Appellate Smackdown and the Future of Obamacare

Zachary Gappa

8/18/2011 12:01:00 AM - Zachary Gappa

The future of the Patient Protection and Affordable Care Act (PPACA - a.k.a. "Obamacare") is more in question than ever after Friday's ruling by the 11th Circuit Court of Appeals. The divided court ruled that the individual mandate is unconstitutional (The individual mandate is a part of the PPACA that forces citizens to purchase health insurance or pay a hefty penalty). Since another appellate court (the 6th Circuit) ruled in favor of Obamacare, the matter will surely be taken up by the Supreme Court next year. At this point, the greatest hope for overturning or significantly changing this federal overreach lies in the hands of the nine justices who make up our Supreme Court.

Back to this latest ruling (which you can find on The Wall Street Journal's website - all 304 pages of it). Of note is that the majority throws out the "activity vs. inactivity" question that has been bandied about by commentators over the last several months. The court draws no clear distinction between government regulating the activity of a citizen and forcing that citizen into action. On this point, they actually agree with the previous ruling by the 6th Circuit Court which upheld the PPACA.

Despite rejecting this common anti-Obamacare argument, the court still ruled that the PPACA was a massive overreach by the federal government. They dismissed the idea that the power to force a citizen to purchase a minimum amount of health insurance was covered through the government's "Commerce Clause" or "Necessary and Proper" powers. From the ruling:

"The federal government’s assertion of power, under the commerce clause, to issue an economic mandate for Americans to purchase insurance from a private company for the entire duration of their lives is unprecedented, lacks cognizable limits, and imperils our federalist structure.... This economic mandate represents a wholly novel and potentially unbounded assertion of congressional authority: the ability to compel Americans to purchase an expensive health insurance product they have elected not to buy, and to make them re-purchase that insurance product every month for their entire lives."

The court believes that there is a significant difference between the individual mandate and past federal mandates. They explain that "Americans have, historically, been subject only to a limited set of personal mandates: serving on juries, registering for the draft, filing tax returns, and responding to the census. These mandates are in the nature of duties owed to the government attendant to citizenship, and they contain clear foundations in the constitutional."

The 11th Circuit majority argues that the individual mandate can be broken off from the broader PPACA and dismissed without negating the entire package. This opinion, if upheld by the Supreme Court, has huge implications for the future of the PPACA. Obamacare is completely undermined without the individual mandate. Its guarantees of coverage for preexisting conditions alone will cripple the insurance industry if healthy Americans are not forced to participate in the system. The PPACA depends on forcing the healthy to subsidize the costs of the sick. Without the individual mandate, insurance rates will skyrocket.

If the Supreme Court agrees with the 11th Circuit Court, we are left with two primary alternatives: Either we subsidize the resultant rapidly-rising cost of insurance policies through taxation or we massively reform the PPACA.

Democrats would likely peddle the former option. This would produce something like a single-payer system that provides insurance for all by taxing all. Essentially, we would have another massive government entitlement.

Republicans would favor the latter option. If the Supreme Court eliminates the individual mandate and Republicans gain seats in the Senate (and maybe the Presidency) in the next election, watch for them to try to strip the PPACA of all significance.

The 11th Circuit Court's opinion will not be the final appellate ruling. There are two more cases that will likely make their way to separate appeals courts (3rd and 4th Circuit) within the next few months, and we are a long way from a conclusive ruling from the Supreme Court, but it is good to see at least one appellate court standing up for the Constitution. When it comes before their bench, hopefully the Supreme Court upholds our founding principles and blocks this overreach. If the individual mandate is struck down, Republicans will have an excellent opportunity to overturn the PPACA after the 2012 elections.