Fourth Circuit Upholds Employer Mandate in Affordable Care Act

A three-judge panel of the Fourth Circuit upheld the employer mandate in the Affordable Care Act.  The ruling in Liberty University v. Lew deals a significant blow to challengers of the Act's requirement that large employers provide affordable health care coverage to full-time employees and dependents or pay a fine.  Unless and until it's appealed to the full Fourth Circuit and the Supreme Court--and unless and until one or the other reverses--the ruling upholds the employer mandate.

The ruling is notable, because it says that Congress had authority under the Commerce Clause to enact the employer mandate.  (Recall that five Justices on the Supreme Court said last summer in National Federation of Independent Business v. Sebelius that Congress exceeded its authority under the Commerce Clause to enact the individual mandate.)  What's the difference?  See below.

The case is a hold-over from the Supreme Court's ruling last summer in National Federation of Independent Business v. Sebelius.  Recall that the Court in that case held that the Anti-Injunction Act did not bar a the suit challenging the individual mandate, and that the individual mandate was a valid exercise of Congress's taxing power.  The Court also remanded Liberty University to the Fourth Circuit for a ruling consistent with NFIB.  (The Fourth Circuit previously held that the Anti-Injunction Act deprived it of jurisdiction to rule on the merits and dismissed the case.)

The Fourth Circuit followed NFIB's lead and ruled that the employer mandate (like the individual mandate in NFIB) was not a "tax" for purposes of the Anti-Injunction Act.  (The court also ruled that Liberty University had standing to lodge its pre-enforcement challenge of the employer mandate, and that the individual named plaintiffs had standing to challenge the individual mandate.)

On the merits, the court ruled that the employer mandate is a valid exercise of Congress's Commerce Clause authority.  (Recall that five members of the Supreme Court in NFIB said that the individual mandate exceeded Congress's Commerce Clause authority, even if it fell within Congress's taxation power.)  What's the difference between the employer mandate and the individual mandate?  In short, unlike individuals who have not purchased health insurance, employers operate in interstate commerce, and health insurance is part of their employees' compensation package, which itself is regulable under the Commerce Clause.  The Fourth Circuit explained:

To begin, we note that unlike the individual mandate . . . the employer mandate does not seek to create commerce in order to regulate it.  In contrast to individuals, all employers are, by their very nature, engaged in economic activity.  All employers are in the market for labor.  And to the extent that the employer mandate compels employers in interstate commerce to do something, it does not compel them to "become active in commerce," [NFIB, emphasis in original]; it merely "regulate[s] existing commercial activity," id., i.e., the compensation of employees . . . .

Further, contrary to Liberty's assertion, the employer mandate does not require employers to "purchase an unwanted product." . . .  Although some employers may have to increase employee compensation (by offering new or modified health insurance coverage), employers are free to self-insure, and many do.

(Interestingly, the court dropped a footnote, note 7, that says, "We express no opinion as to whether the limitation on the commerce power announced by five justices in NFIB constitutes a holding of the Court."  We covered that topic here.)

Following NFIB, the court also upheld the individual mandate under Congress's taxing power, and applied that ruling to uphold the employer mandate under Congress's taxing power.

The court also rejected the plaintiffs' religion claims--based on the First and Fifth Amendments (equal protection) and the Religious Freedom Restoration Act.

SDS