Implementing Health Reform: Establishment Clause ACA Challenge Rejected (Updated)

August 17 Update: No Rehearing For Origination Clause Challenges To ACA Individual And Employer Mandates

On August 17, 2015, the federal Fifth Circuit Court of Appeals finished off another Affordable Care Act challenge, denying en banc (full circuit court) review in Hotze v. Burwell. Dr. Steven Hotze and Braidwood Management sued, claiming that the ACA’s individual and employer mandates were invalid because the ACA was adopted in violation of the Constitution’s Origination Clause. The Origination Clause provides that bills to raise revenue must originate in the House of Representatives, although they can be amended in the Senate.

The district court rejected their claim, holding that the ACA was not a bill to raise revenue and did in fact originate in the House, although it was amended by the Senate. A three judge panel of the Fifth Circuit court of appeals affirmed the dismissal of the case, but for a different reason; it held that the federal courts had no jurisdiction over the case. The panel concluded that Dr. Hotze had not alleged that he lacked minimum essential coverage (in fact he seemed to have employer coverage) and thus did not properly claim that he was injured by the individual mandate. Further, the panel held that the Tax Anti-injunction Act barred Braidwood Management from attempting to enjoin the employer mandate because it was a tax.

The plaintiffs asked the full 5^th Circuit to review the case. On August 17, 2015, the full circuit refused to review the panel decision, with the order stating that none of the fifteen active judges on the court (two-thirds of whom are Republican appointees) had requested reconsideration of the panel decision

The District of Columbia Court of Appeals rejected a petition for rehearing in another Origination Clause challenge, in Sissel v. Burwell, on August 7, 2015. Although the D.C. court was divided on its reasoning, all judges who signed opinions agreed that the ACA does not violate the Origination Clause. With the Fifth Circuit bringing the Hotze case to an end, the constitutionality of the ACA under the Origination Clause would seem to be conclusively determined.

Original Post

On August 14, 2015, yet another federal appellate court tossed yet another Affordable Care Act challenge. Jeffrey Cutler sued the Department of Health and Human Services. He claimed that the religious conscience exception to the individual mandate violated the First Amendment Establishment Clause by allowing members of certain religious sects that object to being covered by insurance for religious reasons to be free from the mandate to which he—a non-observant person who objected to the mandate for personal reasons—was subject. He also challenged, under the Equal Protection Clause of the Constitution, the administration’s transitional policy; he contended the policy permitted individuals in some states to continue to obtain coverage that did not comply with ACA requirements through 2016, while his coverage had been cancelled.

The lower court dismissed Mr. Cutler’s lawsuit, in part based on a finding that Mr. Cutler was not injured by either the religious exception or by the transitional policy and thus had no standing to challenge them. The District of Columbia Circuit Court of Appeals disagreed with the lower court as to Mr. Cutler’s standing to challenge the religious conscience exception. Mr. Cutler was arguably injured by the exception, it held, insofar as he was in fact subject to the penalty to which members of certain religious groups were not.

But the court went on to hold that the exception does not violate the Establishment clause. The ACA exception is essentially the same as exceptions that have long existed in the Social Security and Medicare statutes and that have repeatedly been upheld by the federal courts, including the Supreme Court. The conscience exception specifically exempts only religious groups, like the Amish, that have long-standing objections to receiving the benefit of any government insurance program and that have a well-established history of providing an alternative safety net for their members so that they will not burden the taxpayers. The law thus appropriately protects deeply held beliefs without burdening non-believers.

The court, on the other hand, affirmed the lower court holding that Mr. Cutler did not have standing to challenge the transitional policy on Equal Protection grounds. In fact Mr. Cutler, the court held, was not injured by the transitional policy, which allowed his insurer to continue to cover him. Rather, Mr. Cutler was injured by the private decision of his insurer–for which the government was not answerable–to cancel his coverage.

Delinquent Risk Adjustment Payments

Also on August 14, CMS released an FAQ at its REGTAP website explaining that if an insurer fails to pay its risk adjustment assessment, CMS will reduce risk adjustment payments to—rather than increasing risk adjustment collections from–other insurers. CMS will also pursue debt collection processes against the delinquent insurer. Insurers whose payments are reduced will be able to reflect this in their next year’s risk corridor and medical loss ratio filings.