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The Eleventh Circuit Holds Individual Mandate to be Unconstitutional But Severable

Posted in PPACA

On August 12, 2011, the United States Court of Appeals for the Eleventh Circuit became the second U.S. appellate court to consider the constitutionality of the “individual mandate” under the Patient Protection and Affordable Care Act (“PPACA”) for individuals to maintain health insurance or pay a monetary penalty.  While the Sixth Circuit upheld the constitutionality of the individual mandate, the Eleventh Circuit held, in a 2-1 decision, that the individual mandate is unconstitutional, supported by neither Congress’s power under the Taxing and Spending Clause nor under the Commerce Clause.  In so holding, the Court concluded, “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.”

Despite affirming the U.S. District Court for the Northern District of Florida holding with respect to the unconstitutionality of the individual mandate, the appellate court reversed the district court’s holding that the individual mandate was not severable from the remainder of PPACA.  Rather, the court held that the individual mandate was severable because it concluded that Congress would have enacted the remaining provisions independently of the individual mandate.

The court also held that PPACA’s expansion of Medicaid eligibility and subsidies is constitutional.  The 26 State plaintiffs had argued that the expansion was “unduly coercive,” but the court rejected this argument “not without serious thought and some hesitation.”  The court found several factors as determinative.  First, Congress had warned participating states that it has the right to make changes to the Medicaid program.  Second, the federal government will bear most of the costs of the expansion other than incidental administrative costs.  Third, participating states have four years to decide whether to continue participating in Medicaid.  Fourth, a state’s refusal to participate in the expansion does not mean it will be guaranteed to lose all of its Medicaid funding but such decision was in the discretion of the U.S. Department of Health and Human Services.  Based on these factors, the court believed that Medicaid-participating states have a “real choice” to participate in the expansion.  Accordingly, the court concluded, “Where an entity has a real choice, there can be no coercion.”

After this decision, it becomes more likely that the U.S. Supreme Court will need to resolve the differences of opinion among the lower courts.  Stay tuned for future developments.