Affordable Care Act Legal Challenges

The Affordable Care Act (ACA) was passed into law in 2010.  This 906 page tome makes a substantial number of changes to the national health care law, but much attention has been focused on the individual health care mandate which is found in section 5000A (codified at 26 U.S.C. 5000A) of the law.  This section requires that “an applicable individual shall for each month beginning after 2013 ensure that the individual, and any dependent of the individual who is an applicable individual, is covered under minimum essential coverage for such month.”  If that applicable individual does not have “minimum essential coverage,” that person is subject to a penalty which cannot exceed 300% of $750 ($95 in 2014 and $350 in 2015), or $2,250 in 2016, and which will increase based on a cost of living adjustment in subsequent years.

People are not happy about this requirement to either buy health insurance or face a penalty at tax time that could eat up a family’s federal tax refund.  At least some people are not happy as there have been at least four different challenges to the Affordable Care Act filed in federal court which have made there way up the various federal circuit courts where these cases were filed.  In three of these cases, the administration (defending the constitutionality of the law) was the winner, but in the 11th circuit, the challengers of the law won (in the sense that the court in that case decided to not dismiss their challenge to the law).

In the U.S. today, we generally take for granted that Congress can legislate as it believes it should, and the average person most likely does not think much about whether an act of Congress is constitutional.  However, in our system of government, the Congress is empowered to legislate pursuant to specific enumerated powers found in the Constitution.  The one in play in this case is the interstate commerce clause, which is found in Article I, section 8, clause 3 of the Constitution.  This clause permits Congress to regulate activities that affect commerce between states.  Section 1501 of the ACA discusses how the individual insurance mandate is related to interstate commerce.  There are a number of findings written into the law where Congress has identified:

  • how important health care, as an industry is, to the nation ($2.5 trillion in GDP);
  • that this insurance requirement will add millions of new consumers to the health insurance market across the country;
  • that half of all personal bankruptcies are caused, in part, by medical expenses (which presumably could have been avoided if the medical issue was covered by health insurance); and
  • people don’t buy health insurance when they are healthy, which causes adverse selection in the existing health insurance pool, driving up insurance costs for everyone that does buy insurance.

The challengers to this particular section of the law essentially are arguing that Congress has exceeded its authority in trying to mandate that individuals buy health insurance.  The idea that powers not enumerated to the Congress are reserved to the individual states and the citizens of the country is discussed in the Tenth Amendment and in the history surrounding the nation’s adoption of our Constitution in the late 18th century.  If individuals that purchase health insurance are not impacting interstate commerce, Congress arguably exceeded its authority.

There are Supreme Court decisions that have investigated the limits of the commerce clause.  Federal legislation based on the commerce clause probably hit its high water mark over the buying and selling of wheat in the 1940’s in a case cited as Wickard v. Filburn, 317 U.S. 111 (1942).  In Wickard, the plaintiff had sought injunctive relief against the secretary of the department of Agriculture to prevent the collection of a tax against him for growing more wheat than permitted by federal law which set, at the time, quotas for the amount of wheat a farmer might grow.  The plaintiff alleged that Congress’ attempt at regulating the amount of wheat that a farmer might grow and consume on the farm exceeded its authority to regulate interstate commerce, as this wheat for local use was not in the commerce between states, and could only indirectly affect such commerce.  The Court rejected this argument.

The market for wheat, at the time of Wickard, exceeded any single state in the union.  According to the Court, every state, but one, grew wheat, and all states consumed it.  The market the Congress attempted to regulate was, therefore, a national and not a local one.  That Congress had the authority to regulate such a market was, from the Court’s perspective, squarely found in the Constitution.  “The stimulation of commerce is a use of the regulatory function quite as definitely as prohibitions or restrictions thereon. This record leaves us in no doubt that Congress may properly have considered that wheat consumed on the farm where grown, if wholly outside the scheme of regulation, would have a substantial effect in defeating and obstructing its purpose to stimulate trade therein at increased prices.”  Id. at 129.

Since Wickard, there has been some retreat from the relatively expansive view of the regulation of interstate commerce by Congress.  Notably, the Court indicated that a federal law aimed at criminalizing the possession of a firearm on a school campus exceeded Congress’ power.  See U.S. v. Lopez, 514 U.S. 549 (1995).  However, a divided Court decided more recently that the regulation of controlled substances, even when these drugs are only used locally as in the case of medical marijuana, may still be properly regulated by the federal government pursuant to the commerce clause.  See Gonzales v. Raich, 545 U.S. 1 (2005).

The Court today faces a number of challenges to ACA which share a commerce clause challenge as to the requirement that citizens buy health insurance or face a tax penalty annually.  To claim that health care, a $2.5 trillion market within the U.S., is not a national market, simply cannot pass the giggle test.  To further claim that making people buy health care or face a penalty, in light of the fact that most health care costs are paid for by insurance, exceeds the authority of Congress also does not pass the same test.  To the contrary – the act of not buying insurance inherently means that the risk pool for those with insurance is smaller, and therefore, increases the cost of insurance to those that carry it, plainly and directly impacts the national health care market.  If there ever was an example of local activity impacting a national industry, this would be it, given that there are between 30 and 40 million people who are uninsured in the U.S.  The challenge made, then, to ACA on this ground is to just misunderstand what Congress is supposed to be doing, and misstates an entire body of law on the enumerated powers of Congress.

I was just kidding about “beach law”

But apparently, there is a growing law practice for some that litigate in the panhandle of Florida (see article here).  The case is Stop the Beach Renourishment, Inc. v. Florida Department of Environment Protection and went to the U.S. Supreme Court in early December for oral argument.  At the heart of the case is the question of whether the Florida beach restoration program amounts to a taking of private property without due process of law: a violation of the 5th and 14th amendments according to the plaintiffs in the matter.  For the plaintiffs, the issue is that the restoration program causes the restored shore to become public property.  That makes sense in that the public paid to repair the beach from erosion.  It’s bad for the homeowners that want their privacy on their own little section of the beach.

You can find some of the documents filed in this matter on JD Supra.  Additional analysis and documents filed in the matter are available here.

Net Neutrality & Other Misnomers

I happened across an article on net neutrality today where AT&T was lobbying the Federal Communication Commission (FCC) to moderate their expectations on nondiscrimination rules for internet service providers.  (See article here)

I suspect a fair amount of internet users could care less about this debate.  In some parts of our nation, internet access is nearly ubiquitous, with the advent of iPhones, free Wi-Fi hot spots, and the expansion of broadband networks by big companies like Verizon and Comcast.  With all of this technology available to us, most users probably take internet access for granted.  And I doubt too many users think much about bandwidth limits or network priority when accessing a web site.  For most, typing in search terms in google or a URL in the browser address bar almost always takes them to somewhere they were trying to get to.  And so, net neutrality sounds like some far away monster that some fictional knights are trying to slay.

At its heart, net neutrality is a regulatory command to U.S. internet service providers to not discriminate against certain content that may appear on internet sites.  So, for example, net neutrality rules might prohibit a service provider like Verizon from blocking or reducing the priority of traffic from a web site like youtube or  Priority in networking is typically the way network managers ensure that critical traffic always gets to its destination, while less important traffic waits.  In terms of the overall internet, internet service providers might decide that email traffic is more important than downloading videos, and therefore, your email would always reach its destination but your youtube videos might stop and start or not load at all.

Corporate network managers deal with this problem regularly because businesses generally cannot afford to buy all the bandwidth that their users could use.  This is based on a principle similar to the growth in hard drive storage: in spite of the near exponential growth of hard drive storage space over the last twenty years, computer users continue to find more stuff to fill up their hard drives with.  Bandwidth is the same way.  The more bandwidth available, the more users will use.

The larger internet service providers ultimately will face these same kinds of challenges for the consumer-end of the internet user market.  Most consumers today pay some kind of flat rate for internet access.  Fios, for example, gives you a 10-30 megabit circuit for a flat rate of less than $100 a month.  Residential DSL and residential cable internet access are similarly priced.  For that matter, most cell phone data plans are also flat rate.  I suppose one answer to this is to go back to a pay-for-usage model, where consumers are billed at some kind of per megabyte or gigabyte of internet usage each month.  Those that use more, pay more.

I can’t say I’m a huge fan of this approach, but the truth is that, perhaps unfairly, a minority of consumers likely use the bulk of the available bandwidth to access the internet.  So, the rest of us probably are paying in part for the usage of others, and there is a kind of unfairness about that.  On the other hand, no consumer pays an incredible amount, because the overall cost of operating the entire internet infrastructure is distributed across many many millions of users in the U.S. and globally.  So, you might view internet access as another entitlement, like basic health care or shelter.

The rumblings about net neutrality take another form, however, and that is the fear that internet service providers may make deals with certain content providers (like hulu), where the service provider allocates more bandwidth (or a higher priority) to hulu over competing video sites.  So, if you want to view a video and it is available on several content providers, but your service provider has a deal with hulu, the video will work properly when you go to hulu and maybe not if you go to hulu’s competitors.  Thus, the service provider will tend to cause its users to favor the site that works, and the truth is that you wouldn’t likely even know why that is.  And then, the service providers would control the world, just like the underpants gnomes from Southpark.

Well, maybe not, but exclusivity arrangements between service providers and content providers would likely run smaller operations out of business.  This would probably be bad for competition.  It might even be antitrust worthy if the providers on both sides are large enough to corner a market.  Do the service providers want to be further regulated?  Of course not.  But should our internet not discriminate against certain content?  Probably.  In fact, if government actors can’t discriminate based on viewpoint under the first amendment, the FCC can only choose to implement a non-discrimination regulation, or take no action at all.  If the FCC were to sanction service provider discrimination against certain kinds of content that is otherwise lawful solely because of the viewpoint of that content, those injured content authors might very well be able to state a constitutional claim against the FCC’s regulation.

Practically today, however, much of this is a theoretical problem.  But the principles that the FCC is trying to foster – that we should not leave the censorship to internet service providers – is a sound principle.  In practice, some discrimination is required to ensure that some large networks will work for all that connect to them.  And discrimination against illegal content that is dangerous to your credit card account or results in malicious destruction of property is likely necessary.  But I’m not convinced that these issues should just be left to the free market to figure out, anymore than I want Microsoft to tell me what I can or cannot say on a public street corner.

Copyright Meet Speech

Check out this article on some of our online service/social networks and the impact that private companies have on our free expression by clicking here.  Certainly the first amendment doesn’t give us much protection in private areas like shopping malls or the private homes of others (or even the sidewalk around the back of a Post Office, for that matter, or a military base if you are an anti-war protester), but online systems like youtube and myspace represent a whole new frontier, entirely governed by private terms of service contracts with individual users.  The Supreme Court has held, as far as copyright is concerned, that the rules on fair use balance an individual’s free expression against the property interests of the copyright holder.  Is fair use a sufficient standard, however, when the determination of fair use is entirely in the hands of an editor at a web site operator?  Especially when there is no clear path to appeal an adverse decision of the operator, and no constitutional remedy?