Severability Preview

National Federation of Independent Business v. Sebelius (11-393) and Florida v. Department of Health and Human Services (11-400)

Oral argument: Wed., Mar. 28, 2012

Appealed from: United States Court of Appeals for the Eleventh Circuit (Aug. 12, 2011)

SEVERABILITY, HEALTH CARE, PATIENT PROTECTION AND AFFORDABLE CARE ACT, STANDING, CONGRESSIONAL INTENT

In 2010, Congress enacted the Patient Protection and Affordable Care Act (“Health Care Act”) and restructured the health insurance market. The Health Care Act contains a provision requiring individuals to carry a minimum amount of health insurance (“minimum coverage provision”).  The Supreme Court must decide whether the minimum coverage provision is constitutional. If the Court finds the minimum coverage provision unconstitutional, it must then determine whether it can be severed from the Health Care Act or whether the entire Health Care Act must be struck down. Petitioners, Florida, the National Federation of Independent Business, and various individuals contend that the minimum coverage cannot be severed from the Health Care Act because the intended outcome of the entire Health Care Act hinges on the economic effect of the minimum coverage provision. Respondents, the Department of Health and Human Services and Kathleen Sebelius, argue that the minimum coverage provision is severable, and the Health Care Act can function without it. A holding for the Petitioners would strike down the entire Health Care Act, whereas a holding for the Respondents would preserve the constitutional and functional sections.

Question presented

Congress effected a sweeping and comprehensive restructuring of the Nation’s health-insurance markets in the Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010), as amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 109 (2010) (collectively, the “ACA” or “Act”). But the Eleventh Circuit and the Sixth Circuit now have issued directly conflicting final judgments about the facial constitutionality of the ACA’s mandate that virtually every individual American must obtain health insurance. 26 U.S.C. § 5000A. Moreover, despite the fact that the mandate is a “requirement” that Congress itself deemed “essential” to the Act’s new insurance regulations, 42 U.S.C. § 18091(a)(2)(I), the Eleventh Circuit held that the mandate is severable from the remainder of the Act.

The question presented is whether the ACA must be invalidated in its entirety because it is non-severable from the minimum coverage provision that exceeds Congress’ limited and enumerated powers under the Constitution.

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Issue

If the minimum coverage provision of the Patient Protection and Affordable Care Act is held to be unconstitutional, must the entire Health Care Act be invalidated or is the minimum coverage provision severable from the Health Care Act?

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Facts

To reform systemic dysfunction in the health insurance industry and extend health care access to 50 million uninsured Americans, Congress passed the Patient Protection and Affordable Care Act (“Health Care Act”). See Florida v. U.S. Dep’t of Health and Human Services, 648 F.3d 1235, 1244, 1246 (11th Cir. 2011). The Health Care Act contains an individual mandate that requires that every individual purchase “minimum essential coverage” or pay a tax penalty (“minimum coverage provision”).  See id. at 1251. The Eleventh Circuit found the minimum coverage provision unconstitutional, severed it from the rest of the Health Care Act, and upheld the remainder of the Health Care Act without the minimum coverage provision. See id. at 1328. If the Supreme Court finds that the minimum coverage provision is unconstitutional, then it will determine whether and how the minimum coverage provision can be severed the Health Care Act.

The question of the severability of the minimum coverage provision first arose after Judge Vinson sitting in the United States District Court for the Northern District of Florida, struck down the entire Health Care Act holding that the minimum coverage provision was unconstitutional but necessary for the intended operation of the law. See Florida v. U.S. Dep’t of Health and Human Services, 780 F.Supp. 2d 1256, 1299–1300 (N. Dist. Fla. 2011). Judge Vinson stated that an unconstitutional provision is only severable if a court determines that the other provisions would function in the way Congress intended despite the severed provision. See id. at 1300–01. Judge Vinson found that Congress would not have passed the other provisions of the Health Care Act without the minimum coverage provision. See id. at 1300–01. Judge Vinson based this decision on the fact that, before passing the Health Care Act, Congress removed a severability provision from an earlier draft of the law. See id. at 1301. Further, Judge Vinson reasoned that, by removing the severability clause, Congress showed that the Health Care Act needed the minimum coverage provision to function properly. See id. Additionally, Judge Vinson found that the defendants, the Department of Health and Human Services, conceded that the minimum coverage provision was necessary for implementing the regulatory core of the Act to reform the health insurance industry. See id. at 1301–02. Against this legislative and litigation background, Judge Vinson held that the minimum coverage provision could not be severed. See id. at 1304–05.

The Eleventh Circuit affirmed the district court’s holding that the minimum coverage provision was unconstitutional; however, the Eleventh Circuit reversed on the issue of severability. See 648 F.3d 1235, 1322, 1328. The Eleventh Circuit found that the minimum coverage provision was severable, and the remainder of the Health Care Act was still valid and functional. See id. at 1322, 1327. The Eleventh Circuit held that the absence of a severability clause was insufficient to rebut the strong presumption in favor of severability. See id. at 1322–23.

After the Eleventh Circuit’s decision, twenty-six states, two private individuals, and the National Federation of Independent Business, filed two separate petitions asking the Supreme Court to reverse the decision regarding severability and reinstate the wholesale invalidation of the Act. See Petition for Writ of Certiorari, Twenty-Six States, Florida, et al. v. Dep’t of H&HS, et al. (No. 11-400) and Petition for Writ of Certiorari, NFIB, Nat’l Fed’n of Indep. Bus. v. Sebelius, et al. (No. 11-393). The Supreme Court granted certiorari and consolidated the two petitions. The Court allocated 90 minutes of oral arguments on the issue of severability. See Writ of Certiorari, Nat’l Fed’n of Indep. Bus. v. Sebelius, et al. (No. 11-393) and Florida, et al. v. Dep’t of H&HS, et al. (No. 11-400).

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Discussion

Petitioners, the twenty-six states (collectively “the States”), the National Federation of Independent Business, Kaj Ahlburg, and Mary Brown (collectively “NFIB”), argue that the Health Care Act cannot function without the minimum coverage provision. See Brief for Petitioners, Twenty-Six States (“State Petitioners”) at 35; Brief for Petitioners, National Federation of Independent Business (“Private Petitioners”) at 36–37. In contrast, Respondents Sebelius and the Department of Health and Human Services, et al., (collectively “HHS”) argue that, even if the minimum coverage provision is unconstitutional, the rest of the Health Care Act, with the exception of the guaranteed issue and community-rating provisions, can function effectively and should remain valid. See Brief for Respondents, U.S. Department of Health and Human Services and Kathleen Sebelius at 13–14.

Separation of Powers

Several senators contend that the minimum coverage provision cannot be severed from the Health Care Act. See Brief of Amici Curiae Members of the United States Senate in Support of Petitioners at 10. They argue that, without a severability provision in the Health Care Act, judicial severance would interfere with Congressional power to enact complex laws with interrelated goals. See id. in Support of Petitioners at 26–27, 38. The NFIB echoes the senators’ concern adding that severing the Health Care Act would construct a law that Congress had not passed. See Brief for Private Petitioners at 30. Together, the Texas Public Policy Foundation and the Cato Institute assert that the harsh lessons from state-level Health Care reforms that lacked a minimum coverage provision informed the Congressional decision to include the minimum coverage provision as the key to effective reform. See Brief of Amici Curiae Texas Public Policy Foundation and Cato Institute in Support of Petitioners at 29–30. The Texas Public Policy Foundation and the Cato Institute argue that disregarding the intricate dependency of the insurance regulations on the minimum coverage provision eviscerates Congress’s role in representing Americans by replacing the deliberations of elected officials with the wisdom of a few tenured justices. See id. at 12–13, 19.

In contrast, California and ten other states contend that invalidating the entire Health Care Act would not only unduly constrain the Congressional power to legislate but also thwart ongoing state-level efforts to comply with the Act. See Brief of Amici Curiae States of California, et al., in Support of Respondents at 13–14. For example, they argue that some states have already relied on the Health Care Act and constructed the infrastructure necessary to implement the Medicare and Medicaid provisions before the minimum coverage provision takes effect. See id. at 16–18. These states argue that Congress would have prohibited such state preparations had Congress anticipated that a court would invalidate the entire Health Care Act after finding one provision unconstitutional. See id. at 23–24.  Invalidating the entire Health Care Act would not only unduly interfere with Congress’s encouragement of state reforms but also needlessly waste state resources and harm the long-term health planning of private individuals. See id.  Highlighting the diversity of the provisions and regulatory aims in the Health Care Act, the American Medical Student Association argues that the presumption for severability protects Congress, working as the elected representatives of Americans, against a judicial intrusion into considerations and decisions that are largely political. See Brief of Amici Curiae American Medical Student Association, et al., in Support of Respondents at 13–14.

Adverse Selection in the Health Insurance Industry        

The American Civil Rights Union (“ACRU”) contends that severing the minimum coverage provision from the Act would trigger an unintended “death spiral” to health insurance markets by removing incentives for individuals to obtain insurance prior to becoming ill. See Brief of Amicus Curiae American Civil Rights Union in Support of Petitioners at 2, 4–5. The ACRU states that the prohibition on varying insurance premiums or denying insurance altogether based on preexisting health conditions requires a minimum coverage provision in order to to spread the cost of Health Care among a large population. See id. at 4–5. The ACRU argues that severing the minimum coverage provision but permitting the remainder of the Health Care Act to take effect would encourage people to discontinue their health insurance policies until they were in dire need of Health Care; this would then place the increased costs of providing health insurance on an ever-shrinking pool of insured people. See id. at 5. Similarly, a group of economists characterize the minimum coverage provision as a necessary subsidy for insurance companies to help offset the harsh economic effects of the Health Care Act. See Brief of Amici Curiae Economists in Support of Petitioners at 8–9. According to these economists, without the minimum coverage provision, insurance companies would face at least $715 billion in costs from 2012 through 2021 due to the Health Care Act. See id. at 9.

American Public Health Association (“APHA”) argues that striking down the entire Health Care Act would prevent Americans from receiving the benefits of Health Care reform that stand independently from the insurance reform. See Brief of Amici Curiae American Public Health Association, et al., in Support of Respondent at 24. APHA contends that the Health Care Act reforms Health Care far beyond insurance regulations, pointing to the creation of the National Prevention, Health Promotion and Public Health Council, the promotion of wellness and disease prevention, and national standards for evaluating diabetes programs. See id. at 20–21. Additionally, the American Association of Retired Persons (“AARP”) argues that striking down the Health Care Act because of the failure of an insurance provision would rob senior citizens of federal community-based programming, anti-abuse measures, and regulations of nursing homes. See Brief of Amici Curiae AARP, et al., in Support of Respondent at 28–29, 36–37. Emphasizing that not all provisions pertain to regulating insurance, Missouri adds that striking down all the provisions of the Health Care Act, including break times for nursing mothers, reforms on student loans, and standards for nutrition labeling at restaurants, would deprive Americans of benefits of Health Care reform already in effect. See Brief of Amicus Curiae Missouri Attorney General in Support of Respondent at 4, 5–6.

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Analysis

The Supreme Court will determine whether, if declared unconstitutional, the minimum coverage provision of the Patient Protection and Affordable Care Act (“Health Care Act”) can be severed from the remainder of the Health Care Act. Petitioners, twenty-six states (“States”), the National Federation of Independent Business (“NFIB”), and individuals, argue that the minimum coverage provision is not severable from the rest of the Act and if the minimum coverage provision is unconstitutional, the Court should invalidate the entire Health Care Act. See Brief for Petitioners, Twenty-Six States (“State Petitioners”) at 59; Brief for Petitioners, National Federation of Independent Business (“Private Petitioners”) at 61. Respondents, the Department of Health and Human Services and Kathleen Sebelius, Secretary of Health and Human Services (collectively “HHS”), contend that the States and NFIB do not have standing to put the issue of severability before the Court and also that the minimum coverage provision is severable from the remainder of the Health Care Act excepting the guaranteed-issue and community-rating provisions. See Brief for Respondents, U.S. Department of Health and Human Services and Kathleen Sebelius at 26.

 

Severability

 

NFIB and the States argue that the minimum coverage provision is not severable from the remainder of the Health Care Act. See Brief for Private Petitioners at 61; Brief for State Petitioners at 59. This is so, NFIB contends, because a court must look to legislative intent to determine severability. See Brief for Private Petitioners at 29. NFIB and the States argue that Congress’ focus on the minimum coverage provision during the legislative bargaining process and the central role the provision plays to offset the economic consequences of the rest of the Health Care Act show that the Congressional intent in this case was for the entire Health Care Act to fall or stand on the basis of the constitutionality of the minimum coverage provision. See id. at 36–41, 56; Brief for State Petitioners at 42–46.

 

HHS agrees that severability is determined by looking at the legislative intent. See Brief for Respondents at 42. However, HHS asserts that the fact that many of the provisions of the Health Care Act are already in effect already and functioning show that the remainder of the Health Care Act can make Health Care more affordable independent of the minimum coverage provision. and the legislature intended the entire Health Care Act to become operative regardless of whether the minimum coverage provision was declared unconstitutional. See id. at 13–14. HHS argues that the Health Care Act does many other things that are “wholly unrelated” to the minimum coverage provision, like better enforcing drug prices. See id. at 30–31. HHS concedes that if the minimum coverage provision is unconstitutional, the community-rating and guaranteed-issue provisions cannot function as Congress intended, but the rest of the Health Care Act should be implemented. See id. at 26. However, HHS contends that the minimum coverage provision is constitutional and argues that because NFIB and the States do not have standing, the Court should not make a decision on these provisions now. See id.

 

Standing

 

Before the Court can decide an issue of severability, the petitioners must have standing. HHS argues that the States and NFIB do not have standing to raise severability of the minimum coverage provision from the Health Care Act. See Brief for Respondents at 16. HHS contends that the States and NFIB must show that they are injured by each provision of the Health Care Act before they can attempt to invalidate the entire Act through a severability challenge. See id. HHS argues that merely being affected by one provision of the Act is not enough to provide the States and NFIB standing to challenge the entire Health Care Act. See id. at 14. HHS maintains that aside from the minimum coverage provision, the only other part of the Health Care Act that affects the petitioners is the Medicaid provision. See id. at 14–15. To strengthen their argument, HHS contends that an adversarial process is necessary to ensure that all issues are fully litigated and a truly adversarial process cannot be achieved unless the parties are injured by the entire Act, providing them motivation to strongly advocate their positions with respect to each provision. See id. at 18. HHS argues that without the injury requirement the Court’s resulting opinion advisory opinion, which is forbidden by Article III. See id. at 22.

The States counter that they do have standing to raise the issue of severability before the Court. See Brief for State Petitioners at 27–28. The States point out that deciding whether parts of an act can be severed is a way for a court to provide a remedy related to a single provision—not a way of deciding the merits of a claim of injury about the rest of that act—so a party only needs to be affected by one part of an act to be able to address whether the others can stand alone. See id. at 27–29. Indeed, the States contend that the main purpose of allowing courts to decide on severability is to protect Congressional intent, and a party who raises severability merely helps the court determine legislative intent. See id. at 28–29. Because the States maintain that they have standing to challenge the constitutionality of the minimum coverage provision, they argue that this puts them in a position to help the Court determine Congress’ intent in enacting the Health Care Act—the States argue that it should not matter whether they are independently affected by the other provisions of the Health Care Act. See id. at 28–29. Their challenge to severability in this case is not actually a challenge to the other provisions of the Health Care Act, the States argue, but rather an argument about which remedy would best effectuate Congressional intent. See id. at 27, 34.

HHS argues that the Court’s prior holding in Printz v. United States demonstrates that the States and NFIB should not have standing in this case. See Brief for Respondents at 17, 20–21. HHS maintains that Printz requires the actual parties in interest to be before the court and that there is no exception to this requirement for severability. See id. at 17. Because the States and NFIB are not the parties in interest for the severability issue, HHS argues, Printz should preclude the Court from deciding severability in this case. See id. at 19–21.

 

The States counter that Printz’s holding should be limited to the facts of that case and allow the States to raise severability in the instant case. See Brief for State Petitioners at 31–32. In Printz, neither of the parties had raised severability at any stage of the proceedings, and it was thus an undeveloped issue when presented to the Court, and neither of the parties had an interest in severability. See id. at 31. The States argue that in contrast to Printz, the issue of severability has already been developed in the prior proceedings and that the parties have an interest in severability. See id. at 31–32.

Congressional Intent

NFIB argues that the relevant inquiry in determining whether an unconstitutional provision is severable from the rest of a statute is whether Congress would have chosen to enact the statute without that provision. See Brief for Private Petitioners at 30. NFIB contends that the mere fact that the rest of an act can function does not mean that Congress would have wanted to enact it without the unconstitutional provision. See id. at 30–31. NIFB argues that in determining whether a provision is severable a court must look to the nature of the provision, its role in the legislative bargaining process, the context in which the legislation was enacted, the economic connection between that provision and the rest of the act, and the impact of that provision on the main goal of the act to determine whether Congress would have enacted the statute in the same way. See id. at 31. NFIB maintains that courts should determine whether the unconstitutional provision is part of a “single, coherent policy” such that removing it would undermine the goals of the entire statute, and if it is, the court should invalidate the whole act. See id. at 29, 45.

In contrast, HHS argues that if a provision is invalidated, the Court should sever those unconstitutional provisions and retain those provisions that can function independently and promote Congress’ main goal in creating the Health Care Act. See Brief for Respondents at 27. HHS argues that the court must decide severability by engaging in statutory construction rather than trying to predict how the political process might have played out if Congress had attempted to pass the act without the unconstitutional provision. See id. at 41. HHS contends that the States and NFIB have the burden of showing that it is “evident” that Congress would have wanted the other provisions to fall if the minimum coverage provision was unconstitutional—HHS argues there is a presumption that the Act is severable unless petitioners can show otherwise. See id. at 28, 31–32. HHS argues that the States and NFIB have not met this burden. See id.at 27. HHS contends that the minimum coverage provision is not scheduled to come into effect until 2014, but a number of other provisions in the Act are already functioning, indicating that Congress intended the provisions to operate independently. See id. at 29.

NFIB argues that the Health Care Act cannot function as Congress intended without the minimum coverage provision. See Brief for Private Petitioners at 39–40. NFIB and the States argue that the objective of the Health Care Act was to make health care more affordable, and Congress achieved this goal by structuring the Health Care Act to create a delicate balance of supply and demand for health care. See id. at 36–37, 41; Brief for State Petitioners at 35. NFIB and the States argue that the minimum coverage provision increases the demand for health care, and the guaranteed-issue and community-rating provisions increase the supply by disallowing discriminatory pricing for people who are more likely to need medical treatment. See Brief for State Petitioners at 35; Brief for Private Petitioners at 36–38. The States and NFIB maintain that Congress’s goal can only be effectuated if both supply and demand increase together. See Brief for State Petitioners at 35; Brief for Private Petitioners at 36–37. As a matter of economics, the States and NFIB argue that insurance premiums will only decrease if the other provisions increase supply at the same time as the minimum coverage provision increases demand. See Brief for State Petitioners at 35; Brief for Private Petitioners at 36–37. NFIB further argues that the minimum coverage provision offsets the consequences of all the other provisions of the Act, not just the community-rating and guaranteed-issue provisions. See Brief for Private Petitioners at 41. Choosing to strike down these two provisions rather than any of the other provisions in the Act is a policy choice that the Court should leave to Congress to avoid overstepping its power. See id.

HHS argues that Congress’s real aim in creating the Act was to increase the availability of affordable health care, not merely to balance supply and demand. See Brief for Respondents at 32–33. HHS contends that only the guaranteed-issue and community-rating provisions cannot function without the minimum coverage provision—all the other provisions in the Health Care Act independently advance affordable coverage, and they do not rely on the minimum coverage provision to achieve this goal. See id. at 33–34, 54. As examples, HHS cites that the government has previously expanded Medicaid coverage without a corresponding minimum coverage provision, and employer-responsibility regulations have also previously been proposed without any discussion of a minimum coverage provision. See id. at 34–35. Additionally, HHS argues, the fact that Congress included so many provisions that advance its goal suggest that Congress is committed to keeping as many of those provisions as possible. See id. at 34.

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Conclusion

If the Supreme Court finds the minimum coverage provision unconstitutional, it will determine whether to strike down all or just one or several sections of the Patient Protection and Affordable Care Act. Petitioners argue that because the minimum coverage provision is essential for the functioning of the entire Health Care Act, all the provisions should fall together. In contrast, Respondents argue that, if the Supreme Court holds the minimum coverage provision unconstitutional, it should sever the provision from the Health Care Act and so preserve the provisions which Congress would have enacted regardless of the minimum coverage provision.

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Authors

Prepared by: Meredith Carpenter and Charlotte Davis

Edited by: Kelly Halford  

Additional Sources

• The Examiner: Historic Obamacare Battle at Supreme Court in 2012 (Nov. 2011)
• Grassroot Institute of Hawaii, Cody Hensarling: Severability & Obamacare (Jan. 9, 2012)
• Kenneth A. Klukowski: Severability Doctrine: How Much of a Statute Should Federal Courts Invalidate? (Fall 2011)

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