On June 28, 2012, the Supreme Court upheld the constitutionality
of the individual mandate in the Patient Protection and Affordable
Care Act ("ACA"), while invalidating the ACA's
conditioning of federal Medicaid funds on state acceptance of newly
expanded Medicaid categories.1 The Court's decision
in National Federation of Independent Businesses v.
Sebelius ("NFIB") settled what opponents
considered their most fundamental attack on the ACA.2
But a second wave of litigation challenging important aspects of
the ACA is already underway, and new cases continue to be filed.
The outcome of this next round of litigation may have profound
effects on the ACA's implementation—and thus on important
aspects of the health insurance and health care markets in the
United States.
Tax Credits in Federally-Facilitated Health Insurance Exchanges
The most recent, and perhaps the most fundamental, new challenge
to the ACA concerns the availability of subsidies to individuals
who purchase health insurance through a health insurance exchange
established by the federal government rather than by a state
government.
Heath insurance exchanges—one of the centerpieces of the
ACA's effort to expand the population of those with health care
coverage—operate as virtual marketplaces where individuals
and businesses can purchase private health insurance.3
Individuals with incomes up to 400% of the federal poverty line who
purchase insurance through an exchange are entitled to subsidies in
the form of refundable "premium assistance" tax
credits.4 The ACA provides that all States shall
establish an exchange by January 1, 2014, and provides grants to
States to encourage them to do so.5 But it also
authorizes the federal government to create and operate exchanges
in States that fail to meet that deadline.6 On May 18,
2012, the IRS published a final rule specifying that the tax
credits will be available to all qualifying individuals who
purchase insurance through any exchange, whether state-run or
federally-facilitated.7
On September 19, 2012, the Attorney General of Oklahoma challenged
the final rule, contending that the ACA authorizes tax credits only
for state-run, not federal-facilitated, exchanges.8 Some
estimates suggest that as many as half of the States will not
create exchanges before the January 1, 2014 deadline.9
Thus, if Oklahoma were to prevail, individuals in those States
would not be eligible for exchange tax credits, and likely millions
fewer individuals would gain health insurance coverage than if the
rule were upheld.
The Oklahoma Attorney General's position rests principally on
the authorizing language in the ACA, which refers to individuals
"enrolled in [a qualified health plan] through an Exchange
established by the State."10 Defenders of the final
rule, by contrast, argue that a federally-facilitated exchange
qualifies as an exchange "established by the State" for
these purposes.11 They assert that the final rule is
consistent with the ACA's structure, purpose, and legislative
history.12 And they argue that, to the extent the
statutory text is ambiguous, the IRS's interpretation is
entitled to deference under the Chevron
doctrine.13 Defenders of the federal government's
position also assert that Oklahoma lacks standing to asserts its
claim, and that its challenge is likely barred by the Tax
Anti-Injunction Act.14
Contraceptive-Coverage Requirement
The most active litigation challenging the ACA targets its
requirement that new, "non-grandfathered," group
insurance plans provide certain contraceptive services at no cost
to beneficiaries.15 The regulations implementing this
provision, which became effective August 1, 2012, contain an
exemption for certain religious employers who do not wish to
provide contraceptive services to their employees.16 The
regulations also provide a one-year "safe harbor" from
enforcement for religiously affiliated institutions that object to
the coverage requirement but do not qualify for the
exemption.17 The U.S. Department of Health and Human
Services ("HHS") has committed to amend the regulations
before the end of the safe-harbor period to further accommodate
religiously affiliated institutions.18 More than thirty
lawsuits, however, have already been filed challenging the
contraceptive-coverage requirement.19
Broadly, the plaintiffs claim that the contraceptive-coverage
requirement violates the Religious Freedom Restoration Act
("RFRA"), which prohibits the federal government from
"substantially burden[ing] a person's exercise of
religion."20 They also claim that the provision
violates the First Amendment's Free Exercise Clause, which
protects an individual's right to religious
freedom.21
In several of the cases, the government has argued that the
plaintiffs lack standing to challenge the contraceptive-coverage
requirement. It also has argued that the plaintiffs' claims are
not ripe for judicial review because HHS has demonstrated its
intent to amend the regulations to further accommodate
religiously-affiliated institutions.22
District courts have dismissed three of the suits for lack of
standing or ripeness.23 In O'Brien v. U.S.
Department of Health and Human Services,24 the U.S.
District Court for the Eastern District of Missouri dismissed the
plaintiff's challenge on the merits, concluding that the
requirement does not violate the RFRA or the First
Amendment.25 By contrast, on July 27, 2012, a district
judge in Colorado granted a preliminary injunction temporarily
barring application of the contraceptive-coverage requirement to a
"for-profit, secular employer."26 In so doing,
the judge held that the plaintiffs' RFRA claim would likely
succeed on the merits and was "deserving of more deliberate
investigation."27 On September 25, 2012, the
Government filed an appeal challenging the preliminary
injunction.28 The plaintiffs have filed appeals in the
four cases that were dismissed.29 The other cases
challenging the contraceptive-coverage requirement remain pending
in district courts.30
Maintenance of Effort
A less publicized challenge to the ACA concerns the ACA's
maintenance-of-effort provision, which requires States to maintain
certain Medicaid eligibility standards that were in place on March
23, 2010, when the ACA was signed into law, or risk losing federal
Medicaid funding.31 On September 5, 2012, the
Commissioner of the Maine Department of Health and Human Services
filed a motion for injunctive relief in the U.S. Court of Appeals
for the First Circuit seeking to enjoin enforcement of the
maintenance-of-effort provision.32 The State argues that
the provision "is part of the mandatory [Medicaid] expansion
struck down" by the Supreme Court in the NFIB
decision.33 Maine also contends that the provision is
invalid because it "'surprise[s] participating States with
postacceptance or retroactive conditions,'" which the
Constitution prohibits.34 On September 13, 2012, the
First Circuit issued an order summarily dismissing the State's
motion.35 The State is expected to continue the
litigation in federal district court.36
Origination Clause
Another angle of constitutional attack on the individual mandate
that one plaintiff has adopted in the wake of the Supreme
Court's NFIB decision is the contention that the ACA
violates the Origination Clause, which requires revenue measures to
originate in the House of Representatives rather than in the
Senate.37Plaintiff Matt Sissel contends that because the
Supreme Court determined that the individual mandate was an
exercise of Congress's power to lay and collect taxes, the ACA
should have originated in the House but actually began its
legislative journey in the Senate. His case had been stayed pending
the Supreme Court's decision, and on Sept. 11, 2012, Sissel
sought to amend his complaint to add his Origination Clause
claim.38 As the proposed amended complaint acknowledges,
the ACA was originally considered in the Senate as an amendment to
a bill that did originate in the House, but Sissel contends that
because the House bill neither contained nor addressed health
insurance, that bill's House origins should not save the
mandate from Origination Clause invalidation.39 The
district court has yet to rule.
Independent Payment Advisory Board
In another of the constitutional challenges to the ACA, the
plaintiffs have included a claim challenging the constitutionality
of the Independent Payment Advisory Board ("IPAB"), a
special commission established in the ACA and tasked with
recommending proposals to contain Medicare spending.40
The IPAB's annual proposals automatically go into effect unless
Congress affirmatively acts to supersede them with legislation that
would achieve the same spending reductions.41 The ACA
prohibits administrative and judicial review of the implementation
of IPAB's proposals.42
The plaintiffs in Coons v. Geithner, filed in 2010 in the
District of Arizona, challenge the IPAB as an unconstitutional
delegation of legislative power to an unelected agency, and argue
that the provision barring judicial review of IPAB proposals
violates the separation of powers doctrine.43
On August 31, 2012, the district court dismissed the
plaintiffs' IPAB challenge.44 The court noted that
"[t]o survive an anti-delegation challenge, Congress need only
'clearly delineate the general policy, the public agency which
is to apply it, and the boundaries of this delegated
authority.'"45 The court then concluded that
Congress had "met that test" in establishing the
IPAB.46 It is unclear whether the plaintiffs will appeal
the court's ruling.
Self-Referral Practices at Physician-Owned Hospitals
Another less publicized challenge to the ACA concerns the
availability of Medicare funding for patient referrals made by
physicians to physician-owned hospitals. The Medicare Act prohibits
reimbursement for services provided to a patient at a medical
facility in which the patient's referring physician, or a
member of the physician's immediate family, has a financial
interest.47 Historically, this prohibition has not
applied to patient referrals made by physicians with an ownership
interest in the whole hospital, as opposed to an interest in a
subdivision or department of the hospital.48 This
exception is generally referred to as the "whole hospital
exception."49
Subject to certain exemptions, Section 6001 of the ACA limits the
availability of the "whole hospital exception" to
physician-owned hospitals that (1) had a Medicare provider
agreement in place before December 31, 2010, and (2) do not expand
their facilities after March 23, 2010, without HHS
authorization.50
On June 3, 2010, Physician Hospitals of America and the Texas
Spine & Joint Hospital filed a lawsuit claiming that Section
6001 violates their rights to due process and equal protection
under the Fifth Amendment.51 The plaintiffs also claim
that Section 6001 is void for vagueness and that it effects an
unconstitutional and retroactive taking of their real and personal
property.52 Shortly after the complaint was filed, the
government moved dismiss based on lack of exhaustion of
administrative remedies. The district court denied the motion, but
subsequently granted the government's motion for summary
judgment on the merits.53 On August 16, 2012, the Fifth
Circuit concluded that the district court lacked jurisdiction
because the plaintiffs had not exhausted their administrative
remedies and thus affirmed dismissal of the suit.54 It
remains uncertain whether the plaintiffs will seek review by the
Supreme Court.55
Footnotes
1 See National Fed'n of
Indep. Bus. v. Sebelius, 132 S. Ct. 2566 (June 28,
2012).
2 On July 23, 2012, the petitioners in
one of the cases that was denied certiorari in the wake of
the NFIB decision filed a petition
for rehearing in order to revive religious-freedom and
equal-protection challenges to the individual mandate that had not
been addressed either by the Supreme Court or the court of
appeals. See Petition for
Rehearing at 3-8, Liberty Univ. v.
Geithner, No. 11-438 (U.S. July 23, 2012). On
October 1, the Court directed the Solicitor General to respond to
the rehearing petition by October 31, 2012.
3See, e.g.,
Creating a New Competitive Marketplace: Affordable
Insurance Exchanges, HEALTHCARE.GOV NEWSROOM (Sept.
26, 2012), available at
http://www.healthcare.gov/news/factsheets/2011/05/
exchanges05232011a.html .
4See 26 U.S.C. §
36B (2012).
5See ACA, Pub. L. No.
111-148, §1301(b)(1), 124 Stat. 119 (2010) (codified as
amended at 42 U.S.C. § 18031(b)(1) (2012)).
6See id. § 1321(c)
(codified as amended at 42 U.S.C. § 18041(c)(1)
(2012)).
7 Dep't of the Treasury, Internal
Revenue Service, Health Insurance Premium Tax Credit, 77 Fed.
Reg.
30,378 (May 23, 2012) (to be codified at 26 C.F.R. pts. 1 &
206), available at
http://www.gpo.gov/fdsys/pkg/FR-2012-05-23/pdf/2012-12421.pdf
.
8See Complaint at
13-15, Oklahoma v. Sebelius, No.
CIV-11-030-RAW (E.D. Okla. Sept. 19, 2012). The challenge was
included in an amended version of the complaint. The challenge
draws on ideas developed by a number of commentators.
See, e.g., Jonathan Adler & Michael
Cannon, Taxation without Representation: The Illegal
IRS Rule to Expand Tax Credits Under the PPACA,
HEALTH MATRIX: J. OF LAW-MEDICINE (forthcoming), (Jul. 16,
2012) available at
http://ssrn.com/abstract=2106789 ; Abbe Gluck, The
"CBO Cannon" and the Debate over Tax Credits on Federally
Operated Health Insurance Exchanges, BALKINIZATION (July 10,
2012), available at
http://balkin.blogspot.com/2012/07/cbo-canon-and-debate-over-tax-credits.html
.
9 Abby Goodnough,
Liking It or Not, States Prepare for Health
Law, N.Y. TIMES, Sept. 24, 2012, at A1,
available at
http://www.nytimes.com/2012/09/24/us/like-it-or-not-states-prepare-for-health-law.html
(noting that the governors in seven states "have said
they will not create a state-run exchange," and that as many
as thirty states "are exploring their options");
Establishing Health Insurance Exchanges: An Overview of State
Efforts, THE HENRY J. KAISER FAMILY FOUNDATION (Aug. 2012),
available at
http://www.kff.org/healthreform/upload/8213-2.pdf
("To date, seven states have declared that they will not
create a state-based exchange. . . . Another 16 states have
not yet committed to a health insurance exchange strategy, but are
continuing planning efforts. . . . Nine states have not shown
significant exchange planning activity.").
10See Amended Complaint
at 13-15, Oklahoma v. Sebelius, No.
CIV-11-030-RAW (E.D. Okla. Sept. 19, 2012),
available at
https://ecf.oked.uscourts.gov/doc1/1451580137
.
11 Timothy Stoltzfus Jost,
The Internal Revenue Service's Implementation and
Administration of the Democrat's Health Care
Law, HASTINGS CENTER REPORT (forthcoming Oct.
2012), available at
http://ssrn.com/abstract=2150237 .
12See Timothy Stoltzfus
Jost, Yes, The Federal Exchanges Can Offer Premium
Tax Credits, THE HEALTH CARE BLOG (Sept. 12,
2011), available at
http://thehealthcareblog.com/blog/2011/09/12/yes-the-federal-exchanges-can-offer-premium-tax-credits
.
13See, e.g., id.
14 Nicole Huberfeld,
ACA Litigation-Oklahoma's "Federalism
Unit" Piles On, HEALTHLAWPROF BLOG (Sept. 20,
2012), available at
http://lawprofessors.typepad.com/healthlawprof_blog/2012/09/aca-litigation-oklahomas-federalism-unit-piles-on.html
.
15 Coverage of preventive health
services is required by § 2713 of the ACA, Pub. L. No.
111-148, 124 Stat. 119 (2010) (codified as amended at 42 U.S.C.
§ 300gg-13 (2012)).
16 The exemption to the
contraceptive-coverage requirement applies to institutions that (1)
have as their purpose religious indoctrination, (2) primarily
employ individuals who share the institution's religious
beliefs, (3) primarily serve individuals who share the
institution's religious beliefs, and (4) have a qualifying
non-profit status under the U.S. Code.
See Coverage of Preventive Services, 76
Fed. Reg. 46,621 (Aug. 3, 2011) (to be codified at 45 C.F.R. pt.
147).
17See id. On August
15, 2012, HHS issued an amended bulletin expanding the one-year
safe harbor to cover qualifying non-profit institutions that object
to some, but not all, contraceptive services. See Center for
Consumer Information and Insurance Oversight, U.S. Dep't of
Health & Human Servs., GUIDANCE ON TEMPORARY ENFORCEMENT SAFE
HARBOR FOR CERTAIN EMPLOYERS 3-4 (Aug. 15, 2012),
available at
http://cciio.cms.gov/resources/files/prev-services-guidance-08152012.pdf
.
18 Specifically, HHS plans require
insurance companies to sell plans without contraceptive coverage to
religiously affiliated institutions while providing these services
directly to employees. Coverage of Preventive Services, 77 Fed.
Reg. 8728 (Feb. 15, 2012) (to be codified at 45 C.F.R. pt.
147).
19See HHS Mandate Information
Central, BECKETFUND.ORG,
http://www.becketfund.org/hhsinformationcentral/
(last visited Oct. 12, 2012) (listing and describing cases
challenging the contraceptive-coverage requirement). The plaintiffs
in the thirty-five cases include: (1) for-profit and non-profit
organizations that object to the coverage requirement but do not
qualify for the exemption, (2) individuals whose employers may stop
providing health insurance if required to offer contraceptive
coverage, and (3) States that may be required to provide health
care for individuals whose employers cease to provide insurance
because of the coverage requirement. See
id. Another helpful website compiling information
on these cases can be found at
http://berkleycenter.georgetown.edu/essays/resources-and-background-on-contraception-and-conscience
.
20 42 U.S.C. § 2000bb-1(a)
(2012).
21 Many of the plaintiffs further
claim that the HHS regulations implementing the contraceptive
coverage requirement violate the Administrative Procedure
Act. See, e.g., Belmont Abbey Coll. v.
Sebelius, No. 11-1989, 2012 U.S. Dist. LEXIS 99391,
at *2 (D.D.C. July 18, 2012).
22See, e.g., Wheaton Coll. v.
Sebelius, No. 12-1169, 2012 U.S. Dist. LEXIS
120187, at *2 (D.D.C. Aug. 24, 2012).
23See id. at *3;
Belmont Abbey Coll., 2012 U.S. Dist. LEXIS
99391, at *2-3; Nebraska v. U.S. Dep't of Health
& Human Servs., No. 4:12-cv-3035, 2012 U.S.
Dist. LEXIS 104419, at *78-79 (D. Neb. July 17,
2012).
24 No. 4:12-CV-476-CEJ, 2012 U.S.
Dist. LEXIS 140097 (E.D. Mo. Sept. 28, 2012).
25See id. at *12-42. The
district court also dismissed the plaintiff's claim that the
contraceptive-coverage requirement violates the Administrative
Procedure Act. See id. at
*41-47.
26See Newland v.
Sebelius, No. 1:12-cv-1123-JLK2012, U.S. Dist.
LEXIS 104835, at *7, 28 (D. Colo. July 27, 2012);
see also id. at *28 (noting that the
preliminary injunction "does not enjoin enforcement of the
preventative coverage mandate against any other
party"). On September 25, 2012, the Government filed an
appeal challenging the preliminary injunction.
See Newland v. Sebelius, No. 12-1380 (10th
Cir. filed Sept. 25, 2012). The Tenth Circuit has referred the case
for mediation conferencing. See
Mediation Conference Notice, Newland v.
Sebelius, No. 12-1380 (10th Cir. Oct. 12,
2010).
27Id. at *27 (internal
quotation marks omitted).
28See Newland v.
Sebelius, No. 12-1380 (10th Cir. filed Sept. 25,
2012). The Tenth Circuit has referred the case for mediation
conferencing. See Mediation
Conference Notice, Newland v.
Sebelius, No. 12-1380 (10th Cir. Oct. 12,
2010).
29See O'Brien v. U.S. Dep't of
Health & Human Servs., No. 12-3357 (8th Cir.
filed Oct. 4, 2012); Nebraska v. U.S. Dep't of
Health & Human Servs., No. 12-3238 (8th Cir.
filed Sept. 25, 2012); Belmont Abbey Coll. v.
Sebelius, No. 12-5291 (D.C. Cir. filed Sept. 14,
2012); Wheaton Coll. v. Sebelius,
No. 12-12-5273 (D.C. Cir. filed Aug. 30, 2012).
30See HHS Mandate Information
Central, BECKETFUND.ORG,
http://www.becketfund.org/hhsinformationcentral/
(last visited Oct. 12, 2012).
31 The ACA's MOE requires states
to maintain the Medicaid eligibility standards that were in effect
on March 23, 2010, until the end of 2013 for adults and until
October 2019 for children. See ACA, Pub. L. No. 111-148,
§ 2001(b), 124 Stat. 119 (2010) (codified as amended at 42
U.S.C. §§ 1396a(a)(74), 1396a(gg)
(2012)).
32See Petitioner's
Motion for Injunctive Relief, Mayhew v.
Sebelius, No. 12-2059 (1st Cir. Sept. 5, 2012)).
The State filed its petition for injunctive relief in the First
Circuit before seeking relief in federal district court pursuant to
Rules 8(2) and 18(2) of the Federal Rules of Appellate
Procedure. See id. at 1.
33See id. at
18.
34See id. at 17
(quoting Nat'l Fed'n of Indep. Bus. v.
Sebelius, 132 S. Ct. 2566, 2606 (2012)).
35See Mayhew v.
Sebelius, No. 12-2059 (1st Cir. Sept. 13, 2012)
(order denying preliminary injunction).
36See Katherine Jett
Hayes, Update: Legal Challenges to the Affordable
Care Act's Medicaid Maintenance of Effort
Provisions, HEALTHREFORMGPS (Sept. 26, 2012),
available at
http://healthreformgps.org/resources/update-legal-challenges-to-the-affordable-care-acts-medicaid-maintenance-of-effort-provisions
.
37 "All Bills for raising Revenue
shall originate in the House of Representatives; but the Senate may
propose or concur with Amendments as on other Bills." U.S.
CONST. art. I, § 7, cl. 1.
38See Proposed Amended
Complaint at 11-12, Sissel v. U.S. Dep't
of Health & Human Servs., No. 1:10-cv-01263-BAH
(D.D.C. Sept. 11, 2012).
39See Id.
40 The IPAB was created by §
3403(b) of the ACA. Pub. L. No. 111-148, 124 Stat. 119 (2010)
(codified as amended at 42 U.S.C. § 1395kkk(a)
(2012)).
41See 42 U.S.C. §
1395kkk(d).
42See id. §
1395kkk(e)(5).
43See Amended Complaint
at 29-32, Coons v. Geithner, No. CV-10-1714-PHX-GMS (D. Ariz. May
10, 2011), available at
https://ecf.azd.uscourts.gov/doc1/02517456153
.
44See Coons v. Geithner,
No. CV-10-1714-PHX-GMS, 2012 U.S. Dist. LEXIS 124196, at *5-6 (D.
Ariz. Aug. 31, 2012). Although the court dismissed the
plaintiffs' IPAB challenge, it allowed the plaintiffs to file
additional briefing on other claims concerning privacy, medical
autonomy, and preemption. See id.
at *8.
45Id. (quoting
Mistretta v. United States., 488 U.S. 361,
372-73 (1989)).
46Id.
47See 42 U.S.C. §
1395nn (2012).
48See Reconciliation Act
of 1993, Pub. L. No. 103-66, §13562, 107 Stat. 312 (1993)
(codified as amended at 42 U.S.C. § 1395nn(d)(3)).
49See, e.g., Physician Hosps. of Am. v.
Sebelius, No. 11-40631, 2012 U.S. App. LEXIS 17246,
at *3 (5th Cir. Aug. 16, 2012).
50 Prohibited expansions include
increasing the number of operating rooms, procedure rooms, and beds
for which the hospital was licensed as of Mar. 23, 2010. See
Changes to Whole Hospital and Rural Provider Exceptions, 75 Fed.
Reg. 72,240 (Nov. 24, 2010) (to be codified at 42 C.F.R. pt.
362).
51See Complaint,
Physician Hosps. of Am. v. Sebelius, No.
6:10-cv-277 (E.D. Tex. June 3, 2010), available
at
https://ecf.txed.uscourts.gov/doc1/17513995883
.
52See id.
53Physician Hosps. of Am. v.
Sebelius, 770 F. Supp.2d 828 (E.D. Tex. 2011)
(denying motion to dismiss); Physician Hosps. of Am.
v. Sebelius, 781 F. Supp.2d 431 (E.D. Tex. 2011)
(granting motion for summary judgment).
54See Physician Hosps. of Am. v.
Sebelius, 691 F.3d 649 (5th Cir. 2012).
55 Dayna Worchel, U.S.
Appeals Court Rules Against Tyler Hospital,
TYLERPAPER.COM (Aug. 21, 2012, 5:46 PM), available
at
http://www.tylerpaper.com/article/20120821/NEWS08/308219995/0/PRIVACY
.
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