Blog Home

«
»

Court Says Plaintiffs Have No Standing To Challenge Affordable Care Act



September 9th, 2011
by Timothy Jost

On September 8, 2011, the Fourth Circuit Federal Court of Appeals became the fifth Court of Appeals to rule on cases challenging the Affordable Care Act.  Most public attention has been focused on two of these cases, a Sixth Circuit case which found the ACA’s minimum coverage requirement — sometimes known as the “individual mandate” — to be constitutional in a divided decision and an Eleventh Circuit case which, also in a divided decision, found the minimum coverage requirement unconstitutional while upholding the rest of the statute.  Two other courts, however, the Third and Ninth Circuit’s, have dismissed ACA challenges finding that the plaintiffs had not suffered an injury from the minimum coverage requirement sufficient to give the court jurisdiction over their claim.

The Fourth Circuit actually decided two cases, one brought by the Commonwealth of Virginia and another by Liberty University and several private parties.  While both cases focused on the minimum coverage requirement, the Liberty University also raised religious liberty claims and challenged the employer mandate.  The Fourth Circuit ruled against the plaintiffs in both cases, ordering that both cases be dismissed on jurisdictional grounds.  The court ruled unanimously in the Virginia case, but issued a split opinion in the Liberty University case — two of the judges voted to dismiss the case on jurisdictional grounds, while a third judge dissented, stating that he would have reached the merits and upheld the constitutionality of the law.

One of the judges who voted with the majority also stated that, had he been able to reach the merits, he would have upheld the law. Thus, the Liberty University case effectively provides two more appellate court judges who have expressed the opinion that the minimum coverage requirement is constitutional.

The Virginia Case

The Commonwealth of Virginia decision, written by Judge Motz for a unanimous court, is short and to the point.  From the beginning, some commentators had noted that, while states suing the federal government to have a federal law declared unconstitutional makes great political theater, there is no legal basis for it.  Under the Constitution, the federal courts can only hear “cases and controversies.”  A plaintiff must show that he or she has “suffered an injury in fact,” that the injury was caused by the defendant’s conduct, and that the court can redress the injury.

The Commonwealth of Virginia is not subject to the minimum coverage requirement and is in no way injured by its existence.  Neither can Virginia sue the federal government on behalf of its citizens, because its citizens are also United States citizens, and thus under the Supremacy Clause, they are represented first and foremost by the United States.

Judge Hudson in the district court had found that Virginia had standing to challenge the minimum coverage requirement because it had adopted a law attempting to immunize its citizens from the federal law and could sue to defend the enforceability of its law.   But Virginia’s law, the Fourth Circuit held, is not enforceable, as it is contrary to federal law, and thus Virginia has no interest in enforcing it.

“[I]f we were to adopt Virginia’s standing theory, each state could become a roving constitutional watchdog of sorts; no issue, no matter how generalized or quintessentially political, would fall beyond a state’s power to litigate in federal court,” the court observed, concluding: “The Constitution…requires that courts resolve disputes ‘not in the rarified atmosphere of a debating society, but in a concrete factual context conducive to a realistic appreciation of the consequences of judicial action.”  Virginia’s case was, therefore, dismissed.

This is only one of several cases brought by the states challenging the ACA.  In the other major case, the Florida case involving 26 states, private parties are also involved who have been held to have standing, therefore the Eleventh Circuit did not address the question of whether the states alone had standing.  The reasoning of the Virginia case, however, would indicate that none of the states have standing to challenge the ACA, and if they remain in litigation, it is largely as bystanders with no independent claim of their own.

The Liberty University Case

The Liberty University decision is much longer.  One of the arguments that the government has made all along in support of the minimum coverage requirement is that the exaction used to enforce the requirement is a tax, validly enacted under Congress’ power to tax and spend.  This argument has been rejected by every court that so far has considered it, including the Sixth Circuit which upheld the ACA under the Commerce Clause.  The Fourth Circuit, however, in a decision written by Judge Motz, joined by Judge Wynn, held the minimum coverage requirement exaction was properly enacted as a tax, and that therefore it cannot be challenged in an action for injunctive and declaratory relief because of the Anti-Injunction Act (AIA), which prohibits taxpayers from suing to enjoin the collection of a tax.

The AIA exists to protect the integrity of the tax collection system.  It requires a taxpayer who wants to contest the assessment and collection of a tax to go through regular channels instead of filing a pre-enforcement lawsuit to challenge the underlying law.  Curiously, both the plaintiffs and the federal government had argued that the AIA did not apply in this case, but the court in a long opinion, of interest only to lawyers (and to few of them),  concluded that it does apply, and thus that the case must be dismissed.

Judge Wynn concurred in Judge Motz’s opinion, but further noted that the exaction enforcing the minimum coverage requirement is not only a tax, but a tax validly enacted under the tax and spend clause.  It is also, in his opinion, an indirect rather than a direct tax, and is thus not subject to the special constitutional requirements that attend direct taxes.  He would thus uphold the minimum coverage requirement as a valid exercise of Congress’ power to tax, if he could reach the merits (which he could not because the court lacks jurisdiction).

Judge Davis, in the longest of the three opinions, dissented.  In his opinion, the court is not precluded by the AIA from reaching the merits, and, upon reaching the merits, must conclude that the law is constitutional under the Commerce Clause.   He joins all other courts that have held that the minimum coverage requirement exaction is not a tax, and therefore not subject to the AIA.  He is thus free to reach the merits, which he does.

Judge Davis begins by noting that the markets for health insurance and health services are national in scope and economic in nature and have long been subject to federal regulation.  He thus easily distinguishes Supreme Court cases that have struck down federal laws that regulated local, noneconomic, conduct.  He then moves on to the central question of the Commerce Clause issue—can Congress enact a purchase mandate (can Congress make you buy broccoli)?

Judge Davis notes that, in the first instance, the question of whether conduct affects interstate commerce is a factual issue to be resolved by Congress.  Here Congress reasonably concluded, based on the unique circumstances of health care and of the health care industry that a purchase mandate was necessary to correct a “massive market failure caused by tremendous negative externalities,” that is, the problem of cost-shifting due to uncompensated care for the uninsured.  Congress rationally found that virtually everyone uses health care services, and thus it is appropriate to require everyone to be prepared to pay for those services.

Davis also rejects the argument that Congress is attempting to regulate “inactivity” and cannot do so under the Commerce Clause.  He notes that there is solid Supreme Court precedent for regulating non-market participants, including leading cases where the Court upheld regulation of individuals who grew products for their own use rather than buying or selling products.  Davis, moreover, joins the Sixth Circuit in observing that the plaintiffs are not truly “inactive”; rather, they are self-insuring for their health care, and self-insuring is a form of activity that can be regulated.  Indeed, self-insured employer plans have long been regulated under ERISA.

Judge Davis concludes that the fact that the law compels a purchase is not problematic.  In fact, he argues that compelled purchases are the most basic function of government, as government exists to solve collective action problems.  The fact that here the law compels a purchase from a private vendor rather than collecting a tax and then using the revenue collected to finance a public good does not alter the basic nature of the transaction.  Finally, Judge Davis wraps up the other issues raised by the case, concluding that the employer mandate is constitutional and that nothing about the ACA violates the plaintiffs’ religious freedom.

A More Uncertain Path Forward

It was widely predicted that the Fourth Circuit would reject the plaintiff’s claims in these cases.  The three judges who heard the case were all Democratic appointees and the plaintiffs clearly got the worst of the oral argument.  But throwing the cases out on standing grounds further confuses what happens next.  At this point both the federal government and those who challenge the law would like to get the issue resolved — to get a ruling on the merits from the Supreme Court.  But the Supreme Court is jealous of the jurisdiction of the federal courts, and it is quite conceivable that the Court could also adopt any one of a number of arguments that the federal courts lack jurisdiction to hear these cases at this point.

In any event, if one is keeping track, three appellate court judges have now opined that the minimum coverage requirement is unconstitutional, while five have said that they believe it to be constitutional.  The count that ultimately matters, of course, is that of the nine justices of the Supreme Court.

Email This Post Email This Post Print This Post Print This Post

Don't miss the insightful policy recommendations and thought-provoking research findings published in Health Affairs.

No Trackbacks for “Court Says Plaintiffs Have No Standing To Challenge Affordable Care Act”

1 Response to “Court Says Plaintiffs Have No Standing To Challenge Affordable Care Act”

  1. Jeff Goldsmith Says:

    It is, indeed, hard to see how anyone has been harmed by the mandate until 2014, including Virginia’s Attorney General. My non-lawyer’s prejudice was that standing was the big problem for the mandate’s opponents. The Supreme Court is not the main threat to the implementation of ACA.

    The big problem is public ignorance of the ACA’s benefits (particularly by the uninsured) as well as the broad unpopularity of a law no-one except Tim Jost seems to fully understand. If the President is not re-elected, it’s hard to imagine ACA’s surviving in this opinion climate.

Leave a Reply

Comment moderation is in use. Please do not submit your comment twice -- it will appear shortly.

Authors: Click here to submit a post.