Update on Constitutional Challenges to Individual Coverage Mandate Under the Federal Health Care Reform Law


Two federal Courts of Appeals had reached opposite conclusions in constitutional challenges to the individual coverage mandate effective in 2014 under the Patient Protection and Affordable Care Act (PPACA). The 11th Circuit Court of Appeals has found the individual coverage mandate to be unconstitutional; the Sixth Circuit has found it to be constitutional. Constitutional challenges to the individual mandate will ultimately be heard by the U.S. Supreme Court, possibly as early as the term beginning in October 2011.

The Individual Mandate and Tax Penalty

Beginning in 2014, PPACA imposes penalties on virtually everyone who does not maintain health insurance coverage. The penalty in 2014 will be the greater of $95, or 1 percent of household income in excess of the tax filing threshold. In 2015, the penalty will increase to the greater of $325, or 2 percent of household income in excess of the tax filing threshold. In 2016, the applicable penalty triggers will be $695, or 2.5 percent of household income in excess of the tax filing threshold. Thereafter, the flat dollar penalty will be adjusted for inflation. The penalty for children younger than age 18 is half the adult penalty. The household penalty is capped at 300 percent of the annual flat dollar amount applicable to adults. 26 U.S.C. § 5000A.

Federalism and the 11th Circuit Decision

Most recently, and as was widely expected, the 11th Circuit found the individual mandate to be unconstitutional. State of Florida v. U.S. Dept. of Health and Human Services, No. 11-11021, 2011 U.S. App. LEXIS 16806 (11th Cir. August 12, 2011). In Florida v. HHS, Florida was joined 24 states, the National Federation of Individual Businesses and two individuals. The federal district court for the Northern District of Florida had found the individual mandate to be unconstitutional and struck down PPACA in its entirety. The 11th Circuit reversed the lower court on the severability issue.

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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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