So far two circuit courts have weighed in on the constitutionality of the individual mandate in the Affordable Care Act: the Sixth Circuit, which found the mandate constitutional, and the Eleventh Circuit, which found it unconstitutional. The Fourth Circuit had an opportunity to weigh in as well - it recently heard appeals from two Virginia district courts that reflected the same divide: Virginia v. Sebelius, which found the mandate unconstitutional, and Liberty University v. Geithner, which upheld the mandate. I describe both district court opinions in greater detail in a prior post.
Probably to most people's surprise, the Fourth Circuit dismissed both cases based on a lack of jurisdiction, and therefore did not reach the merits of the constitutional challenge. Practically, this will not impact whether the challenge is ultimately heard by the U.S. Supreme Court in light of the split between the Sixth and Eleventh Circuits. The court's reasoning for dismissal in the Liberty case is potentially significant, however, because it is the first time that a court has embraced the federal government's characterization of the mandate penalty as a "tax." This characterization has two important implications.
The first is reflected in the majority's opinion, which held that plaintiffs could not bring a challenge to the mandate yet because of a provision in the federal tax code known as the Anti-Injunction Act. The Anti-Injunction Act is a federal law that prohibits law suits that seek to prevent the assessment and collection of taxes before they are due. It requires individuals to pay their taxes first and then file a lawsuit for a refund. This means that the earliest an individual would be able to file suit would be in 2015, and only if the person did not qualify for one of the exemptions provided in the law and chose to pay the tax penalty instead of purchasing insurance. Although I suggested that this might ban challenges to the mandate in a prior post, I was surprised by this decision because until now no court has adopted the federal government's characterization of the penalty as a "tax" subject to the Anti-Injunction Act bar.
The court's characterization of the mandate penalty as a "tax" may also impact the more important question about the constitutionality of the mandate. In its defense of the mandate, the federal government has argued that the tax assessment imposed on those who fail to purchase insurance (and are not exempt from the mandate) is a constitutional exercise of the federal government's very broad power to tax and spend for the general welfare. However, every court that had considered this argument before yesterday rejected it. Even those upholding the mandate rejected the government's tax defense; they have all held that the penalty does not qualify as a "tax" but is instead a "regulatory penalty" that must be found to be a legitimate exercise of some other federal power - like the power to regulate interstate commerce.
Judge Wynn, one of the judges in the Liberty majority, wrote a concurring opinion that embraced the federal government's argument. Although Judge Wynn agreed that the challenge had to be dismissed, he went further to note that based on the same reasoning, the mandate should be upheld as a legitimate exercise of Congress' taxing power. According to Judge Wynn, the fact that the "tax" serves a regulatory function does not necessarily undermine its revenue-raising function because taxes typically do both. In addition, he found that the tax passes constitutional muster because it is expected to raise significant amounts of revenue, will be used for the general welfare, and will not infringe any other constitutional rights.
Defense of the mandate based on the "taxing power" has not received nearly as much attention as the interstate commerce argument, that is until the Fourth Circuit thrust it into spotlight yesterday. Two recent blogs discussing the case's implications are Health Care Challenge Rejected, by Lyle Denniston on SCOTUSblog, and Fourth Circuit Dismisses Two Challenges to the Individual mandate on Jurisdictional Grounds by Ilya Somin on The Volokh Conspiracy. For an earlier and more in-depth analysis of the tax justification for health reform, go to the O'Neill Institute's Legal Solutions in Health Reform webpage.
