Whether the controversial individual mandate contained in the new health care law can even be challenged at this time was the subject of debate during the first of three days of oral argument before the U.S. Supreme court on the Affordable Care Act’s (ACA) constitutionality. Under the individual responsibility provisions of the new law, most people will be required to purchase health insurance by 2014 or be subject to a penalty. The issue considered on Monday was whether the parties contesting the legality of the individual mandate have standing to bring a lawsuit in the first instance. Specifically, the question is whether the Anti-Injunction Act (AIA) – which provides that “no suit for the purpose of restraining the assessment or collection of any tax shall be maintained in any court by any person” – bars the individual mandate challenge because no individual penalty has yet been assessed. While it seems unlikely, if the Court were to ultimately decide – as the Fourth Circuit did in Liberty University v. Geithner – that the penalty is a tax and the AIA applies, a lawsuit challenging the individual mandate would not ripen until 2015 at the earliest when the IRS assesses the first penalties under the ACA.
The tone of the questioning during Monday’s session, however, indicates that the Court is not inclined to punt the issue for another three years. Both sides in the case at issue, U.S. Department of Health and Human Services v. Florida, argued that the AIA does not apply in this matter, and that the Court has jurisdiction to decide this case now. Attorney Gregory Katsas, arguing on behalf of 26 state attorneys general, the National Federation of Independent Business and four private individuals, and Solicitor General Donald Verrilli Jr., who represents the United States, both asserted that the individual mandate is enforced by a penalty, not a tax, and is therefore not subject to the AIA. Another argument made was that even if the penalty amounted to a tax for AIA purposes, the statute does not preclude all tax challenges.
Because both parties in this case were in agreement on the AIA issue, the Court appointed attorney Robert Long to argue that the statute does, indeed, apply in this matter. Among his arguments in favor of applying the AIA is that the penalty – which is calculated as a percentage of the individual’s income and paid to the IRS – “bears the key indicia of a tax.” During oral argument Long stated:
The Anti-Injunction Act uses the term "tax"; it doesn't define it. Somewhat to my surprise, "tax" is not defined anywhere in the Internal Revenue Code. In about the time that Congress passed the Anti-Injunction Act, tax had a very broad definition. It's broad enough to include this exaction, which is codified in the Internal Revenue Code. It's part of the taxpayers' annual income tax return. The amount of the liability and whether you owe the liability is based in part on your income. It's assessed and collected by the IRS.
Some of the justices did not seem persuaded by this argument. Since the general intent of the AIA is to ensure that the government can collect the revenues it needs to function without the delay of lawsuits, some expressed doubt that the individual mandate penalty would serve this purpose. According to Justice Ginsburg, the purpose of ACA’s penalty is not to raise revenue. She explained that the AIA “does not apply to penalties that are designed to induce compliance with the law rather than to raise revenue. And this [the individual mandate] is not a revenue-raising measure, because, if it's successful . . . nobody will pay the penalty and there will be no revenue to raise.”
Justice Ginsburg also brought up the point, made by the respondents in this case, that they are contesting not the penalty but the individual mandate itself: “This is a suit that is challenging the must-buy provision, and the argument is made that, if, indeed, ‘must-buy’ is constitutional, than these complainants will not resist the penalty.” Long disagreed with this argument, stating that the parties “clearly challenge both the minimum coverage requirement and the penalty . . .in this case I don't think you can separate the minimum coverage requirement from the penalty because the penalty is the sole means of enforcing the minimum coverage requirement.”
Justice Scalia also seemed reluctant to postpone consideration of the matter on jurisdictional grounds. He noted that the Court generally construes limitations on jurisdiction narrowly. “We had a principle that ousters of jurisdiction are . . . narrowly construed, that, unless it's clear, courts are not deprived of jurisdiction, and I find it hard to think that this is clear.” Justice Sotomayor appeared to echo this position: “regardless of how we define jurisdictional statutes versus claim processing statutes in recent times, isn't the fairer statement that Congress has accepted that in the extraordinary case we will hear the case?”
In general, several of the justices appeared to either view the penalty as separate from a tax as defined under the AIA, or if a tax, still subject to review.
Among other reasons why the penalty is not a tax for AIA purposes, Solicitor General Donald Verrilli Jr. argued, is that “there . . . needs to be textural instruction in the statute that this penalty should be treated as a tax for Anti-Injunction Act purposes, and that's what is lacking here.” Verrilli, however, argued that while the penalty was not a tax for AIA purposes, it was nonetheless within Congress’s taxing authority. While agreeing with Verrilli that the AIA is not a bar to the proceedings, attorney Katsas deviated from the U.S.’s position that the mandate and penalty are inextricably bound. During argument, Katsas stated that “the purpose of this lawsuit is to challenge a requirement -- a Federal requirement to buy health insurance. That requirement itself is not a tax. And for that reason alone, we think the Anti-Injunction Act doesn't apply.” Following this reasoning, a person who is subject to the mandate but not subject to the penalty would have standing to bring suit.
Chief Justice Roberts took issue with this view, stating that “the idea that the mandate is something separate from whether you want to call it a penalty or tax just doesn't seem to make much sense.” He explained further: “It's a command. A mandate is a command. If there is nothing behind the command. It's sort of well what happens if you don't file the mandate? And the answer is nothing. It seems very artificial to separate the punishment from the crime.”
Justice Sotomayor wondered how the state parties in this lawsuit have standing to content the individual mandate matter. Specifically, she asked how the states’ challenge to the Medicaid expansion provisions in ACA gives the states “standing to challenge an obligation that is not imposed on the State in any way?” Katsas responded that “the principal theory for State standing is the States are challenging the mandate because the mandate injures them when people are forced to enroll in Medicaid.”
Overall, the justices appeared reluctant to relinquish jurisdiction over this matter, although their position is far from definitive at this point.
On Tuesday the Court will hear arguments on what many contend is the “main” issue in this lawsuit: whether the individual mandate itself is constitutional.
Links to the audio recording of Monday’s argument and to the written transcript can be found here.
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