“ATLANTA—A federal appeals court Wednesday took up the most significant legal challenge to last year’s health law, with judges giving mixed signals on the central issue of whether it was constitutional to require people to carry insurance or pay a penalty.
The three-judge panel was hearing the Obama administration’s appeal of a ruling in January by Judge Roger Vinson of U.S. District Court in Pensacola, Fla. Judge Vinson found the insurance mandate unconstitutional and took the extra step of declaring the entire law void, though he later put that part of the ruling on hold.
The case was brought by 26 governors and attorneys general, almost all of them Republicans. The legal battle is ultimately expected to land at the Supreme Court, possibly as soon as its 2011-12 term.
At Wednesday’s hearing at the U.S. Court of Appeals for the 11th Circuit, the judges gave few clear indications of their sympathies.
The panel consisted of Chief Judge Joel F. Dubina, an appointee of President George H.W. Bush; Frank M. Hull, an appointee of President Bill Clinton; and Stanley Marcus, appointed by Mr. Clinton. Judge Marcus was also appointed to a lower court by President Ronald Reagan, and court watchers say Judge Hull’s record includes some conservative opinions.
In three hours of sharp questioning, the judges asked whether requiring Americans to buy insurance opened the door to unprecedented government power, and could lead to mandated purchases of energy-friendly products like solar panels. “If they can compel this, what purchase could they not compel?” Judge Marcus asked.
The administration, represented by acting U.S. Solicitor General Neal Katyal, reiterated its argument that the health-insurance market was unlike others because all Americans eventually need medical care. Hospitals are distinct from other enterprises because they are required to provide care regardless of whether a patient pays, Mr. Katyal said. “If you walk in penniless, can you say, give me the solar panel?” he said.
The administration argues that the Commerce Clause of the Constitution gives it the power to mandate buying insurance, and such regulation is necessary to keep the rest of society from having to offset $43 billion a year in unpaid medical bills.
The plaintiffs responded that the law went outside the scope of the Commerce Clause in requiring for the first time that U.S. residents buy a private product. “They’re not engaged in commerce,” said Paul Clement, a former solicitor general under President George W. Bush who represents the states. “They’re sitting in their living rooms.”
Judge Hull took issue with the plaintiffs’ contention that the case hinges on whether failing to carry health insurance is “activity” or “inactivity.” Instead, she said the case was about whether such a decision was an economic one.
The panel also showed sympathy to a secondary claim in the states’ case involving Medicaid. The plaintiffs say the law’s expansion of Medicaid to 16 million lower-income Americans unfairly burdens states, which eventually must pay some of the medical costs for those new beneficiaries.
Judge Vinson ruled against the plaintiffs on that part of the case. But Judge Dubina said states had made a “powerful” argument that such an expansion amounted to coercion.
In a sign that the judges hadn’t ruled out upholding Judge Vinson’s decision, they asked both sides questions about whether the mandate to buy insurance and related provisions could be split from the rest of the law, should the court find the mandate unconstitutional. Under this scenario, the administration contends it could be split. The plaintiffs argue the entire law must fall.
Judge Hull appeared skeptical that the mandate, which is set to take effect in 2014, was central to the law. She said only about four million Americans are expected to pay the penalty for failing to carry coverage and the Internal Revenue Service can’t impose criminal penalties on those who fail to pay. “I don’t know how it’s going to be different than unpaid medical costs,” she said.
More than 30 suits have been filed challenging the law. Many were thrown out on procedural grounds, and five courts have ruled on the merits, splitting along party lines. Three district judges who are Democratic appointees upheld the law, and two Republican-appointed judges ruled against it.
It isn’t clear which of those cases the Supreme Court will pick to settle the issue. Lawyers involved in the Florida case said they expected the 11th Circuit to decide this summer. Texas Attorney General Greg Abbott said Wednesday that if the states lose, they would appeal directly to the Supreme Court to hear the case.