Virginia health reform suit avoids dismissal

A federal judge has declined to dismiss Virginia's lawsuit challenging the national health reform law's requirement that individuals obtain health insurance.

Judge Henry E. Hudson of the U.S. District Court for the Eastern District of Virginia did not decide the merits of Virginia's claim in his 32-page ruling on Aug. 2, but said the case deserved to be argued in court. No federal court has clarified "whether or not Congress has the power to regulate -- and tax -- a citizen's decision not to participate in interstate commerce," he wrote.

The national health reform law will require nearly all U.S. residents to have health coverage by 2014 or pay a tax penalty. Hudson wrote that the national insurance mandate at the heart of the issue "literally forges new ground and extends commerce clause powers beyond its current high watermark."

Advocates for the health reform law said the ruling was on procedural grounds and that their argument will prevail. The judge's action is "not based upon anything approaching a full consideration of the issues, which is yet to come," said Walter Dellinger, a former assistant attorney general and chair of the appellate practice at O'Melveny & Meyers in Washington, D.C.

"We fully expect that the court will ultimately uphold the law," said Ron Pollack, executive director of Families USA, a health consumer advocacy organization.

Hudson will hear oral arguments on Oct. 18, with a ruling expected in November.

Virginia Attorney General Ken Cuccinelli said on Aug. 2: "We recognize there are plenty of rounds to go. However, I'd rather go to round two having won round one."

Cuccinelli filed the lawsuit because the national law conflicts with the Virginia Health Care Freedom Act. The act, which was adopted by the Legislature in March just days before the national health reform law, asserts that no Virginian will be required to have insurance coverage and shall not be forced to pay penalties for not doing so.

"This lawsuit is not about health care; it's about our freedom and about standing up and calling on the federal government to follow the ultimate law of the land -- the Constitution," Cuccinelli said.

Attorneys for Health and Human Services Secretary Kathleen Sebelius argued that all Americans must purchase health care services at some point. The health reform law's individual mandate ensures those services will be paid for fairly, is a central part of health reform and is within Congress' power to regulate, they said. HHS attorneys in May asked the judge to dismiss the Virginia lawsuit based in part on such arguments.

The administration attorneys also argued that the federal government can penalize people for not filing taxes, registering for Selective Service or reporting for military duty. Cuccinelli said Congress does have those constitutional powers but that they cannot be applied to people who don't acquire health insurance.

The ruling is significant because it negates the health reform advocates' argument that the law is undeniably constitutional, said Randy Barnett, a professor of constitutional law at Georgetown University Law Center in Washington, D.C.

Dellinger said states often have sued the federal government after it enacts significant legislation, such as the Social Security Act and the Civil Rights Act, and that judges are usually unwilling to stand up to Congress. Barnett agreed but added that he hasn't heard of a law that attracted lawsuits from at least 21 states, as the health reform law has. "This is not an everyday occurrence."

If allowed to stand, the federal mandate's tax penalty will begin in 2014 at $95 annually or 1% of income for individuals, whichever is higher. The figures increase to $695, or 2.5% of income starting in 2016 if an individual fails to obtain health coverage. The penalty is capped at the average nationwide cost of less-expensive plans available in health insurance exchanges operating by 2014.

Cuccinelli expects the case to reach the U.S. Supreme Court in two or three years. The law, which contains no severance clauses, would be struck down entirely if part of it is found unconstitutional, he said. Barnett said that would not happen automatically, but would be a decision of the court based on certain standards.