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Thoughts on the Sevensky v. Holder Ruling and the Constitutionality of the ACA

If you want a lucid and easily understandable analysis 0f the constitutionality of the ACA, read Judge Silberman’s opinion and analysis in Sevensky v. Holder #11-5047 (DC Court of Appeals November 8, 2011). The issue the court is addressing is whether the individual mandate/shared responsibility is unconstitutional under the Commerce clause because it impacts individuals who may wish to be uninsured or cannot afford the cost of premiums, irrespective of the Exchange’s tax credits and hardship exemptions. Also please see ITUP’s earlier blog posts on this issue.

Most of the DC Circuit Court of Appeals decision is a discussion between the majority and dissent as to whether the case is premature due to the distinction between a tax and penalty under the federal Anti-Injunction Act. You may want to ignore that portion unless you are a lawyer steeped in the jurisdiction of federal courts over tax policy.

The portion of the decision worth reading for the layperson is Section 3 of the court’s decision. Judge Silberman, writing for the majority, points out that the test of whether the Constitution’s Commerce Clause requirements are satisfied is the collective impact of millions of uninsured and underinsured Americans on interstate commerce, not the impacts on a given individual who may choose to be uninsured.

I have excerpted the following.

1) “Appellants’ primary argument why the individual mandate exceeded Congress’ enumerated powers is that Congress cannot require individuals with no connection to interstate commerce, and no desire to purchase a product, nevertheless to do so”.
2) “The Government counters … Congress can regulate even purely local intrastate economic behavior so long as in the aggregate, it substantially affects interstate commerce. The manner in which consumers pay for services in the interstate health care market is such an example. Because virtually everyone will, at some point, need health services, no one is truly inactive, and the health services market is inextricably intertwined with health insurance. Congress found that that those who do not purchase health insurance, and instead self insure, almost inevitably take health care services they cannot afford. Hospitals by virtue of federal law and professional obligation, provide these services, and as a result, $43 billion in annual costs are shifted to the insured through higher premiums. That in turn makes health insurance less affordable, and increases the total number of uninsured.”

Judge Silberman first reviews the text of the Constitution and the definitions in common currency at that time. The Commerce Clause, Article 1, §8, cl. 3, states “The Congress shall have power to regulate commerce with foreign nations, and among the several states.” At the time the Constitution was fashioned, to “regulate” meant as it does now, “to adjust by rule or method,” as well as “to direct”. To “direct,” in turn, included “to prescribe certain measures: to mark out a certain course” and “to order; to command.” In other words, to regulate can mean to require action and nothing in the definition appears to limit that power only to those already active in relation to an interstate market. There is therefore no textual support for the appellants’ argument.”

The court then reviewed the relevant Supreme Court case law and found that Wickard v. Filburn was the closest controlling precedent. In that case, a farmer was growing wheat in excess of his allotment under the Agricultural Adjustment Act of 1938 not for sale in the market but to feed his family and livestock. “The Supreme Court unanimously rejected this claim. It held that growing wheat for personal consumption, not for sale in any market, could affect the national price and therefore was within Congress’ commerce power.”

The court explained: “Appellant’s view that an individual cannot be subject to Commerce Clause regulation absent voluntary, affirmative acts that enter him or her into, or affect, the interstate market expresses a concern for individual liberty that seems more redolent of Due Process clause arguments. But it has no foundation in the Commerce Clause. The shift to the “substantial effects” doctrine in the early twentieth century recognized the reality that national economic problems are the result of millions of individuals engaging in behavior, that in isolation, is seemingly unrelated to interstate commerce. See Lopez, 514 US at 555-6. That accepted assumption undermines appellant’s argument; its very premise is that the magnitude of any one individual’s actions is irrelevant; the only thing that matters is whether the national problem Congress has identified is one that substantially affects interstate commerce.”

“ Broad regulation is an inherent feature of Congress’ constitutional authority in this area; to regulate complex, nationwide economic problems is to necessarily deal in generalities. Congress reasonably determined that as a class, the uninsured create market failures; thus the lack of harm attributable to any particular uninsured individual, like their lack of overt participation, is of no consequence.”

In closing the court said “a direct requirement for most Americans to purchase [health insurance] … certainly is an encroachment on individual liberty, but it is no more so than a command that restaurants or hotels are obliged to serve all customers regardless of race, that gravely ill individuals cannot use a substance their doctors described as the only effective palliative for excruciating pain or that a farmer cannot grow enough wheat to feed his family. The right to be free from federal regulation is not absolute, and yields to the imperative that Congress is free to forge national solutions to national problems.”

The Supreme Court is the final arbiter on the ACA, but it is reassuring that a judge well-respected by conservatives, applying the prior reasoning of Justice Scalia and the recommended analytical approach of Chief Justice Roberts found the ACA to be compliant with constitutional strictures.

The full ruling is available online, and this document is available for downloading as well.

Sevensky v. Holder Sevensky v. Holder.pdf

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