Affordable Care Act Arguments: Severability

by Ice Miller LLP
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On Wednesday, March 28, 2012, nearly two years to the day after 26 states, four individuals and the National Federation of Independent Business (collectively, the petitioners) filed a lawsuit challenging the constitutionality of several provisions of the Patient Protection and Affordable Care Act of 2010 (the Act), including, perhaps most importantly, the minimum coverage provision (commonly referred to as the individual mandate), the Supreme Court of the United States (the Court) held the third day of oral arguments. The first session focused on a determination of whether, in the event the individual mandate was found to be unconstitutional, the rest of the Act is severable and can stand alone.

The Parties' Positions on Severability

In the event that the individual mandate is found to be unconstitutional, the federal government argues that the Act, minus the guarantee issue and community rating provisions, should stand. The "lion's share of the Act," the government argues, has nothing to do with the individual mandate provision. The guarantee issue and community rating provisions, the government concedes, are essential to the individual mandate provision because, without it, insurers would have an adverse selection problem. Additionally, Congress explicitly noted in the Act that the guarantee issue and community ratings provisions were essential to the individual mandate provision. The other provisions, many of which are already in effect several years before the individual mandate provision is scheduled to take effect are not essential, the government argues, and wholly unrelated to the individual mandate. The government noted that the word essential was conspicuously left out of the Titles of the Act that address these other wholly unrelated provisions. Thus, they argue, Congress could not possibly have intended the extraordinary disruption that a finding of total inseverability would have on these provisions if the individual mandate, not scheduled to take effect until 2014, was invalidated.

In the event that the individual mandate is found to be unconstitutional, the petitioners argue that the entire Act should be invalidated because the individual mandate was the core or heart of the Act. All of the other provisions, they argue, were included to strike a balance between the provisions designed to ensure a supply adequate to meet the demand created by the mandate, all enacted in an effort to achieve "Congress' overarching objective of near-universal insurance coverage." On the demand side, the petitioners argue that Congress enacted the individual mandate to force individuals who do not want insurance to obtain it, even if they are unlikely to need it, making it more affordable for insurers to provide insurance to higher risk, higher cost individuals because everyone is in the risk pool. On the supply side, the petitioners argue that Congress enacted a series of measures that included insurance market regulations (including the guarantee issue and community rating provisions), health insurance exchanges, subsidies, employer regulations and an expansion of Medicaid to increase the supply of a combination of private, employer-based and public insurance, guaranteeing that everyone, including individuals who have historically been unable to obtain insurance, would have insurance coverage available to them. Petitioners point to the text of the Act which deemed the mandate essential to the regulatory scheme it intended to create. Petitioners argue that even seemingly unrelated aspects of the Act all work together to achieve Congress' goal of near-universal coverage because these provisions and the series of revenue offsets they create are part of the delicate fiscal balance that Congress designed the Act to achieve.

Ultimately, the challenge to the severability of the individual mandate provision from the rest of the Act is fundamentally a question of congressional intent. Would Congress have intended the entire Act to fall if the individual mandate is found unconstitutional? Are all of the provisions so inextricably intertwined that Congress could not have intended any of the provisions to survive if the individual mandate is struck down or should some of the provisions be saved? Or, did Congress explicitly show its intent that certain provisions are wholly unrelated by allowing these provisions to function independently of the individual mandate as evidenced by the fact many of these provisions are in operation now, years in advance of the 2014 scheduled effective date of the individual mandate?

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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