Fourth Circuit Rejects Challenges to Health Care Law

Justice%20III.jpgIn two opinions issued September 8, 2011 the U.S. Court of Appeals for the 4th Circuit rejected lawsuits challenging the Affordable Care Act’s constitutionally on technical grounds. In one case, the appellate court found that the plaintiffs’ lawsuit was premature. In the second, the court held that the plaintiff, the Commonwealth of Virginia, lacked standing to bring suit in the first instance. While two other federal appellate courts have addressed the constitutionality of the health care law’s requirement that individuals purchase insurance or pay a penalty – often referred to as the law’s “individual mandate” – and reached opposite conclusions, this is the first to dismiss challenges to the law based solely on procedural grounds.

In the first case, Liberty University v. Geithner, (pdf) the plaintiffs challenged both the individual and the employer mandates. The latter provision requires that starting in 2014, large employers provide their full-time employees with minimal essential health coverage or pay a penalty. The lower court upheld the mandates’ constitutionality. On appeal, however, the 4th Circuit declined to reach the merits of the constitutionality arguments, instead finding that the action was barred by the Anti-Injunction Act (AIA), which provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person.” In essence, the AIA bars the lawsuit because no individual or employer penalty has been issued. As the 4th Circuit explains:

By its terms the AIA bars suits seeking to restrain the assessment or collection of a tax. Thus, the AIA forbids only pre-enforcement actions brought before the Secretary of the Treasury or his delegee, the Internal Revenue Service (IRS), has assessed or collected an exaction.

Moreover, the court stated that the individual and employer penalties should be treated as taxes for AIA application: “for purposes of the very assessment authority that the AIA protects, Congress made clear that ‘penalties’ (as well as ‘interest, additional amounts, [and] additions to the tax’) count as ‘taxes.’” Because such a suit is therefore barred, the 4th Circuit stated that it could “go no further” in addressing the merits of the Affordable Care Act challenge.

In the second case, Commonwealth of Virginia v. Kathleen Sebelius, (pdf) the lower court initially found the individual mandate to be unconstitutional. The 4th Circuit did not reach the legality of the individual mandate in this case either, finding instead that since the state lacks standing to sue, the original judgment handed down by the lower court must be vacated and the case dismissed for lack of subject matter jurisdiction.

Specifically, the initial suit claimed that, among other things, the individual mandate provision conflicts with the newly-enacted Virginia Health Care Freedom Act (VHCFA), which makes it unlawful to require that a state resident obtain health insurance, or impose a penalty or fee on that individual for failure to do so. This conflict, the state contended, enables it to bring suit. The appellate court disagreed:

Contrary to Virginia’s arguments, the mere existence of a state law like the VHCFA does not license a state to mount a judicial challenge to any federal statute with which the state law assertedly conflicts. Rather, only when a federal law interferes with a state’s exercise of its sovereign “power to create and enforce a legal code” does it inflict on the state the requisite injury-in-fact. VHCFA regulates nothing and provides for the administration of no state program Instead, it simply purports to immunize Virginia citizens from federal law. In doing so, the VHCFA reflects no exercise of “sovereign power,” for Virginia lacks the sovereign authority to nullify federal law.

Therefore, the 4th Circuit explained, the state lacks any concrete interest in the “continued enforceability” of the statute, as “it has not identified any plausible, much less imminent, enforcement of the VHCFA that might conflict with the individual mandate. Rather, the only apparent function of the VHCFA is to declare Virginia's opposition to a federal insurance mandate.” Thus, because the mandate applies to individuals only, the state lacks standing in this case.

The 4th Circuit is the latest federal appellate court to weigh in on the law’s validity. Last month, the 11th Circuit held that the individual mandate was unconstitutional, while in June the 6th Circuit came to the opposite conclusion, upholding the law. Intensifying the split among judicial circuits, Thursday’s opinions all but guarantee that the Supreme Court will need to resolve this issue in due course.

Photo credit: evirgen

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.