Politics & Policy

The Obamacare Cases Keep Coming

The individual-mandate litigation was only the beginning.

During oral arguments in the Supreme Court challenge to the individual mandate, NFIB v. Sebelius, the plaintiff’s lawyer Paul Clement warned the justices not to make the same mistake they made in the 1970s with Buckley v. Valeo. In Buckley, the Court upheld portions of the post-Watergate campaign-finance reforms while invalidating others. The result was a muddled statute that Congress and the courts would repeatedly revisit for years to come. Repeating this approach with the Patient Protection and Affordable Care Act, Clement cautioned, could produce similar undesirable results. It’s too soon to know how quickly Congress will revisit the PPACA, but Clement’s warning already seems to be coming true in the courts.

NFIB may have upheld the individual-mandate penalty as a tax, but it hardly ended the legal debate over Obamacare. More than three months after the Court’s decision, over three dozen legal challenges to the PPACA or its implementation are pending in federal courts, and more are sure to come. Some of these suits were filed by the law’s ideological opponents, others by companies and groups wary of how the sprawling reforms will affect their economic interests. And while some of these lawsuits raise implausible claims, others are likely to have a significant effect on the PPACA, or whatever parts of it Congress and the winner of this election leave in place.

The largest set of PPACA cases are the various challenges to HHS’s contraception mandate, under which employer-provided group-insurance plans must cover all forms of FDA-approved contraception and sterilization procedures. According to the federal government, this mandate is necessary to implement the Obamacare requirement that insurers cover preventive-care services without cost-sharing, but many religious groups have objected on the grounds that this would force religiously affiliated employers to pay for services that violate their religious convictions. They contend that such a mandate contravenes the Religious Freedom Restoration Act of 1993 (RFRA), if not the First Amendment’s protection of religious practice too. In response, the administration said it would find some way to accommodate religious institutions, but then went ahead and finalized the mandate as originally proposed.

The religious institutions concerned about the mandate were not convinced, and many have gone to court. According to the Becket Fund, more than 30 cases pursuing RFRA and constitutional claims against the mandate are pending in federal court. These cases present a serious challenge to the mandate, for reasons Ed Whelan has explained, and it’s unlikely that any accommodation other than a blanket exemption for religious groups will make these claims go away. It is difficult (if not impossible) to mandate contraception coverage without forcing many religious institutions, such as religiously affiliated hospitals and colleges, to pay for it. HHS Secretary Kathleen Sebelius has suggested such costs could just be shifted to insurers, but religious institutions that self-insure, as many companies do, would still have to pay directly for contraception.

The contraception-mandate cases are not the only lawsuits in town. Physician-owned hospitals have raised constitutional challenges to PPACA provisions limiting their reimbursement under Medicare, and other service providers are likely to challenge implementation decisions that compromise their bottom lines. In addition, the Goldwater Institute filed the first challenge to the Independent Payment Advisory Board (IPAB) on separation-of-powers grounds. IPAB is Congress’s effort to constrain the growth of Medicare costs by creating an independent agency empowered to issue self-executing limitations on which services the government will cover, and how much it will pay for them. IPAB’s purported independence has come at the cost of accountability. IPAB is not dependent upon annual appropriations from Congress, need not follow traditional administrative processes, and is not subject to judicial review. As if that were not enough, the PPACA provides that Congress may dissolve IPAB only if it follows a specified procedure during a seven-month period in 2017 — a statutory provision even the Obama administration has acknowledged could not hold up in court.

The federal government’s efforts to implement the PPACA will also face legal challenge, particularly where they seek to depart from statutory text. The Internal Revenue Service, for example, has promulgated a rule to authorize tax credits and subsidies for the purchase of health insurance in federally run exchanges. Yet such tax credits are not authorized by law, as Michael Cannon and I have explained on NRO (and at much greater length here). The state of Oklahoma has already filed suit to challenge the illegal IRS rule, and additional suits are likely to follow.

Not only did NFIB v. Sebelius not make Obamacare litigation go away, it may have actually done the opposite. In saving the individual-mandate tax penalty as a “tax,” Chief Justice Roberts may have opened new avenues of attack for mandate opponents. Under Article I, section 7, “all bills for raising revenue shall originate in the House of Representatives.” Yet the PPACA was passed by the Senate before proceeding to the House. On this basis, the Pacific Legal Foundation has filed suit alleging that Congress did not comply with the Origination Clause. As a substantive matter, PLF’s claim has merit. But the Senate, anticipating such an attack, used another, unrelated piece of tax legislation first passed by the House — H.R. 3590 — and replaced its text, in its entirety, with that of the PPACA. In this way, Congress complied with the letter, if not the spirit, of Article I, section 7 — and, believe it or not, this subterfuge is likely to survive judicial review. Federal courts are quite reluctant to second-guess whether Congress has followed relevant procedural rules, even when the rules are constitutionally mandated.

The characterization of the mandate’s penalty as a tax has other legal implications that could also end up in court. One reason the penalty functioned as a tax, Chief Justice Roberts explained, is that it was small enough to leave covered individuals with a meaningful choice — but this also means the mandate cannot serve its intended purpose of inducing more people to obtain health coverage. A larger tax, however, would begin to look like a “penalty” and exceed the scope of the federal government’s regulatory authority. Thus, should Congress ever seek to increase the mandate’s tax penalty, more litigation would certainly follow.

PPACA opponents had hoped that a single lawsuit could overturn the law in one fell swoop. Such an outcome in NFIB v. Sebelius was never likely, and did not come to pass. We now know litigation will not make the entire law go away, but it could hamper the PPACA, and perhaps ameliorate some of its worst provisions. Unless the next Congress takes action, much of health-care reform’s future will be determined in federal court.

— NRO contributing editor Jonathan H. Adler is the Johan Verheij Memorial Professor of Law at the Case Western Reserve University School of Law.

Jonathan H. Adler — Mr. Adler is an NRO contributing editor and the inaugural Johan Verheij Memorial Professor of Law at Case Western Reserve University School of Law. His latest book is Marijuana Federalism: Uncle Sam and Mary Jane.


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