Litigation Lowdown

On the day the Affordable Care Act (ACA) was signed into law, lawsuits challenging the constitutionality of its key provision – the individual mandate to purchase health insurance – were filed across the nation. The new parlor game in Washington, DC is guessing the ultimate outcome of the case. Of course, no one knows whether the mandate or the law in its entirety will be struck down or upheld. In the meantime, moderates on the Hill such as Senators Ben Nelson (D-NE) and Claire McCaskill (D-MO) are exploring potential alternatives to the mandate. Senators Ron Wyden (D-OR) and Scott Brown (R-MA) recently introduced legislation that would allow states to waive out of the major requirements of the ACA, including the mandate, and implement their own reforms.

Beyond the political momentum is the action by the courts themselves. On January 31, 2011, Federal District Judge Roger Vinson issued a decision declaring the ACA’s mandate that individuals purchase private health insurance unconstitutional. The main thrust of Judge Vinson’s decision in Florida v. HHS is that the individual mandate to purchase health insurance may be a necessary part of the government’s overall health care regulatory scheme, but Congress is overstepping its constitutional authority nonetheless.

In contrast, Federal District Judge Henry Hudson in Richmond, Virginia ruled on December 13, 2010, in Virginia v. Sebelius, that the mandate is unconstitutional but that the law could survive without it.

So now what happens?

Nothing, yet. The cases are progressing – some quite quickly – through the appeals process. Virginia v. Sebelius has been appealed in the Fourth Circuit court, with oral arguments set for mid-May. The same panel of judges will then hear another case, Liberty University v. Geithner, soon after – so the Fourth Circuit cases are currently leading the charge to the Supreme Court. In the Sixth Circuit, Thomas More Law Center v. Obama will be heard on appeal between late May and early June. Florida v. HHS is awaiting appeal in the Eleventh Circuit. When the appellate judicial process has run its course, it seems inevitable that the U.S. Supreme Court will review these cases – but how soon is still a topic of contention.

On February 8, 2011, Virginia Attorney General Ken Cuccinelli filed a writ of certiorari to the U.S. Supreme Court requesting that it immediately grant a review of Virginia’s constitutional challenge to the ACA. The previous week, the Justice Department indicated opposition to Cuccinelli’s intent to file the writ, but Cuccinelli is not alone in his push for an expedited review. A letter from 28 Republican governors to the White House asked President Obama to secure Justice Department support for an expedited review of the Florida and Virginia cases. Former Governor Ed Rendell (D-PA) expressed his support for the letter and encouraged the Democratic Governors Association to join him, but at the moment no Democratic governors have publicly supported an expedited review.

The Supreme Court could take up one of the Fourth Circuit cases as early as October, but such a fast-track ruling on any of the health care lawsuits seems unlikely. At a recent event at George Washington University, Justice Ruth Bader Ginsburg reminded audiences that the Court very rarely weighs in before lower and appellate courts, saying “the court itself is a reactive institution…we don’t decide, ‘We better get this or that case sooner rather than later.’” As Lawrence Tribe wrote in the New York Times, the challenge to the individual mandate is not a “novel, one-off” political issue (like the fast-tracked ruling on Bush v. Gore in 2000) but a broad legal question that will require careful analysis by the justices.

The Florida decision, without clarification from a higher court, is causing uncertainty among stakeholders tasked with implementing the law. On February 18, the Department of Justice filed a motion calling for clarification on the Florida decision. The same day, Judge Vinson responded with an order agreeing to do so as soon as the plaintiffs (the states) file a response and the DOJ files a reply. In his ruling on Florida v. HHS, Judge Vinson argued that “the declaratory judgment is the functional equivalent of an injunction.” State officials are split on the impact of the ruling on state implementation; Florida, Idaho and Wisconsin argued that the law is now irrelevant for the states involved in the multistate law suit unless an appellate court reverses the decision, and the governors of Georgia, Iowa and Mississippi argued the ruling should not halt implementation efforts. Alaska Governor Sean Parnell announced that he would not implement the law – and would not apply last minute for a health insurance exchange planning grant – arguing that Alaska was bound by the Florida decision.

Immediately following the Vinson decision, Florida returned both its $1 million rate review grant (intended to give states greater control over health insurance premium increases) and its $1 million exchange planning grant to the Department of Health and Human Services. Wisconsin later softened its proclamation about halting implementation, and recently become one of seven states (plus a consortium of states in New England) to receive an “Early Innovator” grant to improve health information technology infrastructure in preparation for the launch of health insurance exchanges. The state will receive over $37 million from HHS for this purpose.

Even if the federal law is struck down, states and hospitals and employers and businesses will continue to develop solutions to our broken health care system. They will continue to strive for better care coordination and management of chronic disease. They will continue to invest in health information technology, evidence-based medicine research, and delivery system reforms.

Furthermore, if the federal law is struck down, it does not necessarily mean that the state laws implementing the federal law will be struck down. Whether a state law stands on its own will be a function of whether the ACA serves as a necessary precondition to the state law’s operability. For example, at a recent event at the Aspen Institute, Virginia Governor Bob McDonnell said that once his state sinks enough resources into creating the exchange, it might make sense just to leave it standing, even if the ACA is eventually struck down. The Virginia General Assembly passed legislation early this month expressing their intent to set up a health insurance exchange by a vote of 95 to 3.

Similarly, contracts that are, in part, drafted as a natural consequence of the federal law are also likely to remain in effect. Private parties are likely to remain bound by a contract unless a new lawsuit successfully questions the contract’s validity absent a law that no longer exists. It seems true that much of the capital investments in new business plans and governance structures will continue unabated by a striking of the federal health reform law.

What will be interesting to see is how – if the law is struck down – Congress will resolve the ongoing problems associated with the uninsured and uncompensated care, problems addressed by the individual mandate.