Appeals Court Upholds Obama’s Health Care Law

Published: June 29, 2011 - New York Times

The Obama administration prevailed in the first appellate review of the 2010 health care law on Wednesday as a three-judge panel from the United States Court of Appeals for the Sixth Circuit held that it was constitutional for Congress to require that Americans obtain health insurance.

The ruling by the Cincinnati court is the first of three opinions to be delivered by separate courts of appeal that heard arguments in the health care litigation in May and June. Opinions are expected soon from panels in both the Fourth Circuit in Richmond, Va., and the Eleventh Circuit in Atlanta.

Lawyers on both sides of the case widely expect the Supreme Court to take one or more of the cases, perhaps as soon as its coming term, which starts in October. The speed of the Sixth Circuit ruling could help insure that timing.

The opinion was the first to not break down strictly along seemingly partisan lines. In the 2-to-1 ruling, a judge appointed by a Republican president joined one named by a Democrat to write the majority opinion.

At the lower District Court level, five judges have divided on the question, with three Democratic appointees backing the law and two Republican appointees rejecting it.

As they look ahead to the Supreme Court, the law’s defenders can take encouragement from the concurring opinion written by Judge Jeffrey S. Sutton, an appointee of President George W. Bush who is typically considered conservative on questions of constitutional reach.

After acknowledging the difficulty of pinpointing the limits on Congress’ power to regulate interstate commerce, Judge Sutton wrote: “In my opinion, the government has the better of the arguments.” He added: “Not every intrusive law is an unconstitutionally instrusive law.”

Joining Judge Sutton was Judge Boyce F. Martin Jr., an appointee of President Jimmy Carter, a Democrat. Dissenting on the central issues was Judge James L. Graham, a District Court judge appointed by President Ronald Reagan who is on temporary assignment to the Sixth Circuit.

The appeal, which was heard by the panel on June 1, came in a challenge filed by the Thomas More Law Center, a conservative public interest firm in Ann Arbor, Mich. In its 69-page ruling, the panel upheld Federal District Judge George C. Steeh of Detroit, who concluded that choosing not to obtain health insurance was a commercial decision that could be regulated by Congress under the Commerce Clause of the Constitution.

Starting in 2014, the Affordable Care Act will require most Americans to obtain health insurance or pay an income tax penalty. The administration argues that without the insurance mandate it is not reasonable to require insurers to cover all applicants regardless of their health status.

The Sixth Circuit majority held that the mandate was “facially constitutional under the Commerce Clause” for two reasons.

“First, the provision regulates economic activity that Congress had a rational basis to believe has substantial effects on interstate commerce,” Judge Martin wrote. “In addition, Congress had a rational basis to believe that the provision was essential to its larger economic scheme reforming the interstate markets in health care and health insurance.”

The court directly addressed whether a choice to go without health insurance qualifies as an “activity” that substantially affects interstate commerce, which is the standard set in prior Supreme Court decisions on the breadth of the Commerce Clause.

“The activity of foregoing health insurance and attempting to cover the cost of health care needs by self-insuring is no less economic than the activity of purchasing an insurance plan,” the opinion stated.

The majority emphasized that the case should not hang on distinctions about whether the failure to purchase insurance should be defined as activity or inactivity, a question the Supreme Court has never considered. “The constitutionality of the minimum coverage provision cannot be resolved with a myopic focus on a malleable label,” the judges said.

In his concurrence, Judge Sutton added: “Inaction is action, sometimes for better, sometimes for worse, when it comes to financial risk.” Whether an individual buys an insurance policy or not, the judge wrote, “each requires affirmative choices; one is no less active than the other; and both affect commerce.”

Judge Graham countered in his dissent that if the mandate was allowed “it is difficult to see what the limits on Congress’s Commerce Clause authority would be.”

But the majority agreed with Neal K. Katyal, the acting United States solicitor general, who argued that individual choices to not purchase insurance, when taken in aggregate, have clear commercial effects because they shift the cost of caring for the uninsured to other payers.

The judges adopted Mr. Katyal’s argument that because the need for health care is unpredictable, it is impossible for individuals to opt out of the market. And they agreed that cost-shifting was inevitable so long as the federal government required hospitals to treat those who show up with life-threatening conditions.