welfare Loss] (“Health insurance is purchased not as
a final consumption good but as a means of paying for the future stochastic
purchases of health services.”)); see also Brief for Econ. Scholars as Amici Curiae
Supporting the Government (“Gov’t Econ. Br.”) at 12 (“Medical care is the set of
services that make one healthier, or prevent deterioration in health. Health
insurance is a mechanism for spreading the costs of that medical care across people
or over time, from a period when the cost would be overwhelming to periods when
costs are more manageable.”).
B.
217
1.
Congress’ commerce power to regulate is, as Chief Justice Marshall taught
us almost two hundred years ago, the power “to prescribe the rule by which
commerce is to be governed. This power, like all others vested in Congress, is
complete in itself, may be exercised to its utmost extent, and acknowledges no
limitations, other than are prescribed in the constitution.” Gibbons, 22 U.S. at 196.
It is precisely this power to prescribe rules governing commerce that Congress
lawfully exercised in enacting the individual mandate.
It is clear that Congress’ rule-making power extends to both the health
insurance and health care markets, areas of commerce that Congress has long
regulated and regulated heavily. First, the parties all agree (as they must) that
Congress’ commerce power lawfully extends to the regulation of insurance in
general, as the Supreme Court concluded more than 60 years ago in United States
v. South-Eastern Underwriters Ass’n, 322 U.S. 533, 552-53 (1944). Indeed,
Congress expressly relied on this proposition in enacting the individual mandate.
See 42 U.S.C. § 18091(a)(3) (citing South-Eastern Underwriters as a basis for
Congress’ authority to regulate insurance under the Commerce Clause).4
4
In response to South-Eastern Underwriters, Congress enacted the McCarran-
Ferguson Act, which provides that state laws regulating insurance will not be
“invalidate[d], impair[ed], or supersede[d]” by federal law, unless the federal law
“specifically relates to the business of insurance.” 15 U.S.C. § 1012(b). But this
218
Second, in light of Congress’ undeniable power under the Commerce Clause
to regulate the business of insurance generally, it follows -- and again there is no
dispute -- that Congress may also regulate health insurance in particular, which is,
after all, a subset of the insurance market. See Charles Fried, Written Testimony
Before the Senate Judiciary Committee Hearing on “The Constitutionality of the
Affordable Care Act” 1 (Feb. 2, 2011), available at
http://judiciary.senate.gov/pdf/11-02-02%20Fried%20Testimony.pdf. In fact,
Congress has extensively exercised its commerce power to regulate the health
insurance market for many years, long before the Act was passed. For example,
Congress enacted the Employee Retirement Income Security Act of 1974
(“ERISA”), Pub. L. No. 93-406, 88 Stat. 829 (1974), which is a massive piece of
legislation regulating the operation of employee benefit plans, including retirement
plans, pension plans, and employer-provided health insurance plans. Congress
enactment in no way affects or diminishes the Court’s clear holding in South-Eastern
Underwriters that Congress may, concurrently with the states, regulate the business of
insurance under the Commerce Clause. What’s more, Congress has hardly abdicated its
role in regulating the insurance business. See Humana Inc. v. Forsyth, 525 U.S. 299, 311,
314 (1999) (holding that federal RICO statute -- which is itself grounded in the
Commerce Clause -- may be applied to insurers because it is not precluded by the
McCarran-Ferguson Act); id. at 308 (“We reject any suggestion that Congress intended to
cede the field of insurance regulation to the States . . . .”). Rather, the McCarran-
Ferguson Act sought “to protect state regulation primarily against inadvertent federal
intrusion -- say, through enactment of a federal statute that describes an affected activity
in broad, general terms, of which the insurance business happens to constitute one part.”
Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25, 39 (1996).
219
expressly pegged the broad scope of ERISA’s coverage to its Commerce Clause
power. 29 U.S.C. § 1001(b) (“It is hereby declared to be the policy of this chapter
to protect interstate commerce . . . .”); see also id. § 1003(a). Among other things,
the regulatory provisions in Title I of ERISA, 29 U.S.C. § 1001 et seq., set forth
“uniform minimum standards to ensure that employee benefit plans are established
and maintained in a fair and financially sound manner.” U.S. Dep’t of Labor,
Health Benefits, Retirement Standards, and Workers’ Compensation: Employee
Benefit Plans, http://www.dol.gov/compliance/guide/erisa.htm (last visited Aug.
10, 2011). Title I of ERISA governs “most private sector employee benefit plans,”
with the most significant exceptions being “plans established or maintained by
government entities or churches.” Id.; see also Williams v. Wright, 927 F.2d 1540,
1545 (11th Cir. 1991) (concluding that ERISA regulates even “plans covering only
a single employee”).
Congressional efforts to regulate health insurance did not end with ERISA.
Congress passed the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”), Pub. L. No. 99-272, 100 Stat. 82 (1986), which contains a wide
variety of provisions relating to health care and health insurance. As for health
insurance, the most significant reforms were amendments to ERISA, which added
“continuation coverage” provisions that allow employees to continue receiving
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employer-sponsored health insurance for a period following the end of their
employment in order to prevent gaps in health insurance coverage. 29 U.S.C. §§
1161, 1162. And in the Health Insurance Portability and Accountability Act of
1996 (“HIPAA”), Pub. L. No. 104-191, 110 Stat. 1936 (1996), Congress amended
the Public Health Service Act to add insurance portability provisions that prohibit
group health plans -- including ERISA plans -- from discriminating against
individual participants and beneficiaries based on health status, that require
insurers to offer coverage to small businesses, and that limit pre-existing condition
exclusions. See 29 U.S.C. §§ 1181-1183.
Under its commerce power, Congress has also repeatedly regulated the
content of private health insurers’ policies. See, e.g., Mental Health Parity Act of
1996, Pub. L. No. 104-204, § 702, 110 Stat. 2874, 2944 (1996) (regulating limits
on mental health benefits); Newborns’ and Mothers’ Health Protection Act of 1996,
Pub. L. No. 104-204, § 603, 110 Stat. 2874, 2935 (1996) (requiring maternity
coverage to provide at least a 48-hour hospital stay); Women’s Health and Cancer
Rights Act of 1998, Pub. L. No. 105-277, § 902, 112 Stat. 2681, 2681-436 (1998)
(requiring certain plans to offer benefits related to mastectomies); Paul Wellstone
and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008, Pub. L.
No. 110-343, § 512, 122 Stat. 3765, 3881 (2008) (providing for parity between
221
mental health/substance abuse disorder benefits and medical/surgical benefits).
Third, it is equally clear that Congress’ power under the Commerce Clause
likewise extends to the regulation of the provision and consumption of health care
services. Indeed, for many years, Congress has substantially regulated both health
care providers and the commodities that those providers may use. As far back as
1946, Congress enacted the Hospital Survey and Construction Act (also known as
the “Hill-Burton Act”), Pub. L. No. 79-725, 60 Stat. 1040 (1946), which
appropriated funds for the construction of new hospitals in the post-World War II
economy. The Hill-Burton Act required hospitals receiving federal construction or
renovation funds to provide care to “all persons residing in the territorial area” and
to provide a “reasonable volume” of free care to indigent patients. See 42 U.S.C. §
291c(e).
The requirement that hospitals provide free care was strengthened and
broadened, when, as part of COBRA, Congress enacted the Emergency Medical
Treatment and Active Labor Act (“EMTALA”). COBRA, Pub. L. No. 99-272, §
9121, 100 Stat. 82, 164 (1986). EMTALA requires all hospitals that receive
Medicare funds to screen and stabilize, if possible, any patient who comes in with
an “emergency medical condition.” 42 U.S.C. § 1395dd(a)-(b); see also Roberts v.
Galen of Va., Inc., 525 U.S. 249, 250-51 (1999) (per curiam). EMTALA also
222
restricts the ability of hospitals to transfer a patient until he is stable or a medical
determination is made that transfer is necessary. 42 U.S.C. § 1395dd(c).
EMTALA’s provisions are backed by both civil fines and a private cause of action
for those harmed by a hospital’s failure to comply. Id. § 1395dd(d).
Congress has also regulated health care providers (and, as mentioned, health
care insurers) through HIPAA. The definition of “health care provider” under
HIPAA is extraordinarily broad, covering any “person or organization who
furnishes, bills, or is paid for health care in the normal course of business.” 45
C.F.R. § 160.103. And in 2009, Congress expanded HIPAA’s coverage even
further to include “business associates” of health care providers and health insurers.
See Health Information Technology for Economic and Clinical Health Act, Pub. L.
No. 111-5, §§ 13401, 13404, 123 Stat. 115, 260, 264 (2009); 45 C.F.R. § 160.103.
In addition to the insurance portability provisions, HIPAA includes a number of
privacy provisions that “govern[] the use and disclosure of protected health
information” by health care providers and health insurers, Sneed v. Pan Am. Hosp.,
370 F. App’x 47, 50 (11th Cir. 2010) (per curiam) (unpublished), as well as protect
the privacy of employees’ health information against inquiries by their employers.
HIPAA even regulates what information health care providers may communicate to
one another. See generally 45 C.F.R. §§ 164.102-164.534; 42 U.S.C. § 1320d-2.
223
HIPAA also requires health care providers to follow several administrative
requirements, including the development of physical and technical privacy
safeguards and employee training. See 45 C.F.R. §§ 164.308, 164.310, 164.312.
Fourth, Congress has extensively regulated under its commerce power the
commodities used in the health care services market, most notably drugs and
medical devices. For example, in the Food, Drug, and Cosmetics Act, Congress
delegated to the Food and Drug Administration the authority to screen and approve
drugs and medical devices for use in commerce, and to regulate their continued use
once approved. See, e.g., 21 U.S.C. §§ 351, 352, 355(a), 360c, 360e, 360j(e).
Fifth, the majority and all the parties also agree that Congress’ commerce
power extends to the regulation of the price to be paid for the consumption of
health care services. Medicare is the most pervasive example. Since 1983, the
Medicare program has set the fees it pays to hospitals through a prospective
payment system that assigns a fixed amount to each service provided rather than
reimbursing hospitals for their actual costs. See United States v. Whiteside, 285
F.3d 1345, 1346 (11th Cir. 2002). In 1989, Congress also set a federally
determined fee schedule for Medicare payments to physicians. Omnibus Budget
Reconciliation Act of 1989, Pub. L. No. 101-239, § 6102, 103 Stat. 2106, 2169
(1989). In this way, Congress directly sets the prices for health care services paid
224
for under Medicare.5
Beyond Congress’ already substantial regulation of the price of health care
services through Medicare and Medicaid, under controlling precedent Congress
may lawfully regulate prices for all manner of health care consumption, however
wise or unwise that regulation may be. In fact, the Supreme Court has said that
Congress may regulate or even fix prices in interstate markets, either directly or by
engaging in the “stimulation of commerce” through regulation. Wickard v.
Filburn, 317 U.S. 111, 128 (1942) (“It is well established . . . that the power to
regulate commerce includes the power to regulate the prices at which commodities
in that commerce are dealt in and practices affecting such prices.”); accord
Gonzales v. Raich, 545 U.S. 1, 18-19 (2005); see also Sunshine Anthracite Coal
Co. v. Adkins, 310 U.S. 381, 394 (1940) (holding that Congress could not only
regulate price, but could also attach “other conditions to the flow of a commodity
5
While Medicaid prices are not as directly regulated at the federal level, Congress
has legislated in a number of ways that affect the prices to be paid to health care providers
and others under the Medicaid program. Most notable is the Medicaid Drug Rebate
Program, created by the Omnibus Budget Reconciliation Act of 1990. The program
provides that, if drug companies want their products to be covered by Medicaid, they
must provide detailed price information to, and enter into a national rebate agreement
with, the Secretary of HHS. 42 U.S.C. § 1396r-8. Congress has thus regulated
prescription drug prices under Medicaid by requiring drug companies to provide
discounts to states -- in the form of rebates -- for their Medicaid drug purchases. See
generally Iowa Dep’t of Human Servs. v. Ctrs. for Medicare & Medicaid Servs., 576 F.3d
885, 886-87 (8th Cir. 2009).
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in interstate [commerce]”); id. (“To regulate the price for . . . transactions is to
regulate commerce itself, and not alone its antecedent conditions or its ultimate
consequences.” (quoting Carter v. Carter Coal Co., 298 U.S. 238, 326 (1936)
(Cardozo, J., dissenting in part and concurring in the judgment in part))).
Sixth, and perhaps most significantly, Congress’ commerce power includes
the power to prescribe rules cutting across the two linked markets of health
insurance and health care services. Both the congressional intent to link the two
and the empirical relation between the purchase of health insurance and the
consumption of health care services are clear. Accordingly, in determining
whether Congress has lawfully exercised its commerce power, courts must examine
“the entire transaction, of which [the] contract [for insurance] is but a part, in order
to determine whether there may be a chain of events which becomes interstate
commerce.” South-Eastern Underwriters, 322 U.S. at 547. I am hard pressed to
see how the relevant “chain of events” here does not include the substantial
consumption of health care services by the uninsured.
2.
The plaintiffs assert, nevertheless, that in enacting the individual mandate
Congress was limited to regulating a single industry at a single point in time -- in
other words, it could only look at the health insurance market standing alone. In
226
the plaintiffs’ view, Congress could not mandate the purchase of insurance as a
means of ameliorating a national problem arising in the related but distinct market
for health care services. The majority appears to have adopted this view,
concluding that the relevant conduct targeted by Congress is not the
uncompensated consumption of health care services by the uninsured, but rather
only the decision to forego health insurance. Maj. Op. at 126, 136. This approach
is wooden, formalistic, and myopic. The plaintiffs and the majority would view the
uninsured in a freeze-framed still, captured, like a photograph, in a single moment
in time. They contend that Congress cannot constitutionally regulate the uninsured
as a class at that single moment, because at that moment any particular uninsured
individual may be healthy, may be sitting in his living room, or may be doing
nothing at all. The only way the plaintiffs and the majority can round even the first
base of their argument against the mandate is by excluding from Congress’
purview, for no principled reason that I can discern, the cost-shifting problems that
arise in the health care services market.
This blinkered approach cannot readily be squared with the well-settled
principle that, in reviewing whether Congress has acted within its enumerated
powers, courts must look at the nature of the problem Congress sought to address,
based on economic and practical realities. See Swift & Co., 196 U.S. at 398
227
(“[C]ommerce among the states is not a technical legal conception, but a practical
one, drawn from the course of business.”); Wickard, 317 U.S. at 123-24
(“[R]ecognition of the relevance of the economic effects in the application of the
Commerce Clause . . . has made the mechanical application of legal formulas no
longer feasible.”); NLRB v. Jones & Laughlin Steel Corp., 301 U.S. 1, 41-42
(1937) (observing that “interstate commerce itself is a practical conception”); N.
Am. Co. v. SEC, 327 U.S. 686, 705 (1946) (“Congress is not bound by technical
legal conceptions. Commerce itself is an intensely practical matter. To deal with it
effectively, Congress must be able to act in terms of economic and financial
realities.” (citation omitted)); Lopez, 514 U.S. at 571, 574 (Kennedy, J.,
concurring) (favoring a pragmatic approach to Congress’ commerce power
grounded in “broad principles of economic practicality” and a “practical conception
of commercial regulation”); Raich, 545 U.S. at 25 n.35. When the individual
mandate is viewed through a more pragmatic and less stilted lens, it is clear that
Congress has addressed a substantial economic problem: the uninsured get sick or
injured, seek health care services they cannot afford, and shift these unpaid costs
onto others.
Moreover, despite their contention that Congress is limited to regulating in a
single industry, the plaintiffs nevertheless concede that Congress may use its rule-
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making power to regulate the market for health insurance as a vehicle or means to
address the cost-shifting problems arising in the market for health care services.
They have conceded, both in their briefs and at oral argument, that Congress may
constitutionally regulate the consumption of health care services by the uninsured
at the time they actually seek medical care. The plaintiffs acknowledge -- as does
the majority -- that Congress may constitutionally require the uninsured to obtain
health care insurance on the hospital doorstep, or that Congress may otherwise
impose a penalty on those who attempt to consume health care services without
insurance. States Br. at 31-32 (“Supreme Court precedent allows Congress to
regulate [the practice of consuming health care services without insurance] -- for
example, by imposing restrictions or penalties on individuals who attempt to
consume health care services without insurance.”); Maj. Op. at 129-30 (“[W]hen
the uninsured actually enter the stream of commerce and consume health care,
Congress may regulate their activity at the point of consumption.”); see also
Florida ex rel. Bondi v. U.S. Dep’t of Health & Human Servs., No. 3:10-cv-91-
RV/EMT, 2011 WL 285683, at *26 (N.D. Fla. Jan. 31, 2011) (“Congress plainly
has the power to regulate [the uninsured] . . . at the time that they initially seek
229
medical care[], a fact with which the plaintiffs agree.”).6 Thus, all of the parties
agree that, at the time of health care consumption, Congress may lawfully cut
across a distinct market and impose a financial penalty designed to compel the
uninsured to obtain health insurance. And Congress may do so even where the
uninsured would otherwise voluntarily choose to finance the consumption of health
care services out of pocket, without buying insurance.
If the plaintiffs had argued that Congress cannot constitutionally force
anyone to buy health insurance at any time as a means of paying for health care,
they at least would have evinced the virtue of consistency. But instead, the
plaintiffs’ concession undermines their claim that Congress has exceeded its rule-
making power by regulating in one industry to address a problem found in another,
at least where the two industries are so closely bound together. After all, even at
the point of consuming health care services, individuals may wish to remain
“inactive” in the health insurance market. But the plaintiffs and the majority
6
At oral argument, counsel for the state plaintiffs was explicitly asked whether, at
the point of health care consumption, Congress “could compel an individual who doesn’t
have health insurance to either pay a penalty or obtain insurance at that time,” to which
counsel responded that “[i]n the health care market, at the time of consumption, yes.”
And at the district court hearing on the government’s motion to dismiss, counsel for the
plaintiffs made a similar concession. In response to the district court’s question, “Well,
the government could impose this penalty at the point of service at the doctor’s office or
the hospital and say, if you do not have insurance, you are subject to a penalty?,” counsel
for the plaintiffs responded, “I believe the government would be able to do it, Your
Honor.” RE 334-35.
230
concede that Congress may nevertheless compel individuals at that point to
purchase a private insurance product.
Despite this concession, the plaintiffs contend that the regulation of
commerce necessarily presupposes a pre-existing voluntary activity to be regulated.
The plaintiffs’ activity/inactivity dichotomy, however, is nowhere to be found in
the text of the Commerce Clause, nor in the jurisprudence surrounding it. The
language of the Commerce Clause itself draws no distinction between activity and
inactivity. The seven operative words speak broadly about Congress’ power “[t]o
regulate Commerce . . . among the several States.” U.S. Const. art. I, § 8, cl. 3.
The power to regulate is the power “to prescribe the rule by which commerce is to
be governed.” Gibbons, 22 U.S. at 196. And while the power of Congress is
limited to specific objects, it is “plenary as to those objects.” Id. at 197. Creating
an artificial doctrinal distinction between activity and inactivity is thus novel and
unprecedented, resembling the categorical limits on Congress’ commerce power
the Supreme Court swept away long ago.
The plaintiffs claim, nevertheless, that the individual mandate exceeds
Congress’ commerce power because it improperly conscripts uninsured individuals
-- who are presently inactive in the health insurance market -- to unwillingly enter
the stream of commerce to purchase health insurance they would not otherwise
231
choose to buy. The plaintiffs and the majority would have Congress wait at the
water’s edge until the uninsured literally enter the emergency room. In other
words, they say, Congress may not legislate prophylactically, but instead must wait
until the cost-shifting problem has boiled over, causing huge increases in costs for
those who have health care insurance (through increased premiums), and for those
who provide health care services.
At bottom, the plaintiffs’ argument seems to boil down only to a temporal
question: can Congress, under the Commerce Clause, regulate how and when
health care services are paid for by requiring individuals -- virtually all of whom
will consume health care services and most of whom have done so already -- to pay
now for those services through the mechanism of health insurance? As I see it, the
answer to whether Congress can make this temporal jump under its Commerce
Clause power is yes.
There is no doctrinal basis for requiring Congress to wait until the cost-
shifting problem materializes for each uninsured person before it may regulate the
uninsured as a class. The majority’s imposition of a strict temporal requirement
that congressional regulation only apply to individuals who first engage in specific
market transactions in the health care services market is at war with the idea that
Congress may adopt “reasonable preventive measures” to avoid future disruptions
232
of interstate commerce. Consol. Edison Co. v. NLRB, 305 U.S. 197, 222 (1938)
(“[I]t cannot be maintained that the exertion of federal power must await the
disruption of [interstate or foreign] commerce.”); see also Katzenbach v. McClung,
379 U.S. 294, 301 (1964) (quoting same, and noting that “Congress was not
required to await the total dislocation of commerce”); Stevens v. United States, 440
F.2d 144, 152 (6th Cir. 1971) (“It is not necessary for Congress to await the total
dislocation of commerce before it may provide reasonable preventive measures for
the protection of commerce.” (citing Katzenbach, 379 U.S. at 301)), limited on
other grounds by United States v. Bass, 404 U.S. 336 (1971); NLRB v. Sunshine
Mining Co., 110 F.2d 780, 784 (9th Cir. 1940). In Consolidated Edison, the
Supreme Court explained that, through the National Labor Relations Act -- which
regulates labor practices -- “Congress did not attempt to deal with particular
instances” in which interstate commerce was disrupted, concluding that Congress
did not need to wait until labor practices actually disrupted interstate commerce
before it could regulate.7 305 U.S. at 222. In other words, Congress may lawfully
7
The majority opinion misapprehends this point. See Maj. Op. at 129 n.100.
Consolidated Edison is cited along with Katzenbach to make this simple point: Congress
need not wait until an economic problem has erupted and the national economy is
disrupted before it may act prophylactically, under its commerce power, to address an
obvious and apparent economic problem. That Consolidated Edison specifically involved
the regulation of labor practices or that Katzenbach (along with Heart of Atlanta)
specifically involved the regulation of innkeepers and restaurateurs is beside the point.
This principle of Commerce Clause jurisprudence is general, and it remains binding law.
233
regulate present conduct to prevent future disruptions of interstate commerce from
occurring.
What’s more, and even more basic, here the disruption of interstate
commerce is already occurring. The majority inexplicably claims that the
individual mandate regulates “the mere possibility of future activity,” Maj. Op. at
129, but as we speak, the uninsured are consuming health care services in large
numbers and shifting costs onto others. By ignoring the close relationship between
the health insurance and health care services markets, the plaintiffs and the
majority seek to avoid the hard fact that the uninsured as a class are actively
consuming substantial quantities of health care services now -- not just next week,
next month, or next year. The uninsured make more than 20 million visits to
emergency rooms each year; 68% of the uninsured had routine checkups in the past
five years; and 50% had one in the past two years.8 See U.S. Dep’t of HHS, New
Data Say Uninsured Account for Nearly One-Fifth of Emergency Room Visits
(July 15, 2009), available at
http://www.hhs.gov/news/press/2009pres/07/20090715b.html; June E. O’Neill &
8
The plaintiffs do not contest the validity of these data. Indeed, at oral argument,
counsel for the state plaintiffs conceded that these visits to the emergency room constitute
economic activity that Congress may lawfully regulate.
234
Dave M. O’Neill, Emp’t Policies Inst., Who Are the Uninsured? An Analysis of
America’s Uninsured Population, Their Characteristics and Their Health 20-21 &
tbl.9 (2009), available at http://epionline.org/studies/oneill_06-2009.pdf; see also
Hidden Health Tax, supra, at 2 (observing that the uninsured consumed $116
billion worth of health care services in 2008); Gov’t Econ. Br. at 10 (“57 percent of
the 40 million people uninsured in all of 2007 used medical services that year.”
(emphasis added)); NFIB Br. at 5 (citing same 57% statistic). In addition, there
were more than two million hospitalizations -- not just emergency room visits, but
actual admissions to a hospital -- of the uninsured in 2008 alone. U.S. Dep’t of
HHS, ASPE Research Brief, The Value of Health Insurance: Few of the Uninsured
Have Adequate Resources To Pay Potential Hospital Bills 5 (2011), available at
http://aspe.hhs.gov/health/reports/2011/valueofinsurance/rb.pdf.
In light of these undisputed figures, there can be little question that
substantial numbers of uninsured Americans are currently active participants in the
health care services market, and that many of these uninsured currently consume
health care services for which they cannot or do not pay. This is, in every real and
meaningful sense, classic economic activity, which, as Congress’ findings tell us,
has a profound effect on commerce. See Thomas More Law Ctr. v. Obama, -- F.3d
--, 2011 WL 2556039, at *24 (6th Cir. June 29, 2011) (Sutton, J., concurring) (“No
235
matter how you slice the relevant market -- as obtaining health care, as paying for
health care, as insuring for health care -- all of these activities affect interstate
commerce, in a substantial way.”).9 Once the artificial barrier drawn between the
health insurance and health care services markets breaks down, the plaintiffs’
inactivity argument collapses. And there can be no doubt that Congress rationally
linked the two markets. Its very findings accompanying the mandate detail at
length the impact that going uninsured has on the broader availability of health
insurance and on the costs associated with the consumption of health care services.
See 42 U.S.C. § 18091(a)(2). I observe again that “[h]ealth insurance is purchased
not as a final consumption good but as a means of paying for the future stochastic
purchase of health care services.” Welfare Loss, supra, at 253. And virtually all of
us will have the misfortune of having to consume health care services at some
unknown point for some unknown malady and at some uncertain price. Each of us
remains susceptible to sudden and unpredictable injury. No one can opt out of
illness, disability, and death. These, we all must accept, are facts of life. Thus,
9
Contrary to the majority’s assertion, see Maj. Op. at 147 n.119, the conduct
being regulated by Congress is the consumption of health care services by the uninsured.
And it is the very act of consuming health care services by those who do not pay for them
that has the natural and probable effect of shifting costs to those who do -- what occurs
when I consume a good, and leave you with the bill. In every real sense, the conduct
being regulated is analytically and conceptually distinct from its effects on interstate
commerce.
236
even if I were to accept the plaintiffs’ distinction between activity and inactivity,
the facts undermine the distinction here. The inevitable consumption of health care
services by the uninsured is sufficient activity to subject them to congressional
regulation.
3.
The plaintiffs and the majority also object to the mandate on different
grounds -- that it is “overinclusive” insofar as it applies to: “those who do not enter
the health care market at all” (“non-consumers”), and those who consume health
care services but pay for their services in full and thus do not shift costs (“non-cost-
shifters”). Maj. Op. at 127.
The majority understates the point when it acknowledges that
“overinclusiveness may not be fatal for constitutional purposes.” Id. Indeed, the
Supreme Court has made it abundantly clear that Congress is not required to
“legislate with scientific exactitude.” Raich, 545 U.S. at 17. Rather, “[w]hen
Congress decides that the total incidence of a practice poses a threat to a national
market, it may regulate the entire class.” Id. (emphases added) (internal quotation
marks omitted). As Justice Holmes put it in Westfall v. United States, 274 U.S.
256 (1927), “when it is necessary in order to prevent an evil to make the law
embrace more than the precise thing to be prevented [Congress] may do so.” Id. at
237
259. There is simply no requirement under the Commerce Clause that Congress
choose the least restrictive means at its disposal to accomplish its legitimate
objectives. Nor is there a requirement that Congress target only those uninsured
individuals who will consume health care services at a particular point in time or
just those who will be unable to pay for the health care services they consume.
Congress concluded that the “total incidence” of health care consumption by the
uninsured threatened the national health insurance and health care services
markets. It was free to regulate the “entire class” of the uninsured.10
Moreover, even if I were to accept the notion that Congress, in regulating
commerce, was obliged to somehow draw the class more narrowly, the subclass of
10
The Court in Raich specifically approved of Congress’ legislating across a
broad class when “enforcement difficulties” would attend drawing the class more
narrowly. Raich, 545 U.S. at 22. The Court said, “[g]iven the enforcement difficulties
that attend distinguishing between marijuana cultivated locally and marijuana grown
elsewhere, and concerns about diversion into illicit channels, we have no difficulty
concluding that Congress had a rational basis for believing that failure to regulate the
intrastate manufacture and possession of marijuana would leave a gaping hole in the
CSA.” Id. (citation and footnote omitted). When it may be difficult to distinguish
between categories of conduct, especially when the categories are fluid, Congress may
enlarge the regulated class. Here, too, Congress may broadly regulate uninsured
individuals because it may be difficult to distinguish between cost-shifters and non-cost-
shifters. And the categories are fluid -- a non-consumer or non-cost-shifter today may
become a cost-shifter tomorrow, especially if a catastrophic injury befalls him.
Moreover, the majority concedes that Congress may regulate all of the uninsured -- cost-
shifters and non-cost-shifters alike -- at the point of consumption. See Maj. Op. at 129-
30. Thus, by the majority’s own lights, Congress’ inclusion of non-cost-shifters within
the mandate’s reach does not create a constitutional infirmity.
238
“non-consumers” -- those individuals who will never enter the health care services
market at all -- is surely minuscule. The plaintiffs emphasize that it is “not strictly
true” that everyone will participate in the health care services market. States Br. at
30. But the only elaboration the plaintiffs offer on this point is that some
individuals will not participate because of “religious scruples” or the vaguely-put
“individual circumstances.” Id. As for the first, it does not get the plaintiffs very
far, because religious groups that opt out of the health care services or health
insurance markets may also seek exemption from the individual mandate. 26
U.S.C. § 5000A(d)(2). And as for “individual circumstances,” presumably what
the plaintiffs mean is that a few individuals either will fortuitously avoid ill health
altogether, or -- more likely -- will fail to consume health care services due to an
immediately fatal accident or the like. I am unable to draw a relevant constitutional
distinction between the virtual inevitability of health care consumption and the
absolute, 100% inevitability of health care consumption. There is less of a chance
that an individual will go through his entire life without ever consuming health care
services than there is that he will win the Irish Sweepstakes at the very moment he
is struck by lightning. Nor are there more than a minuscule number of Americans
who could afford to take on the financial risk of a personal medical catastrophe out
of their own pockets. Yet, on the basis of these slight mathematical possibilities
239
would the majority bring down the individual mandate and all that may fall with it.
Congress has wide regulatory latitude to address “the extent of financial risk-
taking in the health care services market,” Gov’t Reply Br. at 15, which in its view
is “a threat to a national market,” Raich, 545 U.S. at 17. The fact that an
exceedingly small set of individuals may go their whole lives without consuming
health care services or can afford to go it alone poses no obstacle to Congress’
ability under the Commerce Clause to regulate the uninsured as a class.
Similarly, a group of economists who filed an amicus brief in support of the
plaintiffs object to the individual mandate by disputing the substantiality of the
cost-shifting impact the mandate seeks to address. First, they claim that the
individual mandate targets the young and healthy and that the annual costs of
uncompensated care for those individuals is much less than $43 billion. See Brief
for Economists as Amici Curiae Supporting the Plaintiffs (“Plaintiffs Econ. Br.”) at
3, 10, 13. The point is unpersuasive, because it conflates the scope of the
individual mandate with its relative benefits for different population groups. The
individual mandate applies to all non-exempted individuals, 26 U.S.C. § 5000A(a),
and while the young and healthy may benefit less than other groups from having
health insurance, “[i]t is of the essence of regulation that it lays a restraining hand
on the selfinterest of the regulated and that advantages from the regulation
240
commonly fall to others,” Wickard, 317 U.S. at 129. Balancing different groups’
competing economic interests is not a constitutional concern for the courts to
calibrate, but rather is “wisely left under our system to resolution by the Congress
under its more flexible and responsible legislative process.” Id. Moreover, the
argument that the mandate targets the young and healthy and that, therefore, this
Court should only look at the economic impact on interstate commerce of those
individuals is not even consistent with the plaintiffs’ own suggestion that the
individual mandate regulates “everyone at every moment of their lives, from cradle
to grave.” States Br. at 29.
The economists also suggest that even if we look at the $43 billion figure as
a whole, that amount is less than 1.8% of overall annual health care spending
(which Congress found was $2.5 trillion, or 17.6% of the national economy, in
2009, 42 U.S.C. § 18091(a)(2)(B)), and, therefore, the “alleged cost-shifting
problem” is relatively modest and fails to justify the individual mandate. Plaintiffs
Econ. Br. at 9-10. The argument is unconvincing. It would be novel indeed to
examine whether a problem “substantially affects” interstate commerce by
comparing the economic impact of the problem to the total size of the regulated
market. The argument would also lead to the perverse conclusion that Congress
has less regulatory power the larger the national market at issue. But in any event,
241
there can be no doubt that $43 billion is a substantial amount by any accounting.
Even the economists (as well as the district court) recognize that the amount is “not
insignificant.” Plaintiffs Econ. Br. at 10; accord Florida, 2011 WL 285683, at *26
(noting that $43 billion “is clearly a large amount of money”). In this connection, I
am reminded of the comment often attributed to the late Illinois Senator Everett
McKinley Dirksen: “A billion here, a billion there, and pretty soon you’re talking
about real money.”
Relying heavily on the economists’ brief, the majority goes even further and
subjects Congress’ findings to an analysis that looks startlingly like strict scrutiny
review. The majority engages in a breakdown of who among the uninsured are
responsible for the $43 billion, presumably in order to show that the mandate will
not be the most efficacious means of ameliorating the cost-shifting problem. See
Maj. Op. at 139-41. For instance, the majority claims that low-income individuals
and illegal aliens (or other nonresidents) together are responsible for around half of
the total cost shifting, yet are exempted from either the mandate or its penalty. Id.
at 139-40. But even on the majority’s own terms, a substantial number of cost-
shifters are not exempted from the mandate or its penalty, and there was nothing
irrational about Congress’ decision to subject to the mandate those individuals who
could reasonably afford health insurance in the first place.
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More fundamentally, however, as I see it, the majority’s searching inquiry
throughout its opinion into whether the individual mandate fully solves the
problems Congress aimed to solve, or whether there may have been more
efficacious ways to do so, probes far beyond the proper scope of a court’s
Commerce Clause review. The majority suggests any number of changes to the
legislation that would, it claims, improve it. Thus, for example, the majority offers
that Congress should have legislated with a finer scalpel by inserting some element
in the statute calling for a “case-by-case inquiry” of each regulated individual’s
conduct. Id. at 128 (internal quotation marks omitted). And the majority would
have the IRS enforce the mandate more aggressively. See id. at 166; id. at 202
(describing the mandate as “porous and toothless”).
Quite simply, the majority would presume to sit as a superlegislature,
offering ways in which Congress could have legislated more efficaciously or more
narrowly. This approach ignores the wide regulatory latitude afforded to Congress,
under its Commerce Clause power, to address what in its view are substantial
problems, and it misapprehends the role of a reviewing court. As nonelected
judicial officers, we are not afforded the opportunity to rewrite statutes we don’t
like, or to craft a legislative response more sharply than the legislative branch of
government has chosen. What we are obliged to do is to determine whether the
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congressional enactment falls within the boundaries of Art. I, § 8, cl. 3. In
examining the constitutionality of legislation grounded in Congress’ commerce
power, “[w]e need not determine whether [the regulated] activities, taken in the
aggregate, substantially affect interstate commerce in fact.” Raich, 545 U.S. at 22
(emphasis added). Rather, all we need to do -- indeed, all we are permitted to do --
is determine “whether a ‘rational basis’ exists for so concluding.” Id. The courts
are not called upon to judge the wisdom or efficacy of the challenged statutory
scheme. See, e.g., id. at 9 (“The question before us, however, is not whether it is
wise to enforce the statute in these circumstances.”); Wickard, 317 U.S. at 129
(“And with the wisdom, workability, or fairness[] of the plan of regulation we have
nothing to do.”). As Justice Cardozo put it, “[w]hether wisdom or unwisdom
resides in the scheme of [the statute at issue], it is not for us to say. The answer to
such inquiries must come from Congress, not the courts.” Helvering v. Davis, 301
U.S. 619, 644 (1937); see also Thomas More Law Ctr., 2011 WL 2556039, at *33
(Sutton, J., concurring) (“Time assuredly will bring to light the policy strengths and
weaknesses of using the individual mandate as part of this national legislation,
allowing the peoples’ political representatives, rather than their judges, to have the
primary say over its utility.” (emphasis added)).
The majority says, nevertheless, that we are compelled to approach the
244
individual mandate with “caution” and with “greater cause for doubt,” Maj. Op. at
152, because insurance and health care are “areas of traditional state concern,” id.
at 150. While it is true that insurance and health care are, generally speaking, areas
of traditional state regulation, this observation in no way undermines Congress’
commerce power to regulate concurrently in these areas. The sheer size of the
programs Congress has created underscores the extensiveness of its regulation of
the health insurance and health care industries. “In 2010, 47.5 million people were
covered by Medicare . . . .” 2011 Annual Report of the Boards of Trustees of the
Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust
Funds 4 (2011), available at http://www.cms.gov/ReportsTrustFunds/downloads/
tr2011.pdf. Medicaid is similarly massive. As of December 2008, approximately
44.8 million people were covered by Medicaid. The Kaiser Commission on
Medicaid and the Uninsured, Medicaid Enrollment in 50 States 1 (2010), available
at http://www.kff.org/medicaid/upload/7606-05.pdf. And as the government points
out, Medicare and Medicaid accounted for roughly $750 billion of federal spending
in 2009 alone. Gov’t Br. at 10. It would surely come as a great shock to Congress,
or, for that matter, to the 47.5 million people covered by Medicare, the 44.8 million
people covered by Medicaid, and the overwhelming number of employers, health
insurers, and health care providers regulated by ERISA, COBRA, and HIPAA, to
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learn that, because the health care industry also “falls within the sphere of
traditional state regulation,” Maj. Op. at 153, Congress was somehow skating on
thin constitutional ice when it enacted these laws.
4.
In the course of its opinion, the majority also attaches great significance to
the unprecedented nature of the legislation before us. It is surely true that, as the
district court concluded, the individual mandate is a novel exercise of Congress’
Commerce Clause power. Florida, 2011 WL 285683, at *20-21. But the mere fact
of its novelty does not yield its unconstitutionality. See Garcia v. Vanguard Car
Rental USA, Inc., 540 F.3d 1242, 1252 (11th Cir. 2008) (upholding, under the
Commerce and Necessary and Proper Clauses, the constitutionality of the Graves
Amendment, 49 U.S.C. § 30106, even though it was a “novel” statute employing
the “relatively novel” theory that the rental car market should be protected “by
deregulating it”). Every new proposal is in some way unprecedented before it is
tried. And to draw the line against any new congressional enactment simply
because of its novelty ignores the lessons found in the Supreme Court’s Commerce
Clause cases. For example, in Wickard the Court squarely recognized that the case
presented an unprecedented expansion of the Commerce Clause power before then
embracing that expansion. 317 U.S. at 120 (“Even today, when this power has
246
been held to have great latitude, there is no decision of this Court that such
activities [“local” activities such as production, manufacturing, and mining] may be
regulated where no part of the product is intended for interstate commerce or
intermingled with the subjects thereof.”). The truth is that any ruling this Court
issues on the individual mandate’s constitutionality is necessarily a departure from
existing case law because the legislation and the issues presented are new. That the
Supreme Court has never before upheld a regulation of this kind can hardly be
decisive; it has never rejected one either.
Indeed, when measured against the kinds of sweeping changes we have seen
in the past, the individual mandate is far from a cataclysmic expansion of
Congress’ commerce power. Even the briefest examination of the growth of
Congress’ commerce power over the past 75 years makes the point. Facing the
practical realities of an emergent, highly integrated national economy, the Supreme
Court abandoned the categorical and formalistic distinctions that it had erected
initially, in favor of a pragmatic view of commerce drawn from the course of
business. The Court had previously held that broad categories of economic life,
such as agriculture, insurance, labor, manufacturing, mining, and production were
antecedent to commerce itself, which was once viewed as being limited to the
movement of the fruits of those antecedent activities in and among the states. But a
247
more pragmatic view began to take hold by the mid-1930s. The Court’s earlier
restrictive view of commerce did not survive the New Deal-era cases, where the
Supreme Court swiftly brought all of these categories within the lawful ambit of
Congress’ commerce power. See, e.g., Jones & Laughlin Steel, 301 U.S. at 40 (“It
is thus apparent that the fact that the employees here concerned were engaged in
production is not determinative. The question remains as to the effect upon
interstate commerce of the labor practice involved.”); United States v. Darby, 312
U.S. 100, 115-17 (1941) (“[W]e conclude that the prohibition of the shipment
interstate of goods produced under the forbidden substandard labor conditions is
within the constitutional authority of Congress.”); Wickard, 317 U.S. at 124-25
(“Whether the subject of the regulation in question was ‘production,’
‘consumption,’ or ‘marketing’ [of wheat] is . . . not material for purposes of
deciding the question of federal power before us. . . . [E]ven if appellee’s activity
be local and though it may not be regarded as commerce, it may still, whatever its
nature, be reached by Congress if it exerts a substantial economic effect on
interstate commerce . . . .”); South-Eastern Underwriters, 322 U.S. at 553 (“No
commercial enterprise of any kind which conducts its activities across state lines
has been held to be wholly beyond the regulatory power of Congress under the
Commerce Clause. We cannot make an exception of the business of insurance.”).
248
The Court did not stop there. It expanded the scope of Congress’ commerce
power from the regulation of the “intercourse” of goods moving across borders to
the regulation of wholly intrastate conduct that substantially affected interstate
commerce. See Darby, 312 U.S. at 119-20 & n.3. Indeed, Wickard involved a
jump arguably far greater than the one we face today. In order to regulate price,
Congress could penalize conduct -- Filburn’s growing wheat above a fixed quota
for his own personal consumption -- absent any indicia that Filburn would ever
enter into the interstate wheat market. Justice Jackson, writing for the Court,
recognized this as a novel exercise of the commerce power. Wickard, 317 U.S. at
120. The Court held that Congress could nonetheless regulate the price of wheat
by restricting its production, even on a small farm where it was grown purely for
personal consumption. And, according to the Court, if the regulation had the
natural and probable effect of “forcing some farmers into the market to buy what
they could provide for themselves” absent the regulation, so be it. Id. at 129
(emphasis added).
In Wickard, the Court expanded Congress’ commerce power further still,
concluding that the impact or effect on interstate commerce is not measured case by
case, or person by person, but rather in an aggregated way. Id. at 127-28. That
Filburn’s “own contribution to the demand for wheat may be trivial by itself is not
249
enough to remove him from the scope of federal regulation where, as here, his
contribution, taken together with that of many others similarly situated, is far from
trivial.” Id. (emphasis added); see also Darby, 312 U.S. at 123 (“[Congress]
recognized that in present day industry, competition by a small part may affect the
whole and that the total effect of the competition of many small producers may be
great.”); NLRB v. Fainblatt, 306 U.S. 601, 606 (1939) (“The power of Congress to
regulate interstate commerce is plenary and extends to all such commerce be it
great or small.”). Building upon earlier inklings of an aggregation principle found
in Darby and Fainblatt, the Court firmly established that Congress may regulate
classes of local activities that, only in the aggregate, have a substantial effect on
interstate commerce.11
In a pair of notable civil rights cases, Heart of Atlanta Motel, Inc. v. United
States, 379 U.S. 241 (1964), and Katzenbach, 379 U.S. 294, the Supreme Court
continued to read the Commerce Clause in an expansive way. The Court upheld
nondiscrimination legislation, grounded in the Commerce Clause, that required
11
The majority attempts to skirt the breadth of the aggregation principle by
claiming that an “individual’s mere decision not to purchase insurance” is not subject to
aggregation. Maj. Op. at 125. But again, the majority has shot at the wrong target.
Congress is regulating the uninsured’s uncompensated consumption of health care
services. And under Wickard and Raich, we are instructed to measure the effect on
interstate commerce not case-by-case or person-by-person, but rather in the aggregate and
taken as a whole.
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hoteliers and restaurateurs to enter into economic transactions with racial
minorities (indeed, with individuals of any race, color, religion, or national origin)
on the same terms as any other patrons (or exit their respective businesses
altogether). The Court underscored that “the power of Congress to promote
interstate commerce also includes the power to regulate the local incidents thereof,
including local activities in both the States of origin and destination, which might
have a substantial and harmful effect upon that commerce.” Heart of Atlanta, 379
U.S. at 258. The Court concluded that, having entered the stream of commerce,
these sellers could be forced by Congress to engage in economic transactions into
which they would not otherwise enter.
The plaintiffs are quick to point out, however, that the Commerce Clause has
not simply expanded unabated. In rejecting the constitutionality of the individual
mandate, the plaintiffs and the majority rely heavily upon Lopez, 514 U.S. 549, and
United States v. Morrison, 529 U.S. 598 (2000), the only two Supreme Court cases
in the past 75 years to hold that an act of Congress exceeded its commerce power.
Neither Lopez, where the Court struck down a statute criminalizing the possession
of a firearm within 1000 feet of a school, nor Morrison, where the Court struck
down a statute creating a federal civil remedy for victims of gender-motivated
felonious acts of violence, answers the question we face today.
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Indeed, in Raich, 545 U.S. 1, decided five years after Morrison, the Supreme
Court reaffirmed the vitality of Wickard, and specifically applied its holding in a
challenge to the constitutionality of the Controlled Substances Act (“CSA”). The
Court emphatically distinguished Lopez and Morrison, observing that the statutes
at issue in those cases were singular prohibitions regulating wholly noneconomic
criminal behavior. The CSA, on the other hand, was characterized as “a lengthy
and detailed statute creating a comprehensive framework for regulating the
production, distribution, and possession of five classes of ‘controlled substances.’”
Raich, 545 U.S. at 24. The Court found that, “[u]nlike those at issue in Lopez and
Morrison, the activities regulated by the CSA are quintessentially economic.” Id.
at 25.
Thus, much as in Raich, while Lopez and Morrison remind us that there are
discernible limits on Congress’ commerce power, the limits drawn in those two
cases are of limited help in this one. As a panel of this Circuit recently stated,
“Raich makes clear that when a statute regulates economic or commercial activity,
Lopez and Morrison are inapposite.” Garcia, 540 F.3d at 1252. Indeed, when “we
are not . . . dealing with a single-subject statute whose single subject is itself
non-economic (e.g., possession of a gun in a school zone or gender-motivated
violence),” Morrison and Lopez have little applicability and instead “Raich guides
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our analysis.” United States v. Maxwell (“Maxwell II”), 446 F.3d 1210, 1216 n.6
(11th Cir. 2006); see also United States v. Paige, 604 F.3d 1268, 1273 (11th Cir.
2010) (per curiam). Lopez and Morrison each involved an effort to regulate
noneconomic activity (criminal conduct); in neither instance did Congress seek to
broadly regulate an entire industry; and, unlike in this case, the criminal conduct
regulated in those cases was only linked to interstate commerce in a highly
attenuated fashion that required piling inference upon inference. Whatever
problems there may be with the constitutionality of the individual mandate, they
cannot be found in Lopez or Morrison. See Part II.A, infra.
The historical growth of Congress’ commerce power powerfully suggests
that, contrary to the arguments advanced by the plaintiffs, upholding the individual
mandate would be far from a cosmic expansion of the boundaries of the Commerce
Clause. These past expansions have not been random, accidental, or in any way
contrary to first principles or an original understanding of the Constitution. As the
Supreme Court has observed, “[t]he Federal Government undertakes activities
today that would have been unimaginable to the Framers.” United States v.
Comstock, -- U.S. --, 130 S. Ct. 1949, 1965 (2010) (quoting New York v. United
States, 505 U.S. 144, 157 (1992)). Indeed, the Framers purposely drafted “a
Constitution capable of such resilience through time.” Id.; see also McCulloch v.
253
Maryland, 17 U.S. (4 Wheat.) 316, 415 (1819) (describing the Constitution as a
document “intended to endure for ages to come, and consequently, to be adapted to
the various crises of human affairs”).
The long and short of it is that Congress has promulgated a rule (the
individual mandate) by which to comprehensively regulate the timing and means of
payment for the virtually inevitable consumption of health care services, and to
thereby regulate commerce. The individual mandate was enacted as part of a broad
scheme to regulate health insurance and health care services, industries already
heavily regulated by Congress. Congress made express legislative findings
detailing the economic problems it saw, and how the mandate would ameliorate
those problems. And the substantial impact on interstate commerce cannot be
denied. Article I, § 8, cl. 3 requires no more than this.
C.
The individual mandate is also a valid means under the Necessary and Proper
Clause to further the regulatory end of the Act’s insurance reforms. “It has been
long recognized that Congress has the power to pass laws or regulations necessary
and proper to carrying out [its] commerce clause power.” United States v. Ambert,
561 F.3d 1202, 1211 (11th Cir. 2009). Under the Necessary and Proper Clause,
Congress is empowered “[t]o make all Laws which shall be necessary and proper
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for carrying into Execution the foregoing [Art. I, § 8] Powers.” U.S. Const. art. I, §
8, cl. 18. Both the Supreme Court and this Circuit have said that “in determining
whether the Necessary and Proper Clause grants Congress the legislative authority
to enact a particular federal statute, we look to see whether the statute constitutes a
means that is rationally related to the implementation of a constitutionally
enumerated power.” Comstock, 130 S. Ct. at 1956 (emphasis added); United States
v. Belfast, 611 F.3d 783, 804 (11th Cir. 2010).
The constitutionality of the “end” -- that is, the Act’s insurer regulations -- is
both clear and unchallenged, as even the district court recognized. Florida, 2011
WL 285683, at *32 (“[T]he end of regulating the health care insurance industry
(including preventing insurers from excluding or charging higher rates to people
with pre-existing conditions) is clearly legitimate and within the scope of the
constitution.” (internal quotation marks omitted)). Once it has identified a
legitimate and constitutional end, Congress has an expansive choice of means. As
Chief Justice Marshall enduringly articulated “[i]n language that has come to
define the scope of the Necessary and Proper Clause,” Comstock, 130 S. Ct. at
1956:
Let the end be legitimate, let it be within the scope of the constitution,
and all means which are appropriate, which are plainly adapted to that
end, which are not prohibited, but consist with the letter and spirit of
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the constitution, are constitutional.
McCulloch, 17 U.S. at 421. In addition, Chief Justice Marshall broadly defined the
term “necessary.” It does not mean “absolutely necessary,” but rather only
“convenient, or useful” or “conducive” to the “beneficial exercise” of one or more
of Congress’ enumerated powers. Comstock, 130 S. Ct. at 1956 (quoting
McCulloch, 17 U.S. at 413, 414, 418).
It is clear under this expansive definition of “necessary,” the validity of
which was recently reaffirmed by the Supreme Court in Comstock, that requiring
the purchase of health insurance is “convenient,” “useful,” or “conducive” to
effectively implementing the Act’s insurer regulations. As the states that tried to
effectuate guaranteed issue and community rating reforms without some form of
individual mandate attest, trying to do the former without the latter simply does not
work. See, e.g., Brief for Am. Ass’n of People with Disabilities et al. as Amici
Curiae Supporting the Government at 5-6 (“Kentucky, Maine, New Hampshire,
New Jersey, New York, Vermont, and Washington enacted legislation that required
insurers to guarantee issue to all consumers in the individual market, but did not
have a minimum coverage provision. . . . All seven states suffered from sky-
rocketing insurance premium costs, reductions in individuals with coverage, and
reductions in insurance products and providers.” (footnote omitted)); Brief for
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Governor of Wash. as Amicus Curiae Supporting the Government at 2
(“Washington knows firsthand the necessity of universal coverage because of the
problems it experienced when it eliminated barriers to insurance coverage, like
preexisting condition restrictions, without also imposing a minimum coverage
requirement.”); Brief for Law Professors as Amici Curiae Supporting the
Government at 17 (“[A]fter Kentucky enacted reform, all but two insurers (one
State-run) abandoned the State.”).12 In this light, the individual mandate is
“necessary” to the end of regulating insurers’ underwriting practices without
running insurers out of business entirely -- a point the district court recognized.
Florida, 2011 WL 285683, at *33 (“The defendants have asserted again and again
that the individual mandate is absolutely ‘necessary’ and ‘essential’ for the Act to
operate as it was intended by Congress. I accept that it is.”).
The plaintiffs also claim that the individual mandate exceeds Congress’
power because it is not “proper” -- that is, because it is inconsistent with “the letter
12
During a hearing before the House Ways and Means Committee, an economist
stated that “imposition of community-rated premiums and guaranteed issue on a market of
competing private health insurers will inexorably drive that market into extinction, unless
these two features are coupled with . . . a mandate on individual[s] to be insured.” Health
Reform in the 21st Century: Insurance Market Reforms: Hearing Before the H. Comm. on
Ways and Means, 111th Cong. 13 (2009) (statement of Dr. Uwe Reinhardt, Professor,
Princeton University). In other words, without a mandate, these two insurer reforms
would result in adverse selection, increased premiums, decreased enrollment, and fleeing
insurers -- in short, the insurance market would “implode.” See id. at 13 n.4.
257
and the spirit of the constitution.” McCulloch, 17 U.S. at 421. I have little doubt
that the individual mandate is also “proper.” It violates no other provision of the
Constitution.13 Cf. Comstock, 130 S. Ct. at 1957 (“[T]he present statute’s validity
under provisions of the Constitution other than the Necessary and Proper Clause is
an issue that is not before us. . . . [Therefore], the relevant inquiry is simply
whether the means chosen are reasonably adapted to the attainment of a legitimate
end under the commerce power . . . .” (internal quotation marks omitted)). And the
mandate is undoubtedly “rationally related” to the end of effectuating the Act’s
guaranteed issue and community rating reforms. Id. at 1956; Belfast, 611 F.3d at
804. The mandate arguably renders the insurer regulations practically and
economically feasible. Congress found that without the mandate, “many
individuals would wait to purchase health insurance until they needed care,” 42
U.S.C. § 18091(a)(2)(I) -- that is, until they were sick, which would impose
enormous costs on insurers and drive them out of the market. And having observed
the failed experience of those states that tried to enact insurer reforms without an
individual mandate, Congress rationally concluded that one way to prevent this
problem was to require that non-exempted individuals enter the insurance risk pool.
13
I address the plaintiffs’ suggestions that the individual mandate violates the
Fifth or Tenth Amendments in Part II.B, infra.
258
The Necessary and Proper Clause requires nothing more.
II.
More fundamentally, the plaintiffs have offered two arguments that, they say,
undermine the government’s position that Congress’ commerce power can justify
prescribing a rule that compels an individual to buy health insurance. First, they
argue that if Congress has the constitutional authority to enact the individual
mandate, then there is virtually no limit on its authority, and Art. I, § 8, cl. 3 of the
Constitution (whether standing alone or in concert with the Necessary and Proper
Clause) would be transformed into a grant of general police power. Second, they
offer, although largely implicitly, that the individual mandate really infringes upon
notions of individual liberty and popular sovereignty found either in the Fifth or
Tenth Amendments to the Constitution. I take up each argument in turn.
A.
1.
Perhaps at the heart of the plaintiffs’ objection to the mandate -- adopted by
the majority opinion in conclusion, if not in reasoning14 -- is the notion that
14
The majority comes perilously close to abandoning the central foundation -- the
dichotomy between activity and inactivity -- on which the plaintiffs and the district court
rely for their position that upholding the individual mandate would convert the Commerce
Clause into an unlimited general police power. See Maj. Op. at 109 (“[W]e are not
persuaded that the formalistic dichotomy of activity and inactivity provides a workable or
persuasive enough answer in this case.”). As I understand the position taken by the
259
allowing the individual mandate to stand will convert Congress’ commerce power
into a plenary federal police power, admitting of no limits and knowing of no
bounds. The parade of horribles said to follow ineluctably from upholding the
individual mandate includes the federal government’s ability to compel us to
purchase and consume broccoli, buy General Motors vehicles, and exercise three
times a week. However, acknowledging the constitutionality of the individual
mandate portends no such impending doom.
At the outset, there is always a danger in evaluating the constitutionality of
legislation actually before us solely on the basis of conjecture about what the future
may hold. The plaintiffs’ heavy reliance on “floodgate fears” and a “parade of
dreadfuls calls to mind wise counsel: ‘Judges and lawyers live on the slippery slope
of analogies; they are not supposed to ski it to the bottom.’” Buckley v. Am.
plaintiffs and the district court, it is this: if the Commerce Clause affords Congress the
power to conscript the unwilling uninsured to enter the stream of commerce and buy
insurance, then Congress could also conscript any American to buy any private product at
a time and under circumstances not of his own choosing. In other words, the plaintiffs
say, the individual mandate extends the Commerce Clause beyond its outer limits
precisely because it allows the government to conscript the inactive and unwilling.
Without drawing the distinction between activity and inactivity, I am at a loss to
understand the argument that sustaining the individual mandate would transmute the
limited power contained in Art. I, § 8, cl. 3 of the Constitution into an unlimited general
police power. For reasons that remain inexplicable to me, the majority opinion seems to
suggest that the individual mandate is a “bridge too far” -- in the words of the district
court -- not because it conscripts the inactive, but rather for some inchoate reason stated at
the highest order of abstraction.
260
Constitutional Law Found., Inc., 525 U.S. 182, 194 n.16 (1999) (quoting Robert
Bork, The Tempting of America: The Political Seduction of the Law 169 (1990)).
Federal courts may only be called on to resolve ripe controversies, and it is difficult
and hazardous for courts to prejudge the next case or the one after that in a vacuum,
devoid of a factually developed record sharpened in the crucible of the adversarial
process. See Baker v. Carr, 369 U.S. 186, 204 (1962) (“[C]oncrete adverseness . . .
sharpens the presentation of issues upon which the court so largely depends for
illumination of difficult constitutional questions[.]”). As courts of limited
jurisdiction, we ought not lose sight of the legislation before us, viewed in the
context of the discrete issues and facts presented. I have little doubt that the
federal courts will be fully capable of addressing future problems raised in future
cases in the fullness of time.
But a more basic answer is this: upholding the individual mandate leaves
fully intact all of the existing limitations drawn around Congress’ Commerce
Clause power. To begin with, Congress is limited by the constitutional text and
Supreme Court doctrine largely to prescribing rules regulating economic behavior
that has a substantial effect on interstate commerce. These powerful limits afford
no problem in this case, because Congress has undeniably prescribed a rule (the
individual mandate) to regulate economic behavior (consumption of health care
261
services by the uninsured) that has a powerful impact on how, when, and by whom
payment is made for health care services. Indeed, the conduct regulated by the Act
is even more “quintessentially economic” in nature than the cultivation, possession,
and personal use of controlled substances, see Raich, 545 U.S. at 25, or the
cultivation of wheat for personal consumption, see Wickard, 317 U.S. at 119.
In Lopez and Morrison, the Supreme Court began to flesh out some of the
outer limits surrounding Art. I, § 8, cl. 3. Chief Justice Rehnquist, writing for the
Court in both instances, posited a series of “significant considerations,” none of
which pose any problem in this case. See Morrison, 529 U.S. at 609-12. First, he
observed that the regulated conduct at issue in Lopez and Morrison was plainly of a
noneconomic nature -- again, the possession of a handgun within 1000 feet of a
school in Lopez, and gender-motivated felonious acts of violence in Morrison. See
id. at 610 (“[A] fair reading of Lopez shows that the noneconomic, criminal nature
of the conduct at issue was central to our decision in that case.”). Here, in sharp
contrast, Congress has prescribed a rule governing purely economic behavior. As
I’ve noted already, the Act addresses an economic problem of enormous dimension
-- $43 billion of annual cost shifting from the uninsured to insured individuals and
health care providers, 42 U.S.C. § 18091(a)(2)(F) -- by prescribing an economic
rule governing the timing and method of payment for health care services. In short,
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the first problem identified in Lopez and Morrison -- that the statutes reached
purely intrastate, noneconomic behavior -- is not found in this case, and thus the
mandate does not, at least for this reason, penetrate beyond the outer limits of
Congress’ Commerce Clause power.
A second powerful consideration identified by the Court in both Lopez and
Morrison was that the nexus between the criminal conduct regulated by the
legislation and its impact -- even if taken in the aggregate -- on interstate commerce
was remote and wholly attenuated, and on its own terms provided no limiting
principle surrounding the exercise of Congress’ commerce power. In both Lopez
and Morrison, the government relied on a lengthy inferential chain of causal
reasoning in order to show that the criminal conduct regulated had a substantial
effect on interstate commerce. In Lopez -- where Congress had made no factual
findings regarding the effects upon interstate commerce of gun possession in a
school zone -- the government had to argue, among other things, that the
possession of firearms near schools had the natural effect of disrupting the
educational process, and that this disruption, over time, would in turn lower the
economic productivity of our citizens, causing an adverse effect on the national
economy. See Lopez, 514 U.S. at 563-64. It’s no surprise, then, that the Court
found the critical link to interstate commerce wanting, and concluded that if this
263
chain of reasoning were an acceptable means of bridging the gap between the
regulated conduct and commerce, precious little would fall outside the ambit of
Congress’ commerce power. Id. at 564. By the same token, in Morrison, the Court
found wanting Congress’ chain of reasoning -- that felonious acts of violence
against women would, inter alia, cause lost hours in the workplace and drive up
hospital costs and insurance premiums, which in turn would have an adverse effect
on the national economy. See Morrison, 529 U.S. at 615. The problem remained
the same as in Lopez, even though in Morrison, Congress had sought to draw the
causal inferences itself through express factual findings. Again, the causal
reasoning that was required to link the regulated criminal conduct to interstate
commerce was lengthy and attenuated. And again, the very method of reasoning
offered by Congress afforded no limitations on its commerce power. Id. at 615-16.
In this case, no such complex and attenuated causal story is necessary to
locate the regulated conduct’s nexus with interstate commerce. Here, the
substantial effect on commerce occurs directly and immediately when the
uninsured consume health care services in large numbers, do not pay for them in
full or maybe even at all, and thereby shift powerful economic costs onto insured
individuals and health care providers (as Congress found they do). The nexus
between the regulated conduct and interstate commerce could not be more direct. I
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am at a loss to find even a single “inferential leap[],” Maj. Op. at 146, required to
link them. Moreover, Congress unambiguously and in considerable detail drew the
connection between the regulated conduct and its substantial effect on interstate
commerce through extensive findings of fact. See 42 U.S.C. § 18091. Contrary to
the majority’s claim, here there is no need “to pile inference upon inference,”
Lopez, 514 U.S. at 567, to draw the critical nexus, and, therefore, we face no
unlimited exercise of congressional power for that reason.
Moreover, in sharp contrast to Lopez and Morrison, we are confronted today
with a comprehensive economic statute, not a one-off, criminal prohibition. See
Raich, 545 U.S. at 23-24 (drawing a sharp distinction between “brief,
single-subject statute[s]” divorced from a larger regulatory scheme and “lengthy
and detailed statute[s] creating a comprehensive framework for regulating” an
entire market). The individual mandate is “an essential part of a larger regulation
of economic activity,” without which “the regulatory scheme would be undercut,”
Lopez, 514 U.S. at 561, and the Supreme Court has endorsed the constitutionality
of such comprehensive, economic regulatory schemes, Raich, 545 U.S. at 24-25;
see also Hodel v. Indiana, 452 U.S. 314, 329 n.17 (1981) (“A complex regulatory
program such as established by the [Surface Mining] Act can survive a Commerce
Clause challenge without a showing that every single facet of the program is
265
independently and directly related to a valid congressional goal. It is enough that
the challenged provisions are an integral part of the regulatory program and that the
regulatory scheme when considered as a whole satisfies this test.”); Raich, 545 U.S.
at 36 (Scalia, J., concurring in the judgment) (“Though the conduct in Lopez was
not economic, the Court nevertheless recognized that it could be regulated as ‘an
essential part of a larger regulation of economic activity, in which the regulatory
scheme could be undercut unless the intrastate activity were regulated.’” (quoting
Lopez, 514 U.S. at 561)). And, according to Eleventh Circuit precedent, “where
Congress comprehensively regulates economic activity, it may constitutionally
regulate intrastate activity, whether economic or not, so long as the inability to do
so would undermine Congress’s ability to implement effectively the overlying
economic regulatory scheme.” Maxwell II, 446 F.3d at 1215 (footnote omitted).
The majority, in an effort to distance itself from this precedent, suggests that,
because Raich involved an as-applied challenge, the inquiry into whether
challenged legislation is an “essential part of a larger regulation of economic
activity” is only appropriate in as-applied challenges, as opposed to facial ones.
Maj. Op. at 158-60. In other words, the majority seems to be saying that, because
“the Supreme Court has to date never sustained a statute on the basis of the ‘larger
regulatory scheme’ doctrine in a facial challenge,” id. at 159, it is irrelevant to the
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question of the individual mandate’s constitutionality that the mandate is an
essential part of a larger economic regulatory scheme. There is no doctrinal basis
for this view. In Lopez itself, the Court applied this principle in the context of a
facial challenge. In Raich, the Court plainly recognized that, unlike the challenge it
faced, the challenges to the constitutionality of the Gun-Free School Zones Act in
Lopez, and, for that matter, to Title III of the Violence Against Women Act in
Morrison, were facial challenges. Justice Stevens, writing for the majority in
Raich, said: “Here, respondents ask us to excise individual applications of a
concededly valid statutory scheme. In contrast, in both Lopez and Morrison, the
parties asserted that a particular statute or provision fell outside Congress’
commerce power in its entirety,” the very definition of a facial challenge. Raich,
545 U.S. at 23 (emphasis added). Indeed, Justice Thomas, dissenting, likewise
expressly recognized that “[i]n Lopez and Morrison, the parties asserted facial
challenges.” Id. at 71 (Thomas, J., dissenting). And of course in Lopez, the Court,
for the first time, applied this very doctrine, explaining that even though the
Gun-Free School Zones Act targeted purely local, noneconomic behavior, the
Court could have upheld it nonetheless if it had been an “essential part of a larger
regulation of economic activity, in which the regulatory scheme could be undercut
unless the intrastate activity were regulated.” Lopez, 514 U.S. at 561. Moreover, a
267
panel of this Court has recently explained in binding precedent that “what
distinguished Raich from Morrison and Lopez . . . was the comprehensiveness of
the economic component of the regulation,” Maxwell II, 446 F.3d at 1214 -- not
whether the challenge was facial or as-applied.
Furthermore, the majority’s view that the individual mandate is not an
essential part of the Act’s concededly economic regulatory scheme, see Maj. Op. at
162-66, cannot be squared with the economic realities of the health insurance
business or the legislative realities of the Act. Nor can this view be squared with
the contrary judgment reached by Congress on this very point. Thus, for example,
the majority appears to simply cast aside Congress’ finding that the individual
mandate “is essential to creating effective health insurance markets in which
improved health insurance products that are guaranteed issue and do not exclude
coverage of pre-existing conditions can be sold.” 42 U.S.C. § 18091(a)(2)(I). In
Maxwell II, we explained that “courts have only a limited role in second-guessing”
Congress’ judgments about whether leaving a class of conduct outside of federal
control would “undercut[] Congress’s unquestioned authority to regulate the
broader interstate market.” 446 F.3d at 1215 (internal quotation marks omitted).
Faced with evidence that the insurance industry would collapse if the Act’s
guaranteed issue and community rating provisions were implemented without the
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individual mandate, Congress had more than “a rational basis for concluding,”
Raich, 545 U.S. at 19, that the individual mandate was essential to the success of
the Act’s concededly valid and quintessentially economic insurer reforms.15 In
short, the real and substantial limits on the commerce power set forth by the
Supreme Court in Lopez and Morrison would be left wholly intact if we were to
uphold the individual mandate.
Because the impact on interstate commerce of the conduct that Congress
sought to regulate through the individual mandate is so clear and immediate, this
case is readily distinguishable from many of the plaintiffs’ suggested hypothetical
horribles, which suffer from the inference-piling reasoning condemned in Lopez
and Morrison. Thus, for example, in arguing that Congress could force us to
15
Although the majority seems to take comfort in only striking down the
individual mandate, see Maj. Op. at 207 n.145, all of the parties have agreed that the
individual mandate is so essential to the principal insurer reforms that, at least for
severability purposes, the guaranteed issue and community rating provisions necessarily
rise and fall with the individual mandate, Gov’t Reply Br. at 58 (“As plaintiffs note, the
federal government acknowledged below [and continues to acknowledge] that the
guaranteed-issue and community-rating provisions due to take effect in 2014 . . . cannot
be severed from the minimum coverage requirement. The requirement is integral to those
sections that go into effect along with it in 2014 and provide that insurers must extend
coverage and set premiums without regard to pre-existing medical conditions . . . .”);
States Br. at 63 (stating that the individual mandate cannot be severed from “the core,
interrelated health insurance reforms”); NFIB Br. at 60-61 (stating that the mandate and
the principal insurer provisions “truly are the heart of the Act,” and highlighting the
government’s concession that the mandate and the insurer reforms “must stand or fall
together” (internal quotation marks omitted)).
269
purchase broccoli, the plaintiffs necessarily reason as follows: everyone is a
participant in the food market; if people buy more broccoli, they will eat more
broccoli; eating more broccoli will, in the long run, improve people’s health; this,
in turn, will improve overall worker productivity, thus affecting our national
economy. Such reasoning violates the cautionary note that “under the
Government’s ‘national productivity’ reasoning, Congress could regulate any
activity that it found was related to the economic productivity of individual citizens
. . . . Thus, if we were to accept the Government’s arguments, we are hard pressed
to posit any activity by an individual that Congress is without power to regulate.”
Lopez, 514 U.S. at 564. By contrast, the economic problem that Congress sought
to address through the individual mandate does not depend on any remote or long-
term effects on economic productivity stemming from individuals’ health care
choices; indeed, the mandate does not compel individuals to seek health care at all,
much less any particular form of it. Instead, Congress rationally found that the
uninsured’s inevitable, substantial, and often uncompensated consumption of
health care services -- of any form -- in and of itself substantially affects the
national economy.
2.
Moreover, this case does not open the floodgates to an unbounded
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Commerce Clause power because the particular factual circumstances are truly
unique, and not susceptible to replication elsewhere. This factual uniqueness
would render any holding in this case limited. I add the unremarkable observation
that the holding of every case is bounded by the peculiar fact pattern arising
therein. See Licciardello v. Lovelady, 544 F.3d 1280, 1288 n.8 (11th Cir. 2008)
(“Our holding, as always, is limited to the facts before us.”); see also United States
v. Hunter, 172 F.3d 1307, 1310 (11th Cir. 1999) (Carnes, J., concurring) (“The
holdings of a prior decision can reach only as far as the facts and circumstances
presented to the Court in the case which produced that decision.”).
The health care services market is characterized by five relevant factors,
which, when taken in concert, uniquely converge to create a truly sui generis
problem: (1) the unavoidable need that virtually all of us have to consume medical
care; (2) the unpredictability of that need; (3) the high costs associated with the
consumption of health care services; (4) the inability of providers to refuse to
provide care in emergency situations; and, largely as a result of the previous four
factors, (5) the very significant cost shifting that underlies the way medical care is
paid for in this country. Gov’t Econ. Br. at 1.
These are not just five fortuitous descriptors of the health care market,
elevated to artificial constitutional significance. Over the last 75 years the Supreme
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Court has emphatically and repeatedly counseled a pragmatic approach to
Commerce Clause analysis, grounded in a “practical” conception of commercial
regulation, “drawn from the course of business.” Swift & Co., 196 U.S. at 398;
accord Raich, 545 U.S. at 25 n.35; Lopez, 514 U.S. at 571, 574 (Kennedy, J.,
concurring); Wickard, 317 U.S. at 123-24; Jones & Laughlin Steel, 301 U.S. at 41-
42. Legislation enacted pursuant to Congress’ Commerce Clause power cannot be
evaluated in a vacuum, but only in light of the peculiar problems Congress sought
to address, what Congress chose to regulate, how Congress chose to regulate, and
the connection between the regulated conduct and the problem Congress sought to
resolve. Courts must always engage in the “hard work” of “identify[ing] objective
markers for confining the analysis in Commerce Clause cases.” Raich, 545 U.S. at
47 (O’Connor, J., dissenting). Far from being “ad hoc” and “illusory,” Maj. Op. at
168, these factual criteria are relevant descriptors, drawn from the course of
business, of the economic realities Congress confronted. They are, therefore,
precisely what the Court has instructed us to consider in the Commerce Clause
analysis. And given these unique characteristics of the health care market and the
peculiar way these characteristics converge, the individual mandate was part of a
practical solution to the cost-shifting problem Congress sought to address.
The first and most basic of these factors is that no individual can opt out of
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the health care services market, and thus virtually everyone will consume health
care services. Individual participation in the health care services market is
properly, therefore, a question of when and how individuals will consume and pay
for such services, not whether they will consume them. The plaintiffs are correct
that there are other markets that, if defined broadly enough, no one may opt out of,
such as the markets for food, transportation, and shelter. But the hypothetical
mandates -- that Congress can force individuals to buy broccoli, GM cars, or homes
-- do not follow. Neither those markets nor their hypothetical mandates resemble
the market and mandate here.
In the first place, unlike the needs for food, transportation, and shelter --
which are always present and have largely predictable costs -- illness and injury are
wholly unpredictable. Individuals who never intend to consume health care, unlike
those who never intend to purchase GM cars or broccoli or a home, will
nonetheless do so because of accidents, illnesses, and all the vagaries to which
one’s health is subject. Indeed, the economists concluded that even the most
sophisticated methods of predicting medical spending can explain only 25-35% of
the variation in the costs incurred by different individuals; “the vast bulk of
[medical] spending needs cannot be forecast in advance.” Gov’t Econ. Br. at 10-
11.
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In addition, while the costs associated with obtaining food, transportation,
and shelter are susceptible to budgeting, this is not the case for health care, which
can be so expensive that most everyone must have some access to funds beyond
their own resources in order to afford them. Id. at 11-12 (explaining that
unpredicted medical costs can eclipse the financial assets of “all but the very well-
to-do”); see also Gov’t Reply Br. at 15 (“The ‘frequency, timing and magnitude’ of
a given individual’s demand for health care are unknowable.” (quoting Jennifer
Prah Ruger, The Moral Foundations of Health Insurance, 100 Q.J. Med. 53, 54-55
(2007))). Moreover, there are lower cost alternatives to purchasing a house or a
car, such as renting an apartment, leasing an automobile, or relying on public
transportation. There are no realistic alternatives or less expensive substitutes for
treating cancer, a heart attack, or a stroke, or for performing a needed organ
transplant or hip replacement. Even routine medical procedures, such as MRIs, CT
scans, colonoscopies, mammograms, and childbirth, cost more than many
Americans can afford. Gov’t Econ. Br. at 11. This is not to say that individuals
may not budget and plan as best they can for their health care costs, as many surely
do, but the combination of uncertain timing, unpredictable malady, and potentially
astronomical cost can nonetheless leave individuals wholly unable to pay for the
health care services they consume. Indeed, Congress found that “62 percent of all
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personal bankruptcies are caused in part by medical expenses.” 42 U.S.C. §
18091(a)(2)(G).
Largely because of these first three factors -- that health care costs are
inevitable, unpredictable, and often staggeringly high -- the health care services
market, unlike other markets, is paid for predominantly through the mechanism of
insurance.16 Gov’t Br. at 9 (citing CMS data that payments by private and
government insurers comprise 75% of national health care spending). Insurance is
thus already intimately linked to the health care services market. People do not
similarly insure against the risk that they will need food or shelter, because these
needs are apparent and predictable, and people can reliably budget for them.
Although the purchase of a car or a home may often be too expensive for many
individuals to afford out of pocket, it would be fanciful indeed to suggest that
individuals would insure against the sudden and unpredictable purchase of a home
or automobile. The plaintiffs admit that “[r]egulations are ‘plainly adapted’ if they
invoke ‘the ordinary means of execution.’” NFIB Br. at 42 (quoting McCulloch,
16
The unpredictability and wide variation in health care costs demonstrate why
the majority’s comparison of average health care costs to the average insurance premium
misses the point. Maj. Op. at 140. Individuals pay $4500 in insurance premiums not to
avoid the $2000 average annual medical bill, but to avoid the extreme medical bill.
Indeed, the whole point of insurance is to make spending more regular and predictable.
Comparing the “average” medical bill with the “average” insurance premium is hollow --
insurance is purchased for the very reason that one cannot count on receiving the
“average” medical bill every year.
275
17 U.S. at 409, 421). Insurance is the “ordinary means” of paying for health care
services. Thus, a mandate to purchase insurance is more appropriately suited to
address the problems of non-payment and cost shifting in the health care services
market than it would be to address problems in other markets that do not similarly
rely on insurance as the primary method of payment.
The fourth important factor distinguishing the health care market from all
other markets -- and peculiarly contributing to the cost shifting that Congress
sought to address through the mandate -- is the fact that individuals may consume
health care services without regard to their ability to pay and often without ever
paying for them. Unlike any other sellers in any other marketplace, nearly all
hospitals are required by law to provide emergency services to anyone, regardless
of ability to pay. See EMTALA, 42 U.S.C. § 1395dd. If an individual shows up at
the emergency room doorstep with a broken neck from an automobile accident or
bleeding from a gunshot wound, or if an individual suffers a heart attack or a
stroke, hospitals will not turn him away. Even aside from the federal obligation
imposed by EMTALA, by my count, at least ten of the plaintiff states have statutes
on the books requiring hospitals with emergency rooms to provide emergency
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treatment to those in need of it, regardless of ability to pay.17 Still other plaintiff
states have state court judicial rulings imposing similar requirements.18 And even
absent any legal duty, many hospitals provide free or deeply discounted care as part
of their charitable mission, even when the patient’s need does not rise to the level
of an emergency. See Thornton v. Sw. Detroit Hosp., 895 F.2d 1131, 1132 (6th
Cir. 1990) (observing in the application of EMTALA that “American hospitals
have a long tradition of giving emergency medical aid to anyone in need who
appeared on the emergency room doorstep”). One expert from the Heritage
Foundation persuasively illustrated this distinction between health care and other
markets when recommending in 1989 that the government impose a mandate “to
17
See Fla. Stat. Ann. § 395.1041(1); Idaho Code Ann. § 39-1391b; La. Rev. Stat.
Ann. § 40:2113.4(A); Nev. Rev. Stat. Ann. § 439B.410(1); 35 Pa. Stat. Ann. § 449.8(a);
S.C. Code Ann. § 44-7-260(E); Tex. Health & Safety Code Ann. § 311.022(a); Utah Code
Ann. § 26-8a-501(1); Wash. Rev. Code § 70.170.060(2); Wis. Stat. Ann. § 256.30(2); see
also Gov’t Br. at 35 (citing testimony before Congress in 1986 that at least 22 states had
enacted statutes or issued regulations requiring provision of emergency medical services
regardless of ability to pay, and observing that state court rulings impose a common law
duty on doctors and hospitals to provide emergency care).
18
See, e.g., Thompson v. Sun City Cmty. Hosp., Inc., 688 P.2d 605, 610 (Ariz.
1984) (“[A]s a matter of public policy, licensed hospitals in this state are required to
accept and render emergency care to all patients who present themselves in need of such
care. . . . This standard of care has, in effect, been set by statute and regulation embodying
a public policy which requires private hospitals to provide emergency care that is
‘medically indicated’ without consideration of the economic circumstances of the patient
in need of such care.”); Walling v. Allstate Ins. Co., 455 N.W.2d 736, 738 (Mich. Ct.
App. 1990) (“[L]iability on the part of a private hospital may be based upon the refusal of
service to a patient in a case of unmistakable medical emergency.”).
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obtain adequate [health] insurance”:
If a young man wrecks his Porsche and has not had the foresight to
obtain insurance, we may commiserate but society feels no obligation
to repair his car. But health care is different. If a man is struck down
by a heart attack in the street, Americans will care for him whether or
not he has insurance. If we find that he has spent his money on other
things rather than insurance, we may be angry but we will not deny
him services -- even if that means more prudent citizens end up paying
the tab.
Stuart M. Butler, Heritage Found., The Heritage Lectures 218: Assuring Affordable
Health Care for All Americans 6 (1989);19 see also Gov’t Br. at 37.
This obligation of health care providers to provide free medical care creates
market imperfections that fall under a variety of labels: “an externality (a situation
where one person’s actions or inactions affect[] others), a free-rider problem
(where people buy [or consume] a good and leave the costs to others), or a
Samaritan’s dilemma (where people choose not to be prepared for emergencies,
knowing that others will care for them if needed).” Gov’t Econ. Br. at 14-15.
19
The Heritage Foundation has filed an amicus brief in support of the plaintiffs
making clear that this excerpt does not reflect the policy of the Heritage Foundation or
even the current beliefs of the speaker; both strongly dispute the efficacy and the
constitutionality of the individual mandate. Brief for Heritage Found. as Amicus Curiae
Supporting the Plaintiffs at 5-6. I do not doubt the sincerity of this position, and use this
statement not to imply that the Heritage Foundation has blessed the individual mandate
but rather only for the statement’s own value as a persuasively articulated description of
an important distinction between health insurance, health care, and other markets.
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Individuals who decline to purchase health insurance are not held to the full
economic consequence of that choice, as society does not refuse medical care to a
patient in need, even when its cost far exceeds the individual’s ability to pay. The
ability of health care market participants to demand services without paying for
them bolsters Congress’ rational conclusion that the individual mandate -- which
helps to assure payment for services in advance -- is peculiarly suited to addressing
a unique economic problem in the health care market.20
Finally, the four factors described above converge to cause a fifth unique
factor of the health care market: the substantial cost shifting from the uninsured to
current participants in the health insurance market and to health care providers.
This cost shifting does not occur in other markets, even those in which we all
20
Contrary to the plaintiffs’ suggestion, it is not problematic that Congress’ own
legislation -- EMTALA -- may have contributed to the very market conditions that it
sought to address in the Act. Significantly, EMTALA predated the individual mandate by
over two decades, and was enacted for reasons wholly unrelated to the mandate.
Moreover, EMTALA did not create a new federal obligation out of whole cloth and then
impose it on health care providers; rather, it supplemented numerous state laws and
overarching social judgments that the sick and injured should be cared for regardless of
ability to pay. Nor should we be concerned that Congress might similarly enact
legislation requiring companies to give away cars, food, or housing, and then accompany
that legislation with a mandate prescribing the pre-purchase of a mechanism for financing
those items. Not only is it wholly unrealistic that Congress would require companies to
give away free cars or housing (even if it could do so) simply so that it could then impose
an insurance requirement on those items, but cars and houses are also products not
already predominantly financed through insurance. An insurance mandate thus would not
be a well-suited means to regulate payment in those markets.
279
participate, such as transportation, food, or housing. When an individual purchases
a home or a car, the purchaser pays all of the cost (whether upfront or over time
through a loan or mortgage). My neighbor will not help cover my costs of
purchasing a home by paying a higher price for his own house. And I will not pay
more for my car, simply because my neighbor cannot afford to buy one for himself.
The costs in those markets are borne by the individual purchaser alone. Again, in
sharp contrast, the uninsured shift substantial costs to the insured and to health care
providers, because the uninsured in the aggregate consume health care services in
large numbers and yet bear only a small fraction of the costs for the services they
consume. The parties agree that the uninsured fail to pay for 63% of the health
care services they receive, and some 37% (amounting to $43 billion) of all health
care costs incurred by the uninsured are uncompensated entirely. States Br. at 30-
31; Gov’t Reply Br. at 8-9, 11. Congress found that this uncompensated care
increases the average insured family’s annual insurance premiums by $1000. 42
U.S.C. § 18091(a)(2)(F). This cost-shifting phenomenon simply does not occur in
other industries.21 Even under the majority’s characterization of the regulated
21
Perhaps the closest analog to the individual mandate is a requirement that
individuals buy other types of insurance. The district court rejected the government’s
contention that the failure to buy health insurance is a “financing decision” by reasoning
that “this is essentially true of any and all forms of insurance.” Florida, 2011 WL
285683, at *28; see also Maj. Op. at 133. But of the examples suggested by the district
court -- supplemental income, credit, mortgage guaranty, business interruption, or
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conduct as a “decision not to purchase health insurance,” Maj. Op. at 164, deciding
to self-insure in the health care market, unlike all other “financial decisions of
Americans,” id. at 115, is a decision to pay for your care if you can afford it or to
shift costs onto society if you can’t.
In sum, the particular problems riddling the health care industry that
Congress sought to address, together with the unique factors that characterize the
health care market and its peculiar interconnectedness with the health insurance
market, all led Congress to enact the individual mandate as an appropriate means of
ameliorating two large national problems. Although these economic factors “are
not precise formulations, and in the nature of things they cannot be[,] . . . [I] think
they point the way to a correct decision of this case.” Lopez, 514 U.S. at 567; see
also id. at 579 (Kennedy, J., concurring) (“[A]s the branch whose distinctive duty it
is to declare ‘what the law is,’ we are often called upon to resolve questions of
constitutional law not susceptible to the mechanical application of bright and clear
lines.” (citation omitted) (quoting Marbury v. Madison, 5 U.S. (1 Cranch) 137, 177
(1803))). Upholding the mandate under the particular circumstances of this case
would do little to pave the way for future congressional mandates that address
disability insurance -- none insures against risks or costs that are inevitable, or that will
otherwise be subsidized by those with insurance, unlike the relationship between health
insurance and health care services.
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wholly distinct problems that may arise in powerfully different contexts. While the
individual mandate is indeed novel, I cannot accept the charge that it is a “bridge
too far.” The individual mandate, viewed in light of the larger economic regulatory
scheme of the Act as a whole and the truly unique and interrelated nature of both
markets, is a legitimate exercise of Congress’ power under Art. I, § 8, cl. 3 of the
Constitution and is not prone to the slippery slope of hypothetical horrors leading
to an unlimited federal Commerce Clause power.
B.
Finally, implicit in the plaintiffs’ Commerce Clause challenge, and providing
the subtext to much of the majority’s opinion, is the deeply rooted fear that the
federal government is infringing upon the individual’s right to be left alone -- a fear
that is intertwined with a visceral aversion to the government’s making us do
something we do not want to do (in this case, buy a product we do not wish to
purchase). The plaintiffs say that Congress cannot compel unwilling individuals to
engage in a private commercial transaction or otherwise pay a penalty. The
difficulty, however, is in finding firm constitutional footing for the objection. The
plaintiffs suggest that the claim derives, if anywhere, from either of two
constitutional provisions: the Fifth Amendment’s Due Process Clause or the Tenth
Amendment. If derived from the Fifth Amendment, the objection, fairly stated, is
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that the mandate violates individual liberty, as protected by the substantive
component of the Due Process Clause. In the alternative, if derived from the Tenth
Amendment, the objection is that the individual mandate infringes on the powers,
or rights, retained by “the people.”
At the trial court, the plaintiffs squarely raised a Fifth Amendment
substantive due process challenge to the individual mandate, which the district
court flatly rejected. Florida ex rel. McCollum v. U.S. Dep’t of Health & Human
Servs., 716 F. Supp. 2d 1120, 1161-62 (N.D. Fla. 2010). And while the plaintiffs
also challenged the individual mandate on Tenth Amendment grounds, the district
court addressed this challenge only implicitly in ruling that the mandate exceeded
Congress’ commerce power. Florida, 2011 WL 285683, at *33.
On appeal, the plaintiffs have expressly disclaimed any substantive due
process challenge to the individual mandate, although they appear still to advance a
Tenth Amendment challenge. Nevertheless, it is clear that individual liberty
concerns lurk just beneath the surface, inflecting the plaintiffs’ argument
throughout, although largely dressed up in Commerce Clause and Necessary and
Proper Clause terms. For example, the state plaintiffs go so far as to say that the
individual mandate is “one of the Act’s principal threats to individual liberty,”
States Br. at 16, and that upholding it would “sound the death knell for our
283
constitutional structure and individual liberties,” id. at 19. Similarly, the private
plaintiffs claim that the individual mandate “exemplifies the threat to individual
liberty when Congress exceeds its enumerated powers and attempts to wield a
plenary police power.” NFIB Br. at 7. Sounding almost entirely in economic
substantive due process, the private plaintiffs also assert that “[a]mong the most
longstanding and fundamental rights of Americans is their freedom from being
forced to give their property to, or contract with, other private parties.” Id. at 47.
Thus, to the extent the plaintiffs’ individual liberty-based challenge to the
individual mandate derives from the Fifth and Tenth Amendments, I address each
constitutional source in turn.
The Fifth Amendment provides that “[n]o person shall . . . be deprived of
life, liberty, or property, without due process of law.” U.S. Const. amend. V.
Although the Due Process Clause has both a procedural and a substantive
component, only its substantive aspect is implicated here. “The substantive
component [of the Due Process Clause] protects fundamental rights that are so
implicit in the concept of ordered liberty that neither liberty nor justice would exist
if they were sacrificed.” Doe v. Moore, 410 F.3d 1337, 1342 (11th Cir. 2005)
(internal quotation marks omitted). This narrow band of fundamental rights is
largely protected from governmental action, regardless of the procedures employed.
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Id. at 1343. And any law, whether federal or state, that infringes upon these rights
will undergo strict scrutiny review, which means that the law must be “narrowly
tailored to serve a compelling state interest.” Id. (quoting Reno v. Flores, 507 U.S.
292, 302 (1993)). Today, substantive due process protects only a small class of
fundamental rights, including “the rights to marry, to have children, to direct the
education and upbringing of one’s children, to marital privacy, to use
contraception, to bodily integrity, and to abortion,” Washington v. Glucksberg,
521 U.S. 702, 720 (1997) (citations omitted) -- a list the Supreme Court has been
“very reluctant to expand,” Moore, 410 F.3d at 1343.
In a bygone period known as “the Lochner era,”22 however, substantive due
process was more broadly interpreted as also encompassing and protecting the
right, liberty, or freedom of contract. See, e.g., Adkins v. Children’s Hosp. of D.C.,
261 U.S. 525, 545 (1923); Adair v. United States, 208 U.S. 161, 174-75 (1908).
Through this interpretation of the Due Process Clause, the Supreme Court struck
down many federal and state laws that sought to regulate business and industrial
conditions. See, e.g., Adkins, 261 U.S. 525 (striking down a federal law fixing
minimum wages for women and children in the District of Columbia); Jay Burns
22
The name refers, of course, to Lochner v. New York, 198 U.S. 45 (1905), where
the Supreme Court struck down a New York law setting maximum hours for bakery
employees on the ground that it violated the right of contract, as protected by the
Fourteenth Amendment’s Due Process Clause.
285
Baking Co. v. Bryan, 264 U.S. 504 (1924) (striking down a Nebraska law
regulating the weight of loaves of bread for sale).
However, the Supreme Court has long since abandoned the sweeping
protection of economic rights through substantive due process. See, e.g., Ferguson
v. Skrupa, 372 U.S. 726, 730 (1963) (“The doctrine that prevailed in Lochner . . .
and like cases -- that due process authorizes courts to hold laws unconstitutional
when they believe the legislature has acted unwisely -- has long since been
discarded.”); Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 488 (1955)
(“The day is gone when this Court uses the Due Process Clause of the Fourteenth
Amendment to strike down state laws, regulatory of business and industrial
conditions, because they may be unwise, improvident, or out of harmony with a
particular school of thought.”); West Coast Hotel Co. v. Parrish, 300 U.S. 379, 391
(1937). Today, economic regulations are presumed constitutional, Usery v. Turner
Elkhorn Mining Co., 428 U.S. 1, 15 (1976), and are subject only to rational basis
review, Vesta Fire Ins. Corp. v. Florida, 141 F.3d 1427, 1430 n.5 (11th Cir. 1998).
In substantive due process cases, binding precedent requires that we
“carefully formulat[e]” the alleged fundamental right, Glucksberg, 521 U.S. at 722,
which must be “defined in reference to the scope of the [statute at issue],” Williams
v. Att’y Gen. of Ala., 378 F.3d 1232, 1241 (11th Cir. 2004). In light of the
286
individual mandate’s scope, the carefully formulated right would be the right of
non-exempted individuals to refuse to maintain a minimum level of health
insurance. And this right -- whether cast as the freedom to contract, the right to
remain uninsured, or, in the words of one commentator, the “right to force a society
to pay for your medical care by taking a free ride on the system”23 -- cannot be
characterized as a “fundamental” one receiving heightened protection under the
Due Process Clause. The present state of our jurisprudence does not recognize any
such right as a “fundamental” one, “deeply rooted in this Nation’s history and
tradition, and implicit in the concept of ordered liberty, such that neither liberty nor
justice would exist if [it] were sacrificed.” Williams, 378 F.3d at 1239 (quoting
Glucksberg, 521 U.S. at 720-21).
Since the individual liberty interest asserted by the plaintiffs is not a
fundamental right, we are obliged to apply rational basis review, which only asks
whether the mandate is rationally related to a legitimate government interest.
TRM, Inc. v. United States, 52 F.3d 941, 945 (11th Cir. 1995). Under rational
basis review, “legislation must be sustained if there is any conceivable basis for the
legislature to believe that the means they have selected will tend to accomplish the
23
See Is the Obama Health Care Reform Constitutional? Fried, Tribe and Barnett
Debate the Affordable Care Act, Harvard Law School (Mar. 28, 2011),
http://www.law.harvard.edu/news/spotlight/constitutional-law/is-obama-health-care-refor
m-constitutional.html.
287
desired end.” Id. at 945-46 (internal quotation marks omitted); see also Williams v.
Morgan, 478 F.3d 1316, 1320 (11th Cir. 2007) (“A statute is constitutional under
rational basis scrutiny so long as ‘there is any reasonably conceivable state of facts
that could provide a rational basis for the [statute].’” (alteration in original)
(quoting FCC v. Beach Commc’ns, Inc., 508 U.S. 307, 313 (1993))).
Here, Congress rationally found that the individual mandate would address
the powerful economic problems associated with cost shifting from the uninsured
to the insured and to health care providers, and with the inability of millions of
uninsured individuals to obtain health insurance. Thus, to the extent the plaintiffs’
individual liberty concerns are rooted in the Fifth Amendment’s Due Process
Clause, they must fail.
The plaintiffs’ more provocative argument is found in the Tenth
Amendment, which provides that “[t]he powers not delegated to the United States
by the Constitution, nor prohibited by it to the States, are reserved to the States
respectively, or to the people.” U.S. Const. amend. X. The plaintiffs do not
explicitly flesh out how the mandate violates the Tenth Amendment. The state
plaintiffs cite the Tenth Amendment generally, claiming that “[i]f this Court were
to uphold [the individual mandate and the Act’s Medicaid expansion], there would
remain little if any power ‘reserved to the States . . . or to the people.’” States Br.
288
at 3 (alteration in original) (quoting U.S. Const. amend. X).24 And the private
plaintiffs suggest that the portion of the amendment reserving undelegated power
to the people provides the basis for their individual liberty claim. See NFIB Br. at
46 (reciting “the Tenth Amendment’s admonition that the non-enumerated powers
‘are reserved to the States respectively, or to the people.’” (quoting U.S. Const.
amend. X) (emphasis in original)); see also Brief for Cato Institute as Amicus
Curiae Supporting the Plaintiffs at 24 (“[T]he text of the Tenth Amendment
protects not just state sovereignty, but also popular sovereignty.”).
The Supreme Court, however, has said precious little about the tail end of the
Tenth Amendment that reserves power to the people. Indeed, no case, either from
the Supreme Court or from any lower federal court, has ever invoked this portion
of the amendment to strike down an act of Congress. Instead, the Supreme Court’s
Tenth Amendment cases have grappled almost exclusively with the balance of
power between the federal government and the states.25
24
Indeed, when asked at oral argument if the Tenth Amendment had been
abandoned on appeal, counsel for the states reiterated that “the Tenth Amendment is still
very much in this case,” and that “this is both an individual rights case and a Commerce
Clause enumerated rights case.”
25
In Bond v. United States, -- U.S. --, 131 S. Ct. 2355 (2011), the Supreme Court
recently held that an individual has prudential standing to “assert injury from
governmental action taken in excess of the authority that federalism defines.” Id. at 2363-
64. In other words, Carol Anne Bond had standing to raise federalism-based arguments
in challenging the constitutionality of the criminal statute under which she was indicted,
289
In these cases, the Supreme Court has interpreted the Tenth Amendment’s
reservation of power to the states to mean that the federal government may not
“commandeer[] the legislative processes of the States by directly compelling them
to enact and enforce a federal regulatory program.” New York, 505 U.S. at 176
(quoting Hodel v. Va. Surface Mining & Reclamation Ass’n, 452 U.S. 264, 288
(1981)); see also Printz v. United States, 521 U.S. 898, 935 (1997) (“The Federal
Government may neither issue directives requiring the States to address particular
problems, nor command the States’ officers, or those of their political subdivisions,
to administer or enforce a federal regulatory program.”). The Court has thus held
that federal laws compelling state governments to enact legislation providing for
the disposal of radioactive waste, New York, 505 U.S. at 149, and compelling state
agents to conduct background checks on prospective handgun purchasers, Printz,
521 U.S. at 902, violate the Tenth Amendment. In so holding, the Supreme Court
has explained that the limits the Tenth Amendment imposes on Congress’ power
come not from the amendment’s text, but rather from the principle of federalism, or
dual sovereignty, that the Tenth Amendment embodies. See New York, 505 U.S. at
156-57.
18 U.S.C. § 229 (which prohibits the knowing development, acquisition, possession, or
use of chemical weapons). Id. at 2360. It remains true, however, that the Court has never
used the “people” prong of the Tenth Amendment to invalidate an act of Congress.
290
But because of the utter lack of Supreme Court (or any other court)
precedent, the amendment’s “people” prong provides little, if any, support here. It
may be that in time the law will come to breathe practical life into the Tenth
Amendment’s reservation of power to the people, but that day has not yet arrived.
Setting aside the lack of any precedent on point, a Tenth Amendment
challenge to the individual mandate fails for an additional, and critical, reason:
when a federal law is properly within Congress’ delegated power to enact, the
Tenth Amendment poses no limit on the exercise of that power. See, e.g., New
York, 505 U.S. at 156 (“If a power is delegated to Congress in the Constitution, the
Tenth Amendment expressly disclaims any reservation of that power to the States .
. . .”); Midrash Sephardi, Inc. v. Town of Surfside, 366 F.3d 1214, 1242 (11th Cir.
2004) (“Because [the Religious Land Use and Institutionalized Persons Act] is a
proper exercise of Congress’s power under § 5 of the Fourteenth Amendment, there
is no violation of the Tenth Amendment.”); United States v. Williams, 121 F.3d
615, 620 (11th Cir. 1997) (“[T]he [Child Support Recovery Act] is a valid exercise
of Congress’s power under the Commerce Clause, and Congress’s ‘valid exercise
of authority delegated to it under the Constitution does not violate the Tenth
Amendment.’” (quoting Cheffer v. Reno, 55 F.3d 1517, 1519 (11th Cir. 1995))); N.
Ala. Express, Inc. v. ICC, 971 F.2d 661, 666 (11th Cir. 1992) (“Because the Tenth
291
Amendment reserves only those powers not already delegated to the federal
government, the Tenth Amendment has been violated only if [the federal law at
issue] goes beyond the limits of Congress’ power under the Commerce Clause.”).
Since the individual mandate falls within Congress’ commerce power, its
enactment is a proper exercise of a power “delegated to the United States by the
Constitution.” U.S. Const. amend. X. The Tenth Amendment, therefore, has no
independent role to play. In short, the plaintiffs’ individual liberty claims find little
support in the Constitution -- whether pegged to the Fifth Amendment’s Due
Process Clause or to the Tenth Amendment’s reservation of power to the people.
At bottom, Congress rationally concluded that the uninsured’s consumption
of health care services, in the aggregate, shifts enormous costs onto others and thus
substantially affects interstate commerce. The individual mandate directly and
unambiguously addresses this cost-shifting problem by regulating the timing and
means of payment for the consumption of these services. Congress also fairly
determined that the mandate is an essential part of the Act’s comprehensive
regulation of the health insurance market. I would, therefore, uphold the mandate
as constitutional, and I respectfully dissent on this critical point.
292
APPENDIX A to the Majority Opinion: OVERALL STRUCTURE OF ACT’S
NINE TITLES
The Act’s nine Titles are:
I. Quality, Affordable Health Care for All Americans
II. Role of Public Programs
III. Improving the Quality and Efficiency of Health Care
IV. Prevention of Chronic Disease and Improving Public Health
V. Health Care Workforce
VI. Transparency and Program Integrity
VII. Improving Access to Innovative Medical Therapies
VIII. Community Living Assistance Services and Supports
IX. Revenue Provisions1
We outline here the structure and many of the key provisions in these nine
Titles.
Title I reforms the business and underwriting practices of insurance
companies and overhauls their health insurance products. Title I requires that
private insurers change their practices and products and offer new and better health
1
There is also a tenth Title dedicated to amendments to these nine Titles. Although the
amendments are actually located in Title X, we list the substance of the amendments under the
Title being amended.
i
insurance policies for consumers. Title I’s hefty insurance reforms include: (1)
elimination of preexisting conditions exclusions for children immediately, Act
§§ 1201, 1255 (as re-numbered by §§ 10103(f), 10103(e));2 (2) elimination of
preexisting conditions for adults in 2014, §§ 1201, 1255 (as re-numbered by
§ 10103(f)); (3) elimination of annual and lifetime limits on benefits, §§ 1001,
10101(a); (4) required coverage for preventive services, § 1001; (5) immediate
extension of dependent coverage up to age 26, § 1001; (6) imposition of a cap on
insurers’ administrative costs in relation to their claims-payments (the medical loss
ratio), §§ 1001, 10101(f); (7) prohibition on excessive waiting periods to obtain
coverage, §§ 1251, 10103(b); (8) guaranteed issue of coverage and guaranteed
renewability in 2014, §§ 1201, 1255 (as re-numbered by § 10103(f)(1)); (9)
prohibition on rescission except on limited grounds, § 1001; (10) prohibition of
coverage denial based on health status, medical condition, claims experience,
genetic information, or other health-related factors, § 1201; (11) “community-
rated” premiums, § 1201; (12) prohibition of discrimination based on salary,
§§ 1001, 10101(d); (13) development and utilization of uniform explanation of
coverage documents and standardized definitions, § 1001; (14) coverage appeals
2
In this Appendix, we provide citations to the sections of the Act. Our opinion’s in-depth
discussion of the contents of specific provisions, however, cites to the sections of the U.S. Code
where each provision is now, or will be, codified.
ii
process, §§ 1001, 10101(g); and (15) insurance offerings for persons who retire
before age 65, § 1102.
In addition to requiring insurers to offer new, improved health insurance
products, Title I creates new state-run marketplaces for consumers to buy those
new products, accompanied by federal tax credits and subsidies. Title I establishes
state-administered Health Benefit Exchanges where both individuals and small
groups can, and are encouraged to, purchase health insurance plans through non-
profits and private insurers. §§ 1301–1421, 10104–10105. The Exchanges allow
individuals, families, and small businesses to pool resources together and obtain
premium prices competitive with those of large employer group plans. § 1311. The
Exchange provisions include: (1) state flexibility to establish basic health programs
for low-income individuals not eligible for Medicaid, § 1331; (2) transitional
reinsurance program for sellers of insurance in the individual and small group
markets in each state, § 1341; (3) establishment of a temporary risk corridor
program for plans in individual and small group markets, § 1342; (4) refundable
premium-assistance tax credit and reduced cost-sharing for individuals enrolled in
qualified health plans, §§ 1401–02; (5) tax credits for small businesses’ employee
health insurance expenses, § 1421; and (6) streamlining of enrollment procedures
through the Exchanges, Medicaid, CHIP, and health subsidy programs, § 1413.
iii
Title I next addresses employers. Title I imposes penalties on certain
employers if they do not offer any, or an adequate, health insurance plan to their
employees. § 1513. Title I contains provisions regarding “automatic enrollment”
for employees of large corporations, reporting requirements, informing employees
of coverage options, and offering of Exchange-participating health plans through
“cafeteria” plans. §§ 1511–1515. Miscellaneous Title I provisions include
transparency in government, equity for certain eligible survivors, health
information technology enrollment standards and protocols, and prohibition against
discrimination on refusal to furnish services or goods used to facilitate assisted
suicide. §§ 1552, 1553, 1556, 1561.
Title I contains the individual mandate, which requires individual taxpayers
either to purchase health insurance or pay a monetary penalty with their federal tax
return. § 1501. Title I includes three exemptions from the mandate and five
exceptions to the penalty, which together exclude many uninsured persons from the
individual mandate. § 1501.
Title II shifts the Act’s focus to publicly-funded programs such as Medicaid,
CHIP, and initiatives under the Indian Health Care Improvement Act. As to
Medicaid, Title II’s provisions: (1) expand Medicaid eligibility to 133% of the
federal poverty level, § 2001; (2) provide Medicaid coverage for former foster
iv
children, § 2004; (3) rescind the Medicaid Improvement Fund, § 2007; (4) permit
hospitals to make presumptive eligibility determinations for all Medicaid-eligible
populations, § 2202; (5) extend Medicaid coverage to freestanding birth center
services and concurrent care to children, §§ 2301–02; (6) require premium
assistance to Medicaid recipients for employer-sponsored coverage, § 2003; (7)
provide a state eligibility option for Medicaid family planning services, § 2303; (8)
create a Community First Choice Option for Medicaid, § 2401; (9) remove barriers
to providing home- and community-based services through Medicaid, § 2402; (10)
reauthorize Medicaid programs aimed at moving beneficiaries out of institutions
and into their own homes or other community settings, § 2403; and (11) protect
Medicaid recipients of home- and community-based services against spousal
impoverishment, § 2404.
As to CHIP, Title II provides enhanced federal support and funding. § 2101.
The Act: (1) reauthorizes CHIP through September 2015, § 10203; and (2) from
October 2015 through September 2019, increases state matching rates for CHIP by
23 percentage points, up to a 100% cap, § 2101. Title II requires states to maintain
CHIP eligibility through September 2019. § 2101.
Title II also amends and extends the Indian Health Care Improvement Act
(“IHCIA”). § 10221. The Act’s IHCIA amendments, inter alia: (1) make the
v
IHCIA’s provisions permanent; (2) expand programs to address diseases, such as
diabetes, that are prevalent among the Indian population; (3) provide funding and
technical assistance for tribal epidemiology centers; (4) establish behavioral health
initiatives, especially as to Indian youth suicide prevention; and (5) authorize long-
term care and home- and community-based care for the Indian health system.
§ 10221; see S.1790, 111th Cong. (2009).
Title II’s provisions also create, or expand, other new publicly-funded
programs that: (1) establish a pregnancy assistance fund for pregnant and parenting
teens and women, § 10212; (2) fund expansion of State Aging and Disability
Resource Centers, § 2405; (3) fund maternal, infant, and early childhood home
visiting programs in order to reduce infant and maternal mortality, § 2951; (4)
provide for support, education, and research for postpartum depression, § 2952; (5)
support personal responsibility education, § 2953; (6) restore funding for
abstinence education, § 2954; and (7) require inclusion of information about the
importance of foster-care children designating a health care power of attorney for
them as part of their transition planning for aging out of either foster care or other
programs, § 2955.
Title III primarily addresses Medicare. Title III establishes new Medicare
programs, including: (1) a value-based purchasing program for hospitals that links
vi
Medicare payments to quality performance on common, high-cost conditions,
§ 3001; (2) a Center for Medicare & Medicaid Innovation to research and develop
innovative payment and delivery arrangements, § 3021; (3) an Independent
Payment Advisory Board to present to Congress proposals to reduce Medicare
costs and improve quality, §§ 3403, 10320(b); and (4) a new program to develop
community health teams supporting medical homes to increase access to
community-based, coordinated care, §§ 3502, 10321. Title III revises the Medicare
Part D prescription drug program and reduces the so-called “donut hole” coverage
gap in that program.3 § 3301. Title III extends a floor on geographic adjustments to
the Medicare fee schedule to increase provider fees in rural areas. § 3102.
Other sundry Medicare provisions in Title III include: (1) quality reporting
for long-term care hospitals, inpatient rehabilitation hospitals, and hospice
programs, § 3004; (2) permitting physician assistants to order post-hospital
extended care services, § 3108; (3) exemption of certain pharmacies from
accreditation requirements, § 3109; (4) payment for bone density tests, § 3111; (5)
extensions of outpatient hold-harmless provisions, the Rural Community Hospital
3
The Medicare Part D “donut hole” is the gap in prescription drug coverage, where
beneficiaries’ prescription drug expenses exceed the initial coverage limit but do not yet reach
the catastrophic coverage threshold, meaning beneficiaries must pay 100% of those prescription
drug costs. See 42 U.S.C. § 1395w-102(b)(3)(A), (b)(4) (2009). In 2006, the donut hole extended
to yearly prescription drug expenses between $2,250 and $3,600, with values for later years
adjusted by an annual percentage increase. See id.
vii
demonstration project, and the Medicare-dependent hospital program, §§ 3121,
3123–24; (6) payment adjustments for home health care, § 3131; (7) hospice
reform, § 3132; (8) revision of payment for power-driven wheelchairs, § 3136; (9)
payment for biosimilar biological products, § 3139; (10) an HHS study on urban
Medicare-dependent hospitals, § 3142; (11) Medicare Part C benefit protection and
simplification amendments, § 3202; and (12) an increase in premium amount for
high-income Medicare Part D beneficiaries, § 3308. Title III also includes new
federal grants for (1) improving women’s health, § 3509; (2) health care delivery
system research, § 3501; and (3) medication management services in treatment of
chronic diseases, § 3503.
Title IV concentrates on prevention. Title IV creates the National Prevention,
Health Promotion, and Public Health Council, and authorizes $15 billion for a new
Prevention and Public Health Fund to support initiatives from smoking cessation to
fighting obesity. §§ 4001, 4002. Title IV authorizes new publicly-funded programs
for (1) an oral healthcare prevention education campaign, § 4102; (2) Medicare
coverage for annual wellness visits, § 4103; and (3) the operation and development
of school-based health clinics, § 4101. Title IV also: (1) waives Medicare
coinsurance requirements and deductibles for most preventive services, § 4104;
and (2) provides states with an enhanced funds-match if the state Medicaid
viii
program covers certain clinical preventive services and adult immunizations,
§ 4106. Title IV further provides for: (1) Medicaid coverage of comprehensive
tobacco cessation services for pregnant women, § 4107; (2) community
transformation grants, § 4201; (3) nutrition labeling of standard menu items at
chain restaurants, § 4205; (4) reasonable break time for nursing mothers and a
place, other than a bathroom, which may be used, § 4207; (5) research on
optimization of public health services delivery, § 4301; (6) CDC and employer-
based wellness programs, § 4303; (7) advancing research and treatment for pain
care management, § 4305; (8) epidemiology-laboratory capacity grants, § 4304;
and (9) funding for childhood obesity demonstration projects, § 4306.
Title V seeks to increase the supply of health care workers through education
loans, training grants, and other spending. Title V: (1) modifies the federal student
loan program, § 5201; (2) increases the nursing student loan program, § 5202; and
(3) establishes a loan repayment program for pediatric subspecialists, juvenile
mental health providers, and public health workers who practice in underserved
areas, § 5203. Title V also provides for: (1) state health care workforce
development grants, § 5102; (2) a national health care workforce commission,
§ 5101; (3) nurse-managed health clinics, § 5208; (4) workforce diversity grants,
§ 5404; (5) training in general, pediatric, and public health dentistry, § 5303; (6)
ix
mental and behavioral health education and training grants, § 5306; (7) advanced
nursing education grants, § 5309; (8) grants to promote the community health
workforce, § 5313; (9) spending for Federally Qualified Health Centers, § 5601;
and (10) reauthorization of the Wakefield Emergency Medical Services for
Children program, § 5603. Title V addresses: (1) the distribution of additional
residency positions, § 5503; and (2) rules for counting resident time for didactic
and scholarly activities and in non-provider settings, §§ 5504–05.
Title VI creates new transparency and anti-fraud requirements for physician-
owned hospitals participating in Medicare and for nursing facilities under Medicare
or Medicaid. Title VI authorizes the HHS Secretary to (1) reduce civil monetary
penalties for facilities that self-report and correct deficiencies, § 6111; and (2)
establish a nationwide background-check program for employees of certain long-
term support and service facilities, § 6201. Title VI also provides: (1) screening of
providers and suppliers participating in Medicare, Medicaid, and CHIP, § 6401;
and (2) new penalties for false statements on applications or contracts to participate
in a federal health care program, § 6408.
Title VI also includes the Elder Justice Act, designed to prevent and
eliminate elder abuse, neglect, and exploitation. § 6703. Other Title VI provisions
include: (1) dementia and abuse prevention training, § 6121; (2) patient-centered
x
outcomes research funded by a $2 fee on accident or health insurance policies,
§ 6301; (3) federal coordinating counsel for comparative effectiveness research,
§ 6302; (4) enhanced Medicare and Medicaid program integrity provisions, § 6402;
(5) elimination of duplication between the Healthcare Integrity and Protection Data
Bank and the National Practitioner Data Bank, § 6403; (6) reduction of maximum
period for submission of Medicare claims to not more than 12 months, § 6404; (7)
requirement for physicians to provide documentation on referrals to programs at
high risk of waste and abuse, § 6406; (8) requirement of face-to-face encounter
before physicians may certify eligibility for home health services or durable
medical equipment under Medicare, § 6407; (9) prohibition on Medicaid payments
to institutions or entities outside the United States, § 6505; (10) enablement of the
Department of Labor to issue administrative summary cease-and-desist orders and
summary seizure orders against plans in financially hazardous condition, § 6605;
and (11) mandatory state use of the national correct coding initiative, § 6507.
Title VII extends and expands the drug discounts through the 340B
program.4 § 7101. Title VII establishes a process for FDA licensing of biological
4
Section 340B of the Public Health Service Act, 42 U.S.C. § 256b, establishes a program
whereby HHS enters into contracts with manufacturers of certain outpatient drugs under which
the manufacturers provide those drugs at discounted prices to “covered entities”— generally,
certain enumerated types of federally funded health care facilities serving low-income patients.
Id.; see generally Univ. Med. Ctr. of S. Nev. v. Shalala, 173 F.3d 438, 439 (D.C. Cir. 1999).
xi
products shown to be biosimilar or interchangeable with a licensed biological
product. § 7002.
Title VIII establishes a national voluntary long-term care insurance program
for purchasing community living assistance services and support by persons with
functional limitations. § 8002.
Title IX includes: (1) an excise tax on high-premium employer-sponsored
health plans, § 9001; (2) an increase in taxes on distributions from individuals’
health savings accounts, § 9004; (3) increases in the employee portion of the FICA
hospital insurance tax for employees with wages over certain threshold amounts,
§ 9015; (4) an additional tax of 3.8% on investment income above certain
thresholds to fund Medicare, §§ 9001, 10901; HCERA § 1402; (5) a $2,500
limitation on individuals’ health flexible spending accounts under cafeteria plans,
§ 9005; (6) imposition of an annual fee on manufacturers and importers of branded
prescription drugs, § 9008; (7) elimination of the tax deduction for expenses
allocable to the Medicare Part D subsidy, § 9012; (8) a decrease in the itemized tax
deduction for medical expenses, § 9013; and (9) an excise tax on indoor tanning
services, § 10907. Title IX also provides for: (1) inclusion of the cost of employer-
sponsored health coverage on W-2 forms, § 9002; (2) expansion of information-
reporting requirements, § 9006; (3) additional requirements for hospitals to receive
xii
“charitable” designation and tax status, § 9007; (4) a study and report on the effect
of the Act’s new fees on drug manufacturers and insurers on veterans’ health care,
§ 9011; (5) prohibition on health insurers’ deducting employee compensation over
$500,000, § 9014; (6) tax credit for companies with fewer than 250 employees that
are engaged in research on qualifying therapeutic discoveries, § 9023; and (7)
establishment of simple cafeteria plans for small businesses, § 9022. Title IX
assesses an annual fee on health insurance companies, which is apportioned among
insurers based on a ratio designed to reflect each insurer’s share of the net
premiums written in the United States health care market. §§ 9010, 10905; HCERA
§ 1406.
xiii