Recently, a 2-to-1 majority of the Eleventh Circuit Court of Appeals, in Atlanta, found that the individual mandate provision of the Obama administration’s health care law is unconstitutional. The provision, known as the “individual mandate,” would require Americans to purchase health insurance or pay a tax penalty beginning in 2014. The decision was a victory for the 26 Republican attorneys general and governors who challenged the law on behalf of their states.
The case essentially turns on whether the Commerce Clause of the Constitution – which allows Congress the broad power to regulate commerce – is so broad as to allow Congress to force individuals to purchase a product or pay a penalty. The Obama administration had argued that, by making a choice not to purchase insurance, such individuals usually end up passing on the cost of their inevitable health care needs to hospitals, insured individuals and governmental agencies – actions that Congress can legislate under its broad authority to regulate commerce. Not so fast said the Eleventh Circuit.
The court, agreeing with the attorneys general and governors, found that Congress exceeded its powers to regulate commerce by mandating “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.” The two judges in the majority offered some choice words, calling the individual mandate a “wholly novel and potentially unbounded assertion of congressional authority.”
This marks the second court of appeals to rule on the issue and leaves the Obama administration with a 1-1 record. In June, the Sixth Circuit Court of Appeals, in Cincinnati, upheld the individual mandate as a valid exercise of Congress’s power under the Commerce Clause because the mandate (i) regulates economic activity with a substantial effect on interstate commerce and (ii) is essential to Congress’s larger regulation of the interstate insurance market . We await the next opinion, expected shortly from the Fourth Circuit, in Richmond.
Because of the split among the courts of appeals, it appears likely that the Supreme Court will settle the issue as early as its next term, which starts in October. Even though the fate of the individual mandate and health care reform in its entirety remains uncertain, employers still need to comply with health care reform as it exists now.