Supreme Court Takes Center Stage on PPACA

November 11, 2011

The U.S. Supreme Court has announced it will review the Florida v. HHS case, which was brought by 26 states challenging the constitutionality of the individual mandate under PPACA.  The Court’s decision to hear the case is a welcome one for large employers.  HR Policy filed an amicus curiae brief urging the Court to hear the case as soon as possible so that employers can operate in an environment of greater legal certainty. 

The Court will review:

  • Whether the challenge to PPACA is jurisdictionally barred until the law goes into effect in 2014;

  • Whether the individual mandate is unconstitutional; and

  • If so, whether it is severable from PPACA or renders the entire Act invalid.

The vast majority of lower courts have ruled that the challenge is not barred on jurisdictional grounds.  In the Florida case, the Eleventh Circuit ruled that the individual mandate was unconstitutional but that it was severable from the rest of the law.  The district court, however, ruled that not only was the individual mandate unconstitutional but that it could not be severed from PPACA and therefore the entire Act was invalid. 

It is not a given that all five conservative justices on the Supreme Court will rule that the mandate is unconstitutional.  Last week, D.C. Circuit Judge Laurence Silberman, one of the most highly respected—and conservative—jurists in the federal court system, upheld the mandate.  While he expressed concern that while the mandate appeared to be “an intrusive exercise of legislative power” and “an encroachment on individual liberty,” he said “it is no more so than a command that restaurants or hotels are obliged to serve all customers regardless of race, that gravely ill individuals cannot use a substance their doctors described as the only effective palliative for excruciating pain, or that a farmer cannot grow enough wheat to support his family,” each of which has been found to be constitutional.  It’s possible one of the five conservative justices may follow his lead.

With regard to severability, the lower federal courts which have ruled that the individual mandate is unconstitutional have adopted three different approaches: (1) the individual mandate is severable from PPACA because it is not essential to the law’s overall framework; (2) the individual mandate is not severable because the entire law is too intertwined with the other provisions of PPACA; or (3) the individual mandate can be severed from PPACA but only if the insurance reforms providing guaranteed issue coverage and the elimination of preexisting conditions provisions are also severed because the individual mandate is too closely tied with those provisions.  In terms of timing, it appears that the Court’s default rules will apply, which means it will likely be a late March 2012 oral argument and a decision before the end of June 2012.  The Court could, however, adopt a modified schedule.