D.C. Court of Appeals Upholds Individual Mandate

November 10, 2011

HealthcareIn the latest decision on the healthcare reform bill, the D.C. Court of Appeals upheld the Patient Protection and Affordable Care Act (PPACA).  

In Seven-Sky v. Holder, plaintiffs challenged the “minimum essential coverage provision,” commonly referred to as the individual mandate. 

The provision requires individuals to purchase and maintain “minimum essential coverage” beginning in January 2014.  Any taxpayer who fails to comply with the mandate must pay a penalty.

In its 2-to-1 decision, the three-judge panel held that Congress acted within its authority to regulate interstate commerce when it enacted the individual mandate.  The dissenting judge argued that the challenge was premature.

The majority decision was written by Senior Judge Laurence Silberman, who was appointed by Republican President Ronald Reagan.  Judge Silberman is respected in conservative judicial circles and several of his recent decisions have been upheld in the Supreme Court.

In concluding his opinion, Judge Silberman wrote:

The right to be free from federal regulation is not absolute, and yields to the imperative that Congress be free to forge national solutions to national problems, not matter how local–or seemingly passive–their individual origins.

Previously, the 4th Circuit dismissed appeals brought by Virginia Attorney General Kenneth Cuccinelli and Liberty University in Lynchburg, Virginia.  The 6th Circuit also ruled in favor of PPACA over the summer in Thomas More Law Center v. Obama.

However, the 11th Circuit upheld Florida’s challenge to the individual mandate.  Although it also held that the mandate was severable from the rest of the bill, reversing the trial court’s decision that the entire law must be rejected.

Although many argue that severability is the answer, this position ignores that the individual mandate allows risk pooling. 

Without the mandate, individuals could wait until they were sick or injured to purchase insurance and then drop coverage as soon as they were well.  It also spreads the costs of other provisions – such as prohibiting excluding coverage for pre-existing conditions – across a healthier, less costly pool.

There is little question that healthcare costs are a “national problem.” At an estimated $2.4 trillion annually, that’s nearly 16% of the gross domestic product spent on healthcare.

There is also little question that the individual mandate has the citizens of this nation questioning how much federal regulation they are willing to tolerate.

In fact, on the same day the D.C. Court of Appeals issued its decision, citizens of Ohio voted by a nearly 2-to-1 margin amend the state constitution to prohibit enforcement of the individual mandate.

Ohio is the third state to amend its constitution, while Wyoming has a similar amendment on the ballot for 2012.  At least ten other states have passed legislation that allows its citizens to avoid the requirements or to criminalize enforcement of PPACA’s provisions.

Although viewed as largely symbolic, these measures demonstrate the need to carefully balance individual freedoms and “national solutions.”

Resources to help your company or your clients stay in compliance are available on Thomson Reuters Accelus Compliance Advisor.