Obamacare Still Faces Legal Challenges

President claims Affordable Care Act beyond dispute

The U.S. Supreme Court will hear more cases on Obamacare
November 27, 2013

The Affordable Care Act (ACA) still faces numerous legal challenges despite President Barack Obama’s claims that his signature health care legislation is beyond dispute.

Amid enrollment and security concerns about the ACA’s federal website and the cancelations of millions of individual health insurance plans, Obama has insisted that the law is "settled" and "here to stay."

However, a number of cases questioning the legality of the ACA, commonly known as Obamacare, continue to percolate through federal courts.

One challenge—which argues that Obamacare is a tax-laden law that should have originated in the House rather than the Senate—has reached the D.C. Court of Appeals, a traditional stepping-stone to the U.S. Supreme Court. Forty House Republicans have signed onto a brief siding with the plaintiff in the case, known as Sissel v. U.S. Department of Health and Human Services (HHS).

Jacki Pick, one of three attorneys who coauthored the brief, said in an interview that the uncertainty surrounding the troubled rollout of Obamacare could prompt the Supreme Court to take a second look at the law. Even Republicans were skeptical of another legal challenge after the court ruled last year that the law was constitutional because its individual mandate to buy insurance was a tax, she said.

"That might have been a good argument three or four weeks ago, but now it looks like Obamacare is imploding itself—it’s become one of the least popular policies in the country," Pick said. "It may be much easier for the justices to inject themselves."

The Sissel case—named after Iowa small business owner and veteran Matt Sissel, who disagreed with the mandate requiring Americans to purchase insurance with federally dictated benefits—centers on what the brief calls "the tumultuous and unconventional legislative process through which the ACA originated and was enacted."

Although Obamacare was conceived in the Senate, its Democratic backers knew that the revenue-raising bill would only be constitutionally permissible if it originated in the House. The Constitution’s Origination Clause says that "all bills for raising revenue shall originate in the House of Representatives." The Congressional Budget Office (CBO) projected in 2009 that the bill would increase revenues by $486 billion between 2010 and 2019.

The Constitution also allows the Senate to propose amendments to revenue bills, so senators used a "gut and replace" approach. They stripped a six-page House bill of all its language and inserted the 2,074 pages of Obamacare. The newly created health care bill, resembling the former House bill only by the number H.R. 3590, was then returned back to the House and passed without a single Republican vote.

"Basically, we needed a non-controversial House revenue measure to proceed to, so that is why we used the Service Members Home Ownership Tax Act [SMHOTA]. It wasn’t more complicated than that," said Kate Leone, senior health counsel for Sen. Harry Reid (D., Nev.), in a 2011 email.

Pick said there were glaring flaws to the Senate’s approach—namely that the original House bill was not a revenue-raising bill and that the insertion of the health care "amendment" was not even remotely related to it, a violation of constitutional history and court precedents. SMHOTA was originally designed to lower the taxes owed by military service members who bought a home.

"If the Senate can introduce the largest tax increase in American history by simply peeling off the House number from a six-page unrelated bill which does not raise taxes and pasting it on the ‘Senate Health Care Bill,’ and then claim with a straight face that the resulting bill originated in the House, in explicit contravention of the supreme law of the land, then the American ‘rule of law’ has become no rule at all," the brief said.

D.C. District Court Judge Beryl Howell, an Obama appointee, ruled against Sissel in June, arguing that Obamacare raises revenue in only an "incidental" manner but is still germane to the original House bill because both were "revenue-raising in nature."

Court precedents do not support this ruling, Pick argued. Howell borrowed the "incidental" language from the 1990 case U.S. v. Munoz-Flores, where the court ruled that a fine on felons did not raise revenue under the Origination Clause because the money was deposited in a "special victims fund." Money only ended up in the General Treasury "incidentally" if there were excess funds in the account.

"[The individual mandate] is a tax—you pay the tax on your tax return, the IRS is in charge of collecting it," Pick said. "That alone is a pretty good indication this could be a tax. The money is put into the General Treasury as opposed of being put into the Obamacare fund."

Additionally, Howell relied on the 1911 case Flint v. Stone Tracy Co. in her ruling that the Obamacare amendment was related to the original House bill. That case approved a Senate amendment that replaced just one clause among hundreds of tax provisions in a tariff act.

"The Senate’s modest and germane amendment in Flint is substantially different, both qualitatively and quantitatively, from the Senate’s wholesale gut and replace of H.R. 3590 with the Senate Health Care Bill that became ACA," the brief said.

The Origination Clause is important to uphold because the founders intended to only grant the potentially abusive taxing power to the House, the chamber whose representatives are elected every two years and closest to the people, Pick said. The Constitution might not have been ratified without it, according to James Madison’s notes at the Constitutional Convention.

"In short, the acceptance of the plan [U.S. Constitution] will inevitably fail, if the Senate be not restrained from originating Money bills," said Elbridge Gerry, delegate at the convention.

The defendants in the Sissel case must submit an opposing brief by early December, Pick said. Oral arguments could be held in February or March of next year.

Another challenge to Obamacare cleared a key legal hurdle last month when a district court judge refused a motion by the government to dismiss it. The plaintiffs in that case, a group of individuals and small business owners, argue that the law’s individual and employer mandates should not apply in their states because they did not create their own health care exchanges.

The exact text of the law only permits the state exchanges to offer tax credits to assist with premiums, not the federal one, making the mandates and the law potentially unworkable in the 36 states that opted to use the federal exchange.

Government lawyers contend that the Treasury Department "has reasonably interpreted the Act" by implementing an IRS rule that allows both types of exchanges to offer credits.

Other legal experts argue that Congress if anything intended to encourage states to develop their own exchanges by not sanctioning credits on the federal one.

"The health law's authors in Congress deliberately chose to pass the bill with known imperfections and to use the reconciliation process to make only limited amendments," wrote law professor Jonathan Adler and the Cato Institute’s Michael Cannon in 2011. "Writing a perfect bill would have required too many votes and risked failure. If what they passed was an imperfect bill with no premium assistance in federal exchanges, then that is what Congress intended."

The Supreme Court also announced on Tuesday that it would hear two cases pertaining to Obamacare’s insurance contraception mandate, which some employers consider to be a violation of their religious freedom.

Published under: Obamacare , Supreme Court