HHS SCOTUS Mandate Question

8/3/2019 HHS SCOTUS Mandate Question

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No. 11-398

In the Supreme Court of the United States

DEPARTMENT OF H EALTH AND HUMAN SERVICES ,ET AL ., PETITIONERS

v.

STATE OF F LORIDA , ET AL .

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR PETITIONERS(Minimum Coverage Provision)

GEORGE W. M ADISONGeneral Counsel

Department of the TreasuryWashington, D.C. 20220

M. P ATRICIA SMITH

Solicitor of Labor Department of Labor Washington, D.C. 20210

WILLIAM B. SCHULTZ Acting General Counsel

KENNETH Y. CHOE Deputy General Counsel Department of Health and

Human ServicesWashington, D.C. 20201

DONALD B. V ERRILLI , J R. Solicitor General

Counsel of RecordTONY WEST

Assistant Attorney GeneralE DWIN S. KNEEDLER

Deputy Solicitor GeneralBETH S. BRINKMANN

Deputy Assistant AttorneyGeneral

J OSEPH R. P ALMORE Assistant to the Solicitor

GeneralM ARK B. STERN A LISA B. KLEINS AMANTHA L. CHAIFETZD ANA K AERSVANG

Attorneys Department of JusticeWashington, D.C. 20530-0001

[email protected](202) 514-2217


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QUESTION PRESENTED

The minimum coverage provision of the Patient Pro-tection and Affordable Care Act, Pub. L. No. 111-148,124 Stat. 119, as amended by the Health Care and Edu-cation Reconciliation Act of 2010, Pub. L. No. 111-152,124 Stat. 1029, provides that, beginning in 2014, non-exempted federal income taxpayers who fail to maintaina minimum level of health insurance for themselves ortheir dependents will owe a penalty, calculated in parton the basis of the taxpayers household income and re-ported on the taxpayers federal income tax return, foreach month in which coverage is not maintained in thetaxable year. 26 U.S.C.A. 5000A.

The question presented is whether the minimum cov-erage provision is a valid exercise of Congresss powersunder Article I of the Constitution.

(I)


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TABLE OF CONTENTSPage

Opinions below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Constitutional and statutory provisions involved . . . . . . . . . . . 2

Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 A. Statutory background . . . . . . . . . . . . . . . . . . . . . . . . 2

1. Health insurance is the customary meansof payment for services in the health caremarket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. The uninsured participate in the healthcare market and shift substantial risksand costs to other market participants . . . . . . . 7

3. The Affordable Care Act . . . . . . . . . . . . . . . . . . . 9B. Prior health care reform efforts . . . . . . . . . . . . . . . 12C. Proceedings below . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Summary of argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Argument:

I. The minimum coverage provision is a valid exerciseof Congresss commerce power . . . . . . . . . . . . . . . . . . . 21 A. Congress has broad power under the Com-

merce and Necessary and Proper Clauses toenact economic regulation . . . . . . . . . . . . . . . . . . . . 21

B. The minimum coverage provision is an inte-gral part of a comprehensive scheme of eco-nomic regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

C. The minimum coverage provision itself regu-lates economic conduct with a substantialeffect on interstate commerce . . . . . . . . . . . . . . . . . 33

(III)


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IV

Table of ContentsContinued: Page

1. The minimum coverage provision reason-ably regulates the financing of participa-

tion in the health care market and is areasonable means to prevent the shiftingof costs and risks to other market partici-pants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

2. The court of appeals misapprehended thenature of the minimum coverage provi-sion, the mechanics of health insurance,and this courts precedents . . . . . . . . . . . . . . . . 37

3. The minimum coverage provision is fullyconsistent with Lopez and Morrison andthe allocation of authority between thefederal and state governments . . . . . . . . . . . . . 45

II. The minimum coverage provision is independentlyauthorized by Congresss taxing power . . . . . . . . . . . . 52 A. The minimum coverage provision operates as

a tax law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52B. The validity of an assessment under the tax-

ing power does not depend on whether it isdenominated a tax . . . . . . . . . . . . . . . . . . . . . . . . . . . 56

C. The placement of the predicate for impositionof the tax penalty in a separate subsectiondoes not take the minimum coverage provi-sion outside Congresss taxing power . . . . . . . . . . 59

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 Appendix Constitutional and statutory provisions . . . . . 1a


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V

TABLE OF AUTHORITIES

Cases: Page

Bob Jones University v. Simon , 416 U.S. 725 (1974) . . . . 55Carter v. Carter Coal Co. , 298 U.S. 238 (1936) . . . . . . . . . . 27Consolidated Edison Co. v. NLRB , 305 U.S. 197

(1938) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42, 49 Davis v. Michigan Dept of the Treasury , 489 U.S. 803

(1989) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 District of Columbia v. Greater Wash. Bd. of Trade ,

506 U.S. 125 (1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Edward J. DeBartolo Corp. v. Florida Gulf Coast

Bldg. & Constr. Trades Council , 485 U.S. 568

(1988) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 FDA v. Brown & Williamson Tobacco Corp. , 529 U.S.120 (2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Gonzales v. Raich , 545 U.S. 1 (2005) . . . . . . 22, 26, 42, 43, 46 Heart of Atlanta Motel, Inc. v. United States ,

379 U.S. 241 (1964) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Hodel v. Indiana , 452 U.S. 314 (1981) . . . . . . . . . . . . . . 18, 25 Katzenbach v. McClung , 379 U.S. 294 (1964) . . . . . . . . 25, 42 Lawrence v. State Tax Commn , 286 U.S. 276 (1932) . . . . 57 Liberty University, Inc. v. Geithner , No. 10-2347,

2011 WL 3962915 (4th Cir. Sept. 8, 2011), petitionfor cert. pending, No. 11-438 (filed Oct. 7, 2011) . . . 52, 57

License Tax Cases , 72 U.S. (5 Wall.) 462 (1866) . . . . . . . . 57 Mandeville Island Farms, Inc. v. American Crystal

Sugar Co. , 334 U.S. 219 (1948) . . . . . . . . . . . . . . . . . . . . 41 Maryland v. Wirtz , 392 U.S. 183 (1968) . . . . . . . . . . . . . . . 42 McCulloch v. Maryland , 17 U.S. (4 Wheat.) 316

(1819) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 23, 35, 52


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VI

CasesContinued: Page

NLRB v. Jones & Laughlin Steel Corp. , 301 U.S. 1(1937) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 43, 49

Nelson v. Sears, Roebuck & Co. , 312 U.S. 359(1941) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 52, 57

New York v. United States , 505 U.S. 144 (1992) . . 57, 61, 62 Perez v. United States , 402 U.S. 146 (1971) . . . . . . . . . . . . 25 Preseault v. ICC , 494 U.S. 1 (1990) . . . . . . . . . . . . . . . . . . . 32 Ricks v. Budge , 64 P.2d 208 (Utah 1937) . . . . . . . . . . . . . . 39 Roberts v. Galen of Va., Inc. , 525 U.S. 249 (1999) . . . . . . . 40 Rostker v. Goldberg , 453 U.S. 57 (1981) . . . . . . . . . . . . . . . 24 Sabri v. United States , 541 U.S. 600 (2004) . . . . . . . . . . . . 46 Seven-Sky v. Holder , 661 F.3d 1 (D.C. Cir. 2011),

petition for cert. pending, No. 11-679(filed Nov. 30, 2011) . . . . . . . . . . . . . . . . . . . . . . . . . passim

Sonzinsky v. United States , 300 U.S. 506 (1937) . . . . . 54, 55 Stafford v. Wallace , 258 U.S. 495 (1922) . . . . . . . . . . . . . . 41 Steward Mach. Co. v. Davis , 301 U.S. 548 (1937) . . . . . . . 52Thomas More Law Ctr. v. Obama , 651 F.3d 529

(6th Cir. 2011), petition for cert. pending,No. 11-117 (filed July 26, 2011) . . . . . . . . . . . . . . . passim

United States v. Chamberlin , 219 U.S. 250 (1911) . . . . . . 54United States v. Comstock , 130 S. Ct. 1949

(2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22, 23, 30, 38, 40United States v. Darby , 312 U.S. 100

(1941) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 23, 25, 31, 37United States v. Kahriger , 345 U.S. 22 (1953) . . . . . . . . . . 55United States v. Lopez , 514 U.S. 549 (1995) . . . . . . . passimUnited States v. Morrison , 529 U.S. 598 (2000) . . . 34, 45, 46


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VII

CasesContinued: Page

United States v. Rock Royal Co-operative, Inc. , 307U.S. 533 (1939) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

United States v. Sanchez , 340 U.S. 42 (1950) . . . . . 21, 54, 55United States v. South-Eastern Underwriters Assn ,

322 U.S. 533 (1944) . . . . . . . . . . . . . . . . . . . . . . . . 27, 30, 41United States v. Wrightwood Dairy Co. , 315 U.S. 110

(1942) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25Walling v. Allstate Ins. Co., 455 N.W.2d 736

(Mich. Ct. App. 1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Wickard v. Filburn , 317 U.S. 111 (1942) . . . 25, 26, 41, 49, 50Woods v. Cloyd W. Miller Co. , 333 U.S. 138 (1948) . . . . . . 59

Constitution and statutes:

U.S. Const.: Art. I, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1aCl. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Cl. 3 (Commerce Clause) . . . . . . . . . . . 17, 21, 23, 34Cl. 18 (Necessary and Proper

Clause) . . . . . . . . . . . . . . . . . . . . . . . . 17, 21, 22, 23 Anti-Injunction Act, 26 U.S.C. 7421(a) . . . . . . . . . . . . . . . . 58

Emergency Medical Treatment and Labor Act,42 U.S.C. 1395dd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Employee Retirement Income Security Act of 1974,29 U.S.C. 1001 et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

29 U.S.C. 1002(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2829 U.S.C. 1144(b)(2)(A) . . . . . . . . . . . . . . . . . . . . . . . . 2829 U.S.C. 1182 (2006 & Supp. III 2009) . . . . . . . . 5, 44a


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VIII

StatutesContinued: Page

Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029 . . . . . . . . . . . . 2

Health Insurance Portability and Accountability Actof 1996, Pub. L. No. 104-191, 110 Stat. 1936 . . . . . . . . . . 5

Patient Protection and Affordable Care Act, Pub. L.No. 111-148, 124 Stat. 119 . . . . . . . . . . . . . . . . . . . . . . . . . 2

26 U.S.C. 106 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426 U.S.C. 162 (2006 & Supp. III 2009) . . . . . . . . . . . . . . . . . . 526 U.S.C. 4974 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5626 U.S.C. 4980B(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5626 U.S.C. 6402(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

26 U.S.C. 6502 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5426 U.S.C. 7401 et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5426 U.S.C. 9707 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5642 U.S.C. 300gg-1 (2006) . . . . . . . . . . . . . . . . . . . . . . . . . 5, 47a42 U.S.C. 300gg-11(a) (2006) . . . . . . . . . . . . . . . . . . . . . . 5, 49a42 U.S.C. 1395 et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 U.S.C. 1396 et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342 U.S.C. 1396r-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 842 U.S.C. 1397aa et seq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

42 U.S.C. 2021c(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6242 U.S.C. 2021e(d)(2)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5742 U.S.C. 2021e(e)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6242 U.S.C. 2021e(e)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6249 U.S.C. 13906 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3726 U.S.C.A. 36B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 31, 5626 U.S.C.A. 45R . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 5526 U.S.C.A. 4980H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9, 55


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IX


26 U.S.C.A. 5000A . . . . . . . . . . . . . . . 12, 21, 53, 56, 60, 61, 1a

26 U.S.C.A. 5000A(a) . . . . . . . . . . . . . . . . . . . . . . . . . 53, 59, 6026 U.S.C.A. 5000A(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2126 U.S.C.A. 5000A(b)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 12, 5326 U.S.C.A. 5000A(b)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5326 U.S.C.A. 5000A(b)(3)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . 5326 U.S.C.A. 5000A(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 5326 U.S.C.A. 5000A(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1226 U.S.C.A. 5000A(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 6126 U.S.C.A. 5000A(e)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5326 U.S.C.A. 5000A(f )(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . 1226 U.S.C.A. 5000A(f )(1)(B)-(D) . . . . . . . . . . . . . . . . . . . . . . 1226 U.S.C.A. 5000A(f )(1)(E) . . . . . . . . . . . . . . . . . . . . . . . . . . 6126 U.S.C.A. 5000A(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 5326 U.S.C.A. 5000A(g)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6126 U.S.C.A. 5000A(g)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5426 U.S.C.A. 6055 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5342 U.S.C.A. 300gg(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 U.S.C.A. 300gg-1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 17a42 U.S.C.A. 300gg-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10, 20a42 U.S.C.A. 300gg-4(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 U.S.C.A. 300gg-4(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 U.S.C.A. 300gg-11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 U.S.C.A. 300gg-12 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 U.S.C.A. 300gg-14 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 U.S.C.A. 300gg-18(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1042 U.S.C.A. 1396a(a)(10)(A)(i)(VIII) . . . . . . . . . . . . . . . . . . . 9


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42 U.S.C.A. 18011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

42 U.S.C.A. 18031-18044 . . . . . . . . . . . . . . . . . . . . . . . . . 10, 3142 U.S.C.A. 18071 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3142 U.S.C.A. 18071(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1142 U.S.C.A. 18091(a)(2)(A) . . . . . . . . . . . . . . . . . . . . 18, 33, 4142 U.S.C.A. 18091(a)(2)(B) . . . . . . . . . . . . . . . . . . . . . . . . 2, 2742 U.S.C.A. 18091(a)(2)(D) . . . . . . . . . . . . . . . . . . . . . . . 16, 3042 U.S.C.A. 18091(a)(2)(E) . . . . . . . . . . . . . . . . . . . . . . . . . . . 242 U.S.C.A. 18091(a)(2)(F) . . . . . . . . . . . . . . . . . . . . . 8, 19, 3442 U.S.C.A. 18091(a)(2)(G) . . . . . . . . . . . . . . . . . . . . . . . . . . 4442 U.S.C.A. 18091(a)(2)(H) . . . . . . . . . . . . . . . . . . . . . . . . . . 2942 U.S.C.A. 18091(a)(2)(I) . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Fla. Stat. Ann. 395.1041(3)(k)(1) (West 2011) . . . . . . . . . 39Idaho Code Ann. 39-1391b (2011) . . . . . . . . . . . . . . . . . . . 39La. Rev. Stat. Ann. 40:2113.4(A) (2008) . . . . . . . . . . . . . . 39Mass. Ann. Laws ch. 111M, 2 (LexisNexis Supp.

2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16S.C. Code Ann. 44-7-260(E) (2002) . . . . . . . . . . . . . . . . . . 39Tex. Health & Safety Code Ann. (Vernon 2010):

311.022(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

311.022(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39Utah Code Ann. 26-8a-501(1) (2007) . . . . . . . . . . . . . . . . . 39 Wash. Rev. Code Ann. 70.170.060(2) (West 2011) . . . . . 39


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Miscellaneous: Page

Agency for Healthcare Research & Quality,U.S. Dept of Health & Human Servs.,

NHEA-Aligned MEPS: Projected Expendi-ture Data Files: 2002-2016 (Aug. 2009), http:// www.meps.ahrq.gov/mepsweb/data_stats/ download_data_files_detail.jsp?cboPufNumber=NHEA-Aligned%20MEPS&prfricon=yes . . . . . . . . . 4

Stuart Altman & David Shactman, Power, Politics,and Universal Health Care: The Inside Story of aCentury-Long Battle (2011) . . . . . . . . . . . . . . . . . . . . . . . 14

Kenneth J. Arrow, Uncertainty and the Welfare Eco-nomics of Medical Care , 53 Am. Econ. Rev. 941

(1963) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 Anne-Emanuelle Birn et al., Struggles for National

Health Reform in the United States , 93 Am. J.Pub. Health 86 (2003) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Matthew Buettgens et al., Why the Individual Man-date Matters: Timely Analysis of Immediate

Health Policy Issues (2010),http://www.rwjf.org/files/research/71601.pdf . . . . . . . . 32

Code of Medical Ethics of the American Medical Association (2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Sara R. Collins et al., Help on the Horizon, Findings from the Commonwealth Fund Biennial Health Insurance Survey of 2010 (2011),http://www.commonwealthfund.org/ ~/media/Files/Surveys/2011/1486_Collins_help_on_the_horizon_2010_biennial_survey_report_FINAL_31611.pdf . . . . . . . . . . . . . . . . . . 6


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MiscellaneousContinued: Page

Congressional Budget Office:

A Qualitative Analysis of the Heritage Founda-tion and Pauly Group Proposals to Restructurethe Health Insurance System (1994),http://www.cbo.gov/ftpdocs/ 48xx/doc4896/doc23.pdf . . . . . . . . . . . . . . . . . . . . . . . . 15

An Analysis of Health Insurance PremiumsUnder the Patient Protection and AffordableCare Act (Nov. 30, 2009), http://www.cbo.gov/ ftpdocs/107xx/doc10781/11-30-premiums.pdf . . . . . . 11

An Analysis of the Administrations Health Proposal (1994), http://www.cbo.gov/ ftpdocs/48xx/doc4882/doc07.pdf . . . . . . . . . . . . . . . . . 14

CBOs Analysis of the Major Health Care Legislation Enacted in March 2010(Mar. 30, 2011), http://www.cbo.gov/ ftpdocs/121xx/doc12119/03-30-HealthCareLegislation.pdf . . . . . . . . . . . . . . . . . . . . . 11

CBOs March 2011 Estimate of the Effects of the Insurance Coverage Provisions Contained inthe Patient Protection and Affordable Care Act(Mar. 18, 2011), http://www.cbo.gov/budget/

factsheets/2011b/ HealthInsuranceProvisions.pdf . . . . . . . . . . . . . . . . . 33CBOs 2011 Long-Term Budget Outlook ,

http://www.cbo.gov/ftpdocs/122xx/doc12212/ 06-21-Long-Term_Budget_Outlook.pdf . . . . . . . 3, 4, 9

Effects of Eliminating the Individual Mandate toObtain Health Insurance (June 16, 2010),http://www.cbo.gov/ftpdocs/113xx/doc11379/ Eliminate_Individual_Mandate_06_16.pdf . . . . . . . 33


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Key Issues in Analyzing Major Health Insurance Proposals (2008), http://www.cbo.gov/ ftpdocs/99xx/doc9924/12-18-KeyIssues.pdf . . . 5, 6, 28

155 Cong. Rec. (daily ed.):pp. S13,581-S15,382 (Dec. 20, 2009) . . . . . . . . . . . . . . . . 58p. S13,751 (Dec. 22, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . 58p. S13,753 (Dec. 22, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . 58p. S13,830 (Dec. 23, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . 58p. S13,832 (Dec. 23, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . 58

156 Cong. Rec. (daily ed. Mar. 21, 2010):p. H1826 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58p. H1882 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

John L. Czajka & James Mabli, Analysis of Transi-tion Events in Health Insurance Coverage (2009),http://aspe.hhs.gov/health/reports/09/ CoverageTransitions/index.pdf . . . . . . . . . . . . . . . . . . 6, 51

Expanding Consumer Choice and Addressing Ad-verse Selection Concerns in Health Insurance:

Hearing Before the Joint Economic Comm. ,108th Cong., 2d Sess. (2004) . . . . . . . . . . . . . . . . . . . . . . 36

Families USA, Hidden Health Tax: Americans Pay

a Premium (2009), http://familiesusa2.org/assets/ pdfs/hidden-health-tax.pdf . . . . . . . . . . . . . . . . . . . . . . . 7, 8

75 Fed. Reg. 45,629 (Aug. 3, 2010) . . . . . . . . . . . . . . . . . . . . . 9 47 Million and Counting: Why the Health Care Mar-

ketplace Is Broken: Hearing Before the S. Comm.on Finance , 110th Cong., 2d Sess. (2008) . . . . . . . . . 5, 39

Colin Gordon, Dead on Arrival: The Politics of Health Care in Twentieth-Century America (2003) . . 13


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John A. Graves & Sharon K. Long, Urban Inst., Health Policy Online No. 14, Why Do People Lack Health Insurance? (2006), http://www.urban.org/ UploadedPDF/411317_lack_health_ins.pdf . . . . . . . 6, 44

H.R. Rep. No. 241, 99th Cong., 1st Sess. (1985):Pt. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40Pt. 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

H.R. Rep. No. 443, 111th Cong., 2d Sess. (2010):Pt. 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58Pt. 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

Mark A. Hall, An Evaluation of New Yorks Reform

Law , 25 J. Health Pol. Poly & Law 71 (2000) . . . . . . . . 30Health Equity and Access Reform Today Act of 1993,

S. 1770, 103d Cong., 1st Sess. (1993) . . . . . . . . . . . . . . . 15John Holahan, The 2007-09 Recession and Health

Insurance Coverage , 30 Health Affairs 145 (2011) . . . . . 4International Fedn of Health Plans, 2010 Compar-

ative Price Report: Medical and Hospital Fees byCountry , http://www.ifhp.com/documents/ IFHPPricereportfinal.pdf . . . . . . . . . . . . . . . . . . . . . . . . 36

2 Samuel Johnson, Dictionary of the English Lan-

guage (4th ed. 1773) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48Letter from Douglas Elmendorf, Director, Congres-

sional Budget Office, to Nancy Pelosi, Speaker,House of Reps. (Mar. 20, 2010),http://www.cbo.gov/ftpdocs/113xx/doc11379/ amendreconProp.pdf . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

Making Health Care Work for American Families: Hearing Before the Subcomm. on Health of the House Comm. on Energy & Commerce ,111th Cong., 1st Sess. (Mar. 17, 2009) . . . . . . . . . . . . . . 30


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Wendy K. Mariner, Health Reform: Whats Insur-ance Got to Do With It? , 36 Am. J.L. & Med. 436(2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Joyce A. Martin et al., Births: Final Data for 2009 ,Natl Vital Statistics Reports, Nov. 2011,http://www.cdc.gov/nchs/data/nvsr/nvsr60/ nvsr60_01.pdf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

National Ctr. for Health Statistics,U.S. Dept of Health & Human Servs.:

DHHS Pub. No. 2011-1232, Health,United States, 2010 (2011),http://www.cdc.gov/nchs/data/hus/hus10.pdf . . . . 7

DHHS Pub. 2012-1578, Summary Health Sta-tistics for U.S. Children: National Health

Interview Survey, 2010 (2011),http://www.cdc.gov/nchs/data/series/ sr_10/sr10_247.pdf . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Ed Neuschler, Institute for Health Policy Solutions, Policy Brief on Tax Credits for the Uninsured and Maternity Care (2004), http://www.ihps.org/ pubs/2004_Jan_Tax_Credits_Maternity.pdf . . . . . . . . . . 6

Office of the Assistant Secy for Planning & Evalua-

tion, U.S. Dept of Health & Human Servs.: ASPE Issue Brief: 2.5 Million Young Adults

Gain Health Insurance Due to the Afford-able Care Act (2011), http://aspe.hhs.gov/ health/reports/2011/YoungAdultsACA/ib.pdf . . . 10


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ASPE Research Brief: The Value of Health Insurance: Few of the Uninsured Have Ade-quate Resources to Pay Potential Hospital

Bills (May 2011), http://aspe.hhs.gov/ health/reports/2011/ValueofInsurance/ rb.pdf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 8

Office of Mgmt. & Budget, Analytical Perspectives: Budget of the U.S. Government, Fiscal Year 2011(2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Payroll Tax Abuse: Hearing Before the Permanent Subcomm. on Investigations of the Sen. Comm. on Homeland Sec. & Govt Affairs , 110th Cong., 2d

Sess. (2008) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541 Steven Plitt et al., Couch on Insurance 3d (rev. ed.

2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36Presidents Comm. on Econ. Sec., The Unpublished

1935 Report on Health Insurance & Disability bythe Committee on Economic Security (Mar. 7,1935), http://www.socialsecurity.gov/history/ reports/health.html . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

J.P. Ruger, The Moral Foundations of Health Insur-ance , 100 QJM 53 (2007) . . . . . . . . . . . . . . . . . . . . . . . . . 35

Manish C. Shah & Judith M. Rosenberg, Health Care Reform in the 103d CongressA Congressional Analysis , 33 Harv. J. on Legis. 585 (1996) . . . . . . . . . . 14

Special Message to the Congress Recommendinga Comprehensive Health Program , 1945 Pub.Papers 475 (Nov. 19, 1945) . . . . . . . . . . . . . . . . . . . . . . . . 13


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Staff of the Joint Comm. on Taxation, Technical Ex- planation of the Revenue Provisions of the Rec-onciliation Act of 2010, As Amended, in Combi-nation with the Patient Protection and Afford-able Care Act (2010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Paul Starr, The Social Transformation of American Medicine (1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

U.S. Census Bureau:Current Population Survey, Annual Social and

Economic Supplement (Sept. 13, 2011), http:// www.census.gov/hhes/www/cpstables/032011/ faminc/new01_001.htm . . . . . . . . . . . . . . . . . . . . . . . . 11

Income, Poverty, and Health Insurance Coveragein the United States: 2009 , (2010), http:// www.census.gov/prod/2010pubs/p60-238.pdf . . . . . . . 7

Flint J. Wainess, The Ways and Means of National Health Care Reform, 1974 and Beyond , 25 J.Health Pol. Poly & L. 305 (1999) . . . . . . . . . . . . . . . . . . 14


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In the Supreme Court of the United States

No. 11-398DEPARTMENT OF HEALTH AND HUMAN SERVICES ,

ET AL ., PETITIONERSv.

STATE OF F LORIDA , ET AL .

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF FOR PETITIONERS

OPINIONS BELOW

The opinion of the court of appeals (Pet. App. 1a-273a) is reported at 648 F.3d 1235. The district courtsopinion on petitioners motion to dismiss (Pet. App.394a-475a) is reported at 716 F. Supp. 2d 1120. Thedistrict courts opinion on cross-motions for sum-mary judgment (Pet. App. 274a-368a) is reported at780 F. Supp. 2d 1256.

JURISDICTION

The judgment of the court of appeals was entered on August 12, 2011. The petition for a writ of certiorari wasfiled on September 28, 2011, and was granted on Novem-ber 14, 2011. The jurisdiction of this Court rests on28 U.S.C. 1254(1).

(1)


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CONSTITUTIONAL AND STATUTORYPROVISIONS INVOLVED

Pertinent constitutional and statutory provisions are

set forth in the appendix to this brief.STATEMENT

A. Statutory Background

Congress enacted the Patient Protection and Afford-able Care Act, Pub. L. No. 111-148, 124 Stat. 119 (Af-fordable Care Act or Act), 1 to address a crisis in the na-tional health care market. Spending in that market ac-counts for 17.6% of the Nations economy. 42 U.S.C.A.18091(a)(2)(B). Insurance is the customary means of payment for services in the health care market, but mil-lions of people cannot obtain insurance. Many cannotafford it, and others are denied it or charged dramati-cally higher premiums as the result of their medical his-tories.

The uninsured face enormous obstacles in obtaininghealth care services. See 42 U.S.C. 18091(a)(2)(E) (con-gressional finding noting poorer health and shorterlifespan of the uninsured). The uninsured do, however,consume health care (frequently in hospital emergencyrooms or inpatient facilities), but often they cannot payfor it. As a class, the uninsured shift tens of billionsof dollars of costs for the uncompensated care they re-ceive to other market participants annually. That cost-shifting drives up insurance premiums, which, in turn,makes insurance unaffordable to even more people. The Act breaks this cycle through a comprehensive framework of economic regulation and incentives that will im-

1 Amended by the Health Care and Education Reconciliation Act of 2010, Pub. L. No. 111-152, 124 Stat. 1029.


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prove the functioning of the national market for healthcare by regulating the terms on which insurance is of-fered, controlling costs, and rationalizing the timing and

method of payment for health care services. 1. Health insurance is the customary means of payment

for services in the health care market

The customary means by which people pay for services in the U.S. health care market is through insur-ance, either private or governmental. In 2009, paymentsby private health insurance and government programsaccounted for 84% of total spending on health care con-sumption. Congressional Budget Office (CBO), CBOs

2011 Long-Term Budget Outlook 37 ( Budget Outlook ).

Out-of-pocket expenditures accounted for only 13% of spending on health care consumption in 2009, includingpayments made to satisfy deductibles and co-paymentsas well as payments for uncovered services. Ibid . Otherprivate spending, such as philanthropy, accounted forthe remainder. Ibid.

The largest federal program providing affordableaccess to health care is Medicare, which insures virtu-ally all Americans aged 65 years or older, as well as sev-eral million others with certain disabilities. See42 U.S.C. 1395 et seq. ; Budget Outlook 37. In 2009, the

federal government spent approximately $500 billion onMedicare22% of total spending on health care con-sumption in the country. Id . at 36-37.

The federal and state governments jointly financeaccess to health care for low-income persons throughMedicaid, 42 U.S.C. 1396 et seq. , and the ChildrensHealth Insurance Program (CHIP), 42 U.S.C. 1397aaet seq . In 2009, combined spending on those programs was approximately $390 billion17% of total spending


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on health care consumption in the United States. Bud- get Outlook 36-37. Medicaid and CHIP paid for thehealth care of 37.6 million non-elderly individuals, 14.2%

of the non- elderly population. John Holahan, The 2007-09 Recession and Health Insurance Coverage , 30Health Affairs 145, 148 (2011) (Holahan).

Payments by private insurers constituted about 34%of total spending on health care consumption in 2009.

Budget Outlook 37. The vast majority of persons withprivate insurance obtain it through employers. For thenon-elderly with private health insurance, 93% of healthcare expenditures in 2009 was attributable to persons with employer-sponsored or other group coverage;only 7% percent was attributable to persons who bought

policies in the non-group market, in which a personcan purchase individual or family coverage apart froman employer or other group. Agency for HealthcareResearch & Quality, U.S. Dept of Health & Human Ser- vices (HHS), NHEA-Aligned MEPS: Projected Expen-diture Data Files: 2002-2016 , Tbls. 4H and 5H (Aug.2009). Employer-sponsored plans insured 156.2 million(59%) of the non-elderly in 2009, while non-group poli-cies covered 13.8 million (5%). Holahan 148.

For decades, the federal government has madeemployer-sponsored insurance more affordable throughfavorable tax treatment. Employees generally do notinclude as income and pay taxes on employers paymentsof their health insurance premiums, unlike most otherforms of employee compensation. 26 U.S.C. 106 (2006).This tax subsidy for employment-based health insurance was $242 billion in 2009. Office of Mgmt. & Budget, An-alytical Perspectives: Budget of the U.S. Government,

Fiscal Year 2011 , Tbl. 16:1 (2010). In addition, employ-


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ers can deduct such premium payments as business ex-penses. 26 U.S.C. 162 (2006 & Supp. III 2009).

Congress also has long regulated certain terms of

employer-sponsored health coverage. See CBO, Key Issues in Analyzing Major Health Insurance Proposals79-80 (2008) ( Key Issues ) (citing Employee RetirementIncome Security Act of 1974 (ERISA), 29 U.S.C. 1001et seq. , and Health Insurance Portability and Account-ability Act of 1996 (HIPAA), Pub. L. No. 104-191, 110Stat. 1936. For example, federal law generally barsgroup health plans from excluding individuals based onhealth status-related factors or charging differentpremiums for similarly situated employees within agroup based on such factors. 42 U.S.C. 300gg-1 (2006);

29 U.S.C. 1182 (2006 & Supp. III 2009). Federal law further requires that insurers offering coverage to smallemployers (generally defined as those with fewer than51 employees) accept all small employers that apply.42 U.S.C. 300gg-11(a) (2006).

Before the Affordable Care Act, these federal effortsto facilitate affordable access to health care services lefta significant and discrete gap. With limited exceptions,health insurance purchased in the non-group market didnot receive favorable federal tax treatment, so the pur-chasers had to bear the full costs of premiums. Key Is-sues 9. Nor did federal law generally prevent insurersin that market from varying premiums, or denying cov-erage altogether, based on an individuals medical condi-tion or history.

Without such rules, insurers deny coverage or chargehigher rates for individuals with conditions as commonas high blood pressure, asthma, ear infections, and evenpregnancy. 47 Million and Counting: Why the HealthCare Marketplace Is Broken: Hearing Before the


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S. Comm. on Finance , 110th Cong., 2d Sess. 52 (2008)(Senate Hearing) (Prof. Mark A. Hall); Ed Neuschler,

Policy Brief on Tax Credits for the Uninsured and Ma-

ternity Care 3 (2004). A recent survey estimated that35% of non-elderly adults who tried to purchase healthinsurance in the non-group market in the previous threeyears (about 9 million people) were denied coverage,charged a higher rate, or offered restricted coveragebecause of their medical condition or history. Sara R.Collins et al., Help on the Horizon, Findings from theCommonwealth Fund Biennial Health Insurance Sur-vey of 2010 xi (2011).

Because participants in the non-group market payhigher premiums and face other discriminatory insur-

ance practices, participation in that market is low. Key Issues 46. In 2009, of those non-elderly individuals whodid not work for employers offering health insurance or who were not eligible for a government insurance pro-gram, only about 20% were covered by a policy pur-chased in the non-group insurance market. Ibid . Theremaining 80% were uninsured. Ibid . These same fac-tors also may induce people with employer-sponsoredinsurance to avoid putting their insurance at risk byswitching jobs or pursuing entrepreneurial opportuni-ties. Id. at 8 & n.12.

Notwithstanding the large number of uninsured atany given time, most of the uninsured are not perma-nently without health insurance. Instead, they move inand out of coverage. See John L. Czajka & JamesMabli, Analysis of Transition Events in Health Insur-ance Coverage 1, 10 (2009) (Czajka). The coverage gapsthey experience result for the most part from the highcost of insurance and employment changesnot a belief that coverage is unnecessary. See John A. Graves &


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Sharon K. Long, Why Do People Lack Health Insur-ance? 4 (2006) (Graves).

2. The uninsured participate in the health care market

and shift substantial risks and costs to other market participants

About 50 million people lacked health insurance in2009. U.S. Census Bureau, Income, Poverty, and

Health Insurance Coverage in the United States: 2009 ,Tbl. 8, at 23 (2010). The lack of insurance coverage seri-ously impairs the ability of this class to obtain adequatehealth care. But it does not foreclose access completely.For decades, state and federal lawsreflecting deeplyrooted societal valueshave required emergency rooms

to stabilize patients who arrive with an emergency con-dition, and common-law and ethical duties restrict a phy-sicians ability to terminate a patient-physician relation-ship. See pp. 39-40, infra . The uninsured thus partici-pate actively in the market for health care services, evenif they cannot pay in full.

As a class, the uninsured consumed $116 billion of health care services in 2008. Families USA, Hidden

Health Tax: Americans Pay a Premium 2 (2009) ( Hid-den Health Tax ). In 2009, more than 55% of Americansunder age 65 who were uninsured for more than 12

months had at least one visit to a doctor or an emer-gency room; about 80% of those who were uninsured forless than 12 months did so. National Ctr. for HealthStatistics (NCHS), DHHS Pub. No. 2011-1232 , Health,United States, 2010 , Tbl. 79, at 281 (2011); see NCHS,

DHHS Pub. No. 2012-1578 , Summary Health Statistics for U.S. Children: National Health Interview Survey, 2010 , Tbl. 16, at 43 (2011). The uninsured were hospital-ized more than 2.1 million times in 2008. Office of the


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Assistant Secy for Planning & Evaluation (ASPE),HHS, ASPE Research Brief: The Value of Health In-surance: Few of the Uninsured Have Adequate Re-

sources to Pay Potential Hospital Bills 5 (May 2011)(ASPE Research Br.). The average bill for a single hos-pital stay for an uninsured person was $22,200, andnearly 60% of those hospitalizations generated billsgreater than $10,000. Id . at 5, 8.

Individuals without insurance can rarely covercharges of this magnitude. Even uninsured families with income above 400% of the federal poverty leveli.e ., starting at just under $90,000 for families of fourhave sufficient assets to pay their full hospital bills foronly 37% of their hospitalizations. ASPE Research Br.

6. In 2008, people without insurance did not pay for 63%of their health care costs. Hidden Health Tax 2, 6.Third-party sources, including government programs(like Medicaid disproportionate share hospital pay-ments, 42 U.S.C. 1396r-4) and charities, paid for 26% of their care, totaling $30.2 billion. Hidden Health Tax2, 6. Thirty-seven percent of the uninsureds health carecosts, totaling $43 billion, was uncompensated carei.e. , care received by uninsured patients but not paidfor by them or by a third party on their behalf. Ibid .;42 U.S.C.A. 18091(a)(2)(F). Health care providers passon much of the cost of that care to private insurers, which pass it on to insured participants in the healthcare market. 42 U.S.C.A. 18091(a)(2)(F ). Congressfound that this cost-shifting increases the average pre-mium for insured families by more than $1000 per year.

Ibid .; see Hidden Health Tax 2, 6.


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3. The Affordable Care Act

The Affordable Care Act establishes a framework of economic regulation and incentives that will reformhealth insurance markets, expand access to health careservices, control costs, and reduce the market-distortingeffects of cost-shifting.

First , Congress made health insurance available tomillions more low-income individuals by expanding eligi-bility for Medicaid. Beginning in 2014, Medicaid eligibil-ity will extend to anyone under age 65 with income upto 133% of the federal poverty level. 42 U.S.C.A.1396a(a)(10)(A)(i)(VIII). 2 Currently, Medicaid benefi-ciaries are primarily children in low-income families,their parents, low-income pregnant women, and low-in-come elderly or disabled individuals. Budget Outlook39. The newly eligible persons will consist primarily of low-income non-elderly adults without dependent chil-dren. Id . at 38.

Second , Congress enacted taxing measures that en-courage expansion of employer-sponsored insurance.The Act establishes new tax incentives for eligible smallbusinesses to purchase health insurance for their em-ployees. 26 U.S.C.A. 45R. In addition, the Acts em-ployer responsibility provision imposes a tax liabilityunder specified circumstances on large employers thatdo not offer adequate coverage to full-time employees.26 U.S.C.A. 4980H.

Third , Congress provided for creation of health in-surance exchanges to enable individuals and small busi-nesses to leverage their collective buying power to ob-

2 Except in Alaska and Hawaii, the federal poverty level in 2010 was$10,830 for one person and $22,050 for a family of four. 75 Fed. Reg.45,629 (Aug. 3, 2010).


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tain health insurance at rates competitive with thosecharged for typical large employer plans. 42 U.S.C.A.18031-18044.

Fourth , Congress enacted market reforms that willmake affordable insurance available to millions who can-not now obtain it. Certain reforms have already takeneffect, including provisions that bar insurers from can-celing insurance absent fraud or intentional misrepre-sentation, 42 U.S.C.A. 300gg-12, and from placing life-time caps on benefits, 42 U.S.C.A. 300gg-11. In addi-tion, the Act establishes medical loss ratios for insurers,i.e. , minimum percentages of premium revenues thatinsurers must spend on clinical services and activitiesthat improve health care quality, as opposed to adminis-

trative costs or profits. See 42 U.S.C.A. 300gg-18(b).The Act also requires insurers providing family cover-age to continue covering adult children until age 26,42 U.S.C.A. 300gg-14, which has led to an additional 2.5million young adults gaining coverage, see ASPE, HHS,

ASPE Issue Brief: 2.5 Million Young Adults Gain Health Insurance Due to the Affordable Care Act (2011).

Beginning in 2014, the Act will bar insurers fromdenying coverage to any person because of medical con-dition or history, 42 U.S.C.A. 300gg-1, 300gg-3,300gg-4(a) (guaranteed-issue provision), and fromcharging higher premiums because of a persons medicalcondition or history, 42 U.S.C.A. 300gg(a)(1), 300gg-4(b)(community-rating provision).

Fifth , Congress enacted new tax credits, cost-sharingreduction payments, and tax penalties as incentives forindividuals to maintain a minimum level of health insur-ance. The Act establishes federal premium tax creditsto assist eligible individuals with household income up to400% of the federal poverty level purchase insurance


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through the new exchanges. 26 U.S.C.A. 36B. Thesepremium tax credits, which are advanceable and fullyrefundable such that individuals with little or no income

tax liability can still benefit, are designed to make healthinsurance affordable by reducing a taxpayers net costof insurance. The credits will be available even to fami-lies with incomes at (and above) the median level, which,in 2010, was $75,148 for a family of four and $42,863 foran individual. 3 For eligible individuals with income up to250% of the federal poverty level, the Act also autho-rizes federal payments to insurers to help cover thoseindividuals cost-sharing expenses (such as co-paymentsor deductibles) for insurance obtained through an ex-change. 42 U.S.C.A. 18071(c)(2). CBO projected that

83% of people who buy non-group insurance policiesthrough exchanges will receive premium tax credits,CBOs Analysis of the Major Health Care Legislation

Enacted in March 2010 , Tbl. 3, at 18-19 (Mar. 30, 2011)(20 million of 24 million), and that those credits, on aver-age, will cover nearly two-thirds of the premium, An

Analysis of Health Insurance Premiums Under the Patient Protection and Affordable Care Act 6 (Nov. 30,2009).

In addition to those incentives through tax and othersubsidies to purchase health insurance, Congress as-signed adverse tax consequences to the alternative of attempted self-insuring. Congress provided that, begin-ning in 2014, non-exempted federal income taxpayers who fail to maintain a minimum level of health insurancecoverage for themselves or their dependents will owe atax penalty for each month in the tax year during which

3 See U.S. Census Bureau, Current Population Survey, Annual Social and Economic Supplement , Tbl. FINC-01 (Sept. 13, 2011)(Selected Characteristics of Families by Total Money Income).


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minimum coverage is not maintained. 26 U.S.C.A.5000A. The amount of the penalty will be calculated asa percentage of household income for federal income tax

purposes, subject to a floor and capped at the price of forgone insurance coverage. 26 U.S.C.A. 5000A(c). It will be reported on the taxpayers federal income taxreturn and assessed and collected by the Internal Reve-nue Service (IRS) under the Internal Revenue Codein the same manner as other assessable penalties.26 U.S.C.A. 5000A(b)(2) and (g).

Individuals who are not required to file federal in-come tax returns for a given year are exempt from thepenalty. Congress also exempted individuals whose pre-mium payments would exceed eight percent of their

household income, individuals who establish that obtain-ing coverage would be a hardship under standards to beset by the Secretary of HHS, and members of recog-nized Indian tribes. 26 U.S.C.A. 5000A(e). Individuals who qualify for religious exemptions, are incarcerated,or are undocumented aliens are not subject to the mini-mum coverage provision. 26 U.S.C.A. 5000A(d).

Various types of insurance coverage are deemed min-imum coverage, including government-sponsored pro-grams such as Medicare, Medicaid, CHIP, and programsoffered by the Departments of Defense and Veterans Affairs. 26 U.S.C.A. 5000A(f)(1)(A). Minimum coveragealso includes eligible employer-sponsored plans andplans offered in the non-group market. 26 U.S.C.A.5000A(f)(1)(B)-(D); 42 U.S.C.A 18011.

B. Prior Health Care Reform Efforts

The Act in general, and the insurance reforms in par-ticular, culminated a nearly century-long national effortto expand access to health care by making affordable


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health insurance more widely available. As early as1912, Theodore Roosevelt called for a system of socialinsurance to protect against illness and other hazards.

Anne-Emanuelle Birn et al., Struggles for National Health Reform in the United States , 93 Am. J. Pub.Health 86, 86 (2003).

President Franklin Roosevelts task force for socialsecurity legislation initially proposed a joint federal-state health insurance program financed at the statelevel by mandatory employer and employee contribu-tions and supplemented with federal subsidies. See TheUnpublished 1935 Report on Health Insurance & Dis-ability by the Committee on Economic Security (Mar. 7,1935). President Roosevelt, however, ultimately decided

to focus first on social insurance for retirement and un-employment, leaving health insurance for further study.See Colin Gordon, Dead on Arrival: The Politics of

Health Care in Twentieth-Century America 17-18(2003) (Gordon).

In 1945, President Truman called for a compulsorynational health insurance program. See Special Mes-sage to the Congress Recommending a Comprehensive

Health Program , 1945 Pub. Papers 475 (Nov. 19, 1945). Although President Truman continued to promote thatprogram after his election in 1948, the legislation wasnot enacted. See Paul Starr, The Social Transformationof American Medicine 281-286 (1982).

In 1965, Congress enacted Medicare and Medicaid, which extended health insurance to elderly and low-in-come individuals, for whom private insurance was gener-ally inaccessible. See Gordon 28. Yet the inaccessibilityof health insurance continued to command sustainednational attention in the ensuing decades.


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In 1971, President Nixon developed a national healthcare strategy that included a comprehensive nationalinsurance program. The program would have required

employers to provide employees and their dependents with health insurance and pay most of the premiums, while subsidizing coverage for families of the unem-ployed. See Stuart Altman & David Shactman, Power,

Politics, and Universal Health Care: The Inside Storyof a Century-Long Battle 42-43 (2011). A bill partlybased on an expanded proposal by President Nixon wasintroduced in Congress but substituted a new payroll taxfor a direct employer mandate and also made employeeparticipation compulsory. See Flint J. Wainess, TheWays and Means of National Health Care Reform, 1974

and Beyond , 24 J. Health Pol. Poly & L. 305, 318-319(1999). Ultimately, however, no reform legislation wasenacted during the Nixon administration.

In 1993, President Clinton proposed a Health Secu-rity Plan that would have required all employers to paypremiums on behalf of their employees and also wouldhave required all employees, except those with very low income, to contribute to their premiums. See CBO, An

Analysis of the Administrations Health Proposal , at xi(1994).

Alternatives to President Clintons plan emerged,ranging from federal single-payer plans (extendinggovernment-provided health insurance to those not eligi-ble for Medicare or Medicaid) to proposals to expandcoverage by requiring individuals to obtain insurance,coupled with tax credits to make insurance affordable.See Manish C. Shah & Judith M. Rosenberg, HealthCare Reform in the 103d CongressA Congressional

Analysis , 33 Harv. J. on Legis. 585, 595-608 (1996).Plans in the latter category were based on recommenda-


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tions by the Heritage Foundation and a group of healthcare economists and lawyers associated with the Ameri-can Enterprise Institute, both of which supported the

mandatory purchase of private insurance so that the saleof insurance and delivery of health care would take ad- vantage of private-sector market efficiencies. See gen-erally CBO, A Qualitative Analysis of the Heritage

Foundation and Pauly Group Proposals to Restructurethe Health Insurance System (1994). A leading congres-sional alternative to President Clintons plan, the HealthEquity and Access Reform Today Act of 1993, was mod-eled on those proposals. It would have mandated thateach individual who is a citizen or lawful permanentresident of the United States shall be covered under

* * * a qualified health plan, or * * * an equivalenthealth care program such as Medicare or Medicaid.S. 1770, 103d Cong., 1st Sess. 1501 (1993). NeitherPresident Clintons proposal nor the alternative bill wasenacted.

In the absence of federal reform, a number of Statesattempted their own efforts to broaden access to healthcare services by ending discriminatory insurance prac-tices. Kentucky, Maine, New Hampshire, New Jersey,New York, Vermont, and Washington enacted legisla-tion that required insurers to guarantee issue to all con-sumers in the individual market, but did not have a mini-mum coverage provision. Pet. App. 230a-231a (MarcusJ.) (quoting Am. Assn of People with Disabilities C.A. Amicus Br. 5-6). 4 Because those reforms effectively per-mitted individuals to purchase insurance after illness orinjury struck, [a]ll seven states suffered from sky-rock-

4 In the decision below, Judge Marcus concurred in part and dis-sented in part. Pet. App. 189a. This brief will identify his opinion withthe parenthetical (Marcus, J.).


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eting insurance premium costs, reductions in individuals with coverage, and reductions in insurance products andproviders. Id. at 231a (same).

By contrast, Massachusetts in 2006 successfullypaired insurance market reforms with a provision re-quiring individuals to pay a tax penalty if they do notobtain and maintain creditable coverage. Mass. Ann.Laws ch. 111M, 2 (LexisNexis Supp. 2011). Congresscited the Massachusetts law as a template for key provi-sions of the Affordable Care Act, including the minimumcoverage provision. See 42 U.S.C.A. 18091(a)(2)(D).

C. Proceedings Below

Respondents are two individuals (Mary Brown and

Kaj Ahlburg), the National Federation of IndependentBusiness (NFIB), and 26 States. They filed suit in theDistrict Court for the Northern District of Florida, chal-lenging the constitutionality of several provisions of the Act. As relevant here, the district court held that theminimum coverage provision is not a valid exercise of Congresss commerce or taxing powers. Pet. App. 278an.4, 296a-350a, 401a-424a.

A divided court of appeals affirmed that ruling. Pet. App. 1a-273a. The court held that the minimum cover-age provision is not a valid exercise of Congresss com-

merce power, id. at 63a-156a, or taxing power, id. at157a-172a. Judge Marcus dissented, concluding that theminimum coverage provision falls well within Congressscommerce power. Id. at 189a-273a.5

5 The federal government has contested the standing of the Staterespondents to challenge the minimum coverage provision, see Cert.-Stage Reply Br. 9-11, as well as NFIBs associational standing, seeMem. in Support of D.Ct. Motn to Dismiss 27-28. In the court of appeals, the federal government conceded Browns standing, Fed. Govt


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SUMMARY OF ARGUMENT

The minimum coverage provision is within Con-gresss powers under Article I of the Constitution.

1. Congress had authority under the Commerce andNecessary and Proper Clauses to enact the minimumcoverage provision. The Affordable Care Act expandsaccess to health care services and controls health carecosts by reforming the terms on which health insuranceis offered and rationalizing the timing and means of pay-ment for health care services. It does so by ending dis-criminatory insurance practices that have excluded mil-lions of individuals from coverage based on medical his-tory; creating State-based exchanges to further competi-tion and lower prices in the individual and small-groupmarket; using tax credits and penalties to expand theavailability of employer-provided coverage and makeindividual coverage more affordable; and expanding eli-gibility for Medicaid.

The minimum coverage provision plays a critical rolein that comprehensive regulatory scheme by regulatinghow health care consumption is financed. It creates anincentive for individuals to finance their participation inthe health care market by means of insurance, the cus-tomary way of paying for health care in this country,

C.A. Br. 6 n.1, but she has closed the business discussed in the declar-ation filed in the district court to support her standing. See Letter fromGregory G. Katsas, Jones Day, to Denise J. McNerney, Merits CasesClerk, Sup. Ct. of the U.S. (Dec. 7, 2011) (Katsas letter) and attached Voluntary Petition, In re Brown , No. 5:11-bk-50521 (Bankr. N.D. Fla.filed Sept. 30, 2011); J.A. 140-142. The federal government has support-ed a motion in this Court to add as parties two NFIB members whosestanding allegations are materially identical to those made by Brownbefore the filing of her bankruptcy petition. See Unopposed Motion forLeave to Add Parties Dana Grimes and David Klemencic (Jan. 4, 2012).


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and it works in tandem with the Acts other provisions toexpand the availability and affordability of health insur-ance coverage. In particular, the minimum coverage

provision is key to the viability of the Acts guaranteed-issue and community-rating provisions. Those marketreforms will end discriminatory practices under whichmillions of Americans are denied coverage, or chargedunaffordable rates, based on medical condition or his-tory. Federal law previously applied similar protectionsin the employer-sponsored group-insurance market; theguaranteed-issue and community-rating provisions thusserve to fill a gap by requiring insurers who sell policiesdirectly to individuals to operate under similar normsof non-discrimination. As demonstrated by the experi-

ence of States that attempted such reforms without aminimum coverage provision, guaranteed-issue andcommunity-rating enacted in isolation create a spiral of higher costs and reduced coverage because individualscan wait to enroll until they are sick. As Congressfound, the minimum coverage provision is thus neces-sary to achieve Congresss concededly valid objective of reforming the interstate market in health insurance.

The minimum coverage provision is within Con-gresss power to enact not only because it is a necessarycomponent of a broader scheme of interstate economicregulation, see e.g., Hodel v. Indiana , 452 U.S. 314, 329n.17 (1981); United States v. Darby , 312 U.S. 100, 119-120 (1941), but also because, within that scheme, theprovision itself regulates economic conduct with a sub-stantial effect on interstate commerce, namely the wayin which individuals finance their participation in thehealth care market, 42 U.S.C.A. 18091(a)(2)(A). Individ-uals without insurance actively participate in the healthcare market, but they pay only a fraction of the cost of


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the services they consume. As Congress found, the un-insured consumed approximately $116 billion in healthcare services in 2008, and providers were not compen-

sated for $43 billion of that total. 42 U.S.C.A.18091(a)(2)(F). Those costs are shifted to other marketparticipants, raising the average familys annual healthinsurance premiums by more than $1000. Ibid. In sum,the uninsured as a class presently externalize the risksand costs of much of their health care; the minimum cov-erage provision will require that they internalize them(or pay a tax penalty). This is classic economic regula-tion of economic conduct.

Respondents do not contest Congresss authority toregulate the financing of health care consumption. In-

stead, they contend that the particular means Congressemployeda minimum insurance coverage provisionthat applies in advance of health care consumption was beyond its power. But Congress has wide latitude when deciding how best to achieve its constitutional ob- jectives, and its decision to adopt a minimum coverageprovision was eminently reasonable. Insurance is by farthe predominant means of paying for health care in thiscountry, and that prevalence reflects the realities of themarket. Unlike costs in other markets, many healthcare costs cannot reasonably be anticipated and bud-geted for. The frequency, timing, and magnitude of anindividuals overall demand for health care services arelargely unknowable. Thus, the uninsured, as a class, payonly 37% of their health care costs out of pocket. Pet. App. 193a (Marcus, J.). Because health insurance is theprincipal mechanism for meeting these unpredictableand often expensive liabilities, it was reasonable forCongress to invoke that same mechanism to address theproblem of uncompensated care.


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The court of appeals was of the view that Congresssonly choice in enacting a minimum coverage provision was to require those who consume health care to pay

for it with insurance when doing so. Pet. App. 119a.No constitutional principle supports such a limitation onCongresss choice of means for achieving its constitu-tionally authorized ends. Congresss decision to requireinsurance in advance, rather than attempting to apply aminimum coverage provision at the point of consump-tion, was particularly reasonable in light of the economicrealities of insurance (which must be obtained before theneed to use it arises) and the well-established legal dutyof health care providers to provide emergency care re-gardless of ability to pay (which makes restrictions at

the point of sale infeasible as well as inhumane). In-deed, the court of appeals reasoning parallels the now-discarded approach to the commerce power under whichthe Court attempted to impose semantic and formalisticlimitations on its exercise.

2. Congresss taxing power provides an independentground to uphold the minimum coverage provision. Inpassing on the constitutionality of a tax law, a court isconcerned only with its practical operation, not its defi-nition or the precise form of descriptive words whichmay be applied to it. Nelson v. Sears, Roebuck & Co. ,312 U.S. 359, 363 (1941) (citation omitted). The practicaloperation of the minimum coverage provision is as a taxlaw. The only consequences of a failure to maintain min-imum coverage are tax consequences: non-exemptedfederal income taxpayers will have increased tax liabilityfor those months in which they fail to maintain minimumcoverage for themselves or their dependents. That addi-tional tax liability will be calculated on the basis of thetaxpayers household income (subject to a floor and a


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cap), reported on the taxpayers federal income tax re-turn, and collected by the IRS.

The fact that the minimum coverage provisionlike

longstanding tax provisions such as the exclusion of employer-paid health insurance premiums from employ-ees taxable incomeis intended to encourage healthinsurance coverage has no bearing on the taxing powerinquiry. It is well settled that a tax does not cease to be valid merely because it regulates, discourages, or evendefinitely deters the activities taxed. United States v.

Sanchez , 340 U.S. 42, 44 (1950).Likewise, that Congress used the word penalty in

the minimum coverage provision, 26 U.S.C.A. 5000A(b),rather than tax, is immaterial to whether it was a

proper exercise of Congresss power over taxation. Sotoo is the fact that Section 5000A includes the predicatefor the penalty in a different subsection than those gov-erning the penaltys calculation, assessment, and collec-tion.

ARGUMENT

I. THE MINIMUM COVERAGE PROVISION IS A VALIDEXERCISE OF CONGRESSS COMMERCE POWER

A. Congress Has Broad Power Under The Commerce AndNecessary And Proper Clauses To Enact Economic Reg-

ulation1. The Constitution grants Congress the power [t]o

regulate Commerce * * * among the several States. Art. I, 8, Cl. 3. [T]he power to regulate commerce isthe power to enact all appropriate legislation for itsprotection and advancement; to adopt measures to pro-mote its growth and insure its safety; to foster, protect,control and restrain. NLRB v. Jones & Laughlin


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Steel Corp. , 301 U.S. 1, 36-37 (1937) (internal citationsomitted).

In addition to regulating the channels of interstate

commerce and the instrumentalities of interstate com-merce, and persons or things in interstate commerce,Congress may regulate activities that substantiallyaffect interstate commerce. Gonzales v. Raich ,545 U.S. 1, 16-17 (2005). When Congress acts in thisthird category, it has the power to regulate purely localactivities that are part of an economic class of activitiesthat have a substantial effect on interstate commerce.

Id. at 17. And [w]hen Congress decides that the totalincidence of a practice poses a threat to a national mar-ket, it may regulate the entire class. Ibid. (citation

omitted). In reviewing such a determination, theCourts task * * * is a modest one. Id. at 22. TheCourt need not determine whether [the regulated] ac-tivities, taken in the aggregate, substantially affect in-terstate commerce in fact, but only whether a rationalbasis exists for so concluding. Ibid. (citation omitted).

The Necessary and Proper Clause, which authorizesCongress to make all Laws which shall be necessaryand proper for carrying into Execution its other enu-merated powers, Art. I, 8, Cl. 18, also grants Con-gress broad authority to enact federal legislation.United States v. Comstock , 130 S. Ct. 1949, 1956 (2010);see Raich , 545 U.S. at 39 (Scalia, J., concurring in the judgment). While the federal government is one of enu-merated powers, a government, entrusted with suchpowers must also be entrusted with ample means fortheir execution. Comstock , 130 S. Ct. at 1956 (quoting

McCulloch v. Maryland , 17 U.S. (4 Wheat.) 316, 408(1819)). Accordingly, the Necessary and Proper Clausemakes clear that the Constitutions grants of specific


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federal legislative authority are accompanied by broadpower to enact laws that are convenient, or useful orconducive, to the authoritys beneficial exercise. Ibid.

(quoting McCulloch , 17 U.S. (4 Wheat.) at 413, 418).2. Respondents do not contend that the AffordableCare Acts comprehensive market reforms and the endsthose reforms advance are beyond Congresss powersunder the Commerce Clause and the Necessary andProper Clause. Respondents do not even dispute thatCongress may accomplish those ends through the meansof requiring individuals to maintain health insurance inorder to receive health care services. Instead, they chal-lenge only one particular feature of the means Congresschose: application of the minimum coverage provision

before, rather than at, the point of consumption of health care. Yet, as the Court has recognized since thetime of Chief Justice Marshall, if the end be legiti-mate, McCulloch , 17 U.S. (4 Wheat.) at 421, Congresssauthority is at its apogee when it determines whatmeans to deploy to achieve that end. See Comstock , 130S. Ct. at 1956; United States v. Darby , 312 U.S. 100, 121(1941); McCulloch , 17 U.S. (4 Wheat.) at 409-410.

The Acts minimum coverage provision is a particu-larly well-adapted means of accomplishing Congresssconcededly legitimate ends. It is necessary to effectuateCongresss comprehensive reforms of the insurancemarket, and is itself an economic regulation of the tim-ing and method of financing the purchase of health careservices. In both of these respects, the minimum cover-age provision regulates economic activity that substan-tially affects interstate commerce. Its links to interstatecommerce are tangible, direct, and strong. See Com-stock , 130 S. Ct. at 1967 (Kennedy, J., concurring). It istherefore well within the established scope of Congresss


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power. See United States v. Lopez , 514 U.S. 549, 560(1995).

Whenever called upon to judge the constitutionality

of an Act of Congressthe gravest and most delicateduty that this Court is called upon to performtheCourt accords great weight to the decisions of Con-gress. Rostker v. Goldberg , 453 U.S. 57, 64 (1981) (ci-tations omitted). Congress enacted the Affordable Care Act, and chose to include the minimum coverage provi-sion, after years of careful consideration and after a vig-orous national debate. That was a policy choice the Con-stitution entrusts the democratically accountableBranches to make, and the Court should respect it.

B. The Minimum Coverage Provision Is An Integral PartOf A Comprehensive Scheme Of Economic Regulation

The minimum coverage provision is integral to the Affordable Care Acts insurance reforms. Those re-forms are part of the Acts broad framework of economicregulation and incentives designed to address the termson which health insurance is offered, rationalize the tim-ing and method of payment for health care services, ex-pand access to health care, and reduce shifting of risksand costs. That framework builds upon decades of fed-eral involvement in this enormous and highly regulated

segment of the national economy. The Act and the pre-existing federal statutory structure on which it buildscomprehensively address economic conduct having asubstantial effect on interstate commerce and are there-fore unquestionably within the scope of Congresss com-merce power. The minimum coverage provision is nec-essary to make effective the Acts core reforms of theinsurance market, i.e. , the guaranteed-issue andcommunity-rating provisions. And the minimum cover-


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age provision itself regulates economic conduct withsubstantial effects on interstate commercethe mannerin which individuals finance and pay for services in the

health care market. Even considered in isolation, there-fore, the provision is well within the commerce power.See pp. 33-52, infra . Because the provision is necessaryto make the Acts reforms effective, and is an independ-ently valid economic regulation, it is plainly constitu-tional.

1. In determining whether a challenged statutoryprovision is a permissible exercise of the commercepower, the Court considers its role as part of a broadereconomic regulatory scheme. To sustain provisions thatare part of a complex regulatory program such as es-

tablished by the [Affordable Care] Act * * * [i]t isenough that the challenged provisions are an integralpart of the regulatory program and that the regulatoryscheme when considered as a whole is within the com-merce power. Hodel v. Indiana , 452 U.S. 314, 329 n.17(1981) (citing Heart of Atlanta Motel, Inc. v. United

States , 379 U.S. 241, 262 (1964), Katzenbach v. McClung ,379 U.S. 294, 303-304 (1964), Perez v. United States ,402 U.S. 146, 154-156 (1971), Wickard v. Filburn ,317 U.S. 111, 127-128 (1942), and Darby , 312 U.S. at123). The Court has therefore many times held that thepower of Congress to regulate interstate commerce ex-tends to the regulation through legislative action of ac-tivities intrastate which have a substantial effect on thecommerce or the exercise of the Congressional power over it . Darby , 312 U.S. at 119-120 (emphasis added);see United States v. Wrightwood Dairy Co. , 315 U.S.110, 118-120 (1942) (Where Congress has the authorityto regulate interstate commerce, it possesses everypower needed to make that regulation effective.).


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For example, in Wickard the Court upheld the fed-eral regulation of wheat that was neither sold [n]orintended to be sold but instead was intended for use

only on a single farm. 317 U.S. at 119, 129. The Courtheld that Congress had power under the CommerceClause to regulate the interstate market in wheat, andit upheld regulation of the non-commercial home-grown wheat because exercise of that authority was integral tothe larger regulatory scheme. Id. at 128-129. InWickard , the potential disruption of Congresss inter-state regulation, and not only the effect that personalconsumption of wheat had on interstate commerce, justi-fied Congresss regulation of that conduct. Raich ,545 U.S. at 37 n.2 (Scalia, J., concurring in the judg-

ment).Indeed, Congress may regulate even noneconomiclocal activity if that regulation is a necessary part of amore general regulation of interstate commerce.

Raich , 545 U.S. at 37 (Scalia, J., concurring in the judg-ment) (citing Lopez , 514 U.S. at 561)). That is not apower that threatens to obliterate the line betweenwhat is truly national and what is truly local, id. at 38(quoting Lopez , 514 U.S. at 567-568), because Congresscan exercise it only when enacting comprehensive regu-lation that is within its commerce power. See Seven-Sky v. Holder , 661 F.3d 1, 21 (D.C. Cir. 2011) (Edwards, J.,concurring), petition for cert. pending, No. 11-679 (filedNov. 30, 2011). And where (as here) Congress regulateseconomic conduct to effectuate a comprehensive scheme,see pp. 33-52, infra , it acts well within the full scope of its authority. In the modern era of Commerce Clause jurisprudence beginning with Jones & Laughlin Steel ,the Court has not once invalidated a provision enactedby Congress as part of a comprehensive scheme of na-


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tional economic regulation. Compare Carter v. Carter Coal Co. , 298 U.S. 238, 297-310 (1936).

2. The minimum coverage provision is an integral

part of the Acts comprehensive regulation of the marketin health care and health care financing. In particular,it is essential to the Acts reform of discriminatory prac-tices in the individual insurance market. The healthcare sector occupies a dominant position in the Americaneconomy. As Congress found, [n]ational health spend-ing is projected to increase from $2,500,000,000,000,or 17.6 percent of the economy, in 2009 to$4,700,000,000,000 in 2019. 42 U.S.C.A. 18091(a)(2)(B).Private health insurance spending [was] projected to be$854,000,000,000 in 2009, and pays for medical supplies,

drugs, and equipment that are shipped in interstate com-merce. Ibid. As Congress further found, [s]ince mosthealth insurance is sold by national or regional healthinsurance companies, health insurance is sold in inter-state commerce and claims payments flow through inter-state commerce. Ibid. ; see United States v. South-

Eastern Underwriters Assn , 322 U.S. 533, 539-553(1944).

The Act supplements the already-pervasive involve-ment by the federal government in the health care sec-tor, both as a direct payer and as a regulator andsubsidizer of private insurance. See pp. 3-5, supra (dis-cussing Medicare, Medicaid, CHIP, and tax subsidies foremployer-provided insurance). ERISA, for example,sets out a comprehensive system for the federal regula-tion of private employee benefit plans, including * * *any plan, fund, or program maintained for the purposeof providing medical or other health benefits for employ-ees or their beneficiaries through the purchase of insur-ance or otherwise. District of Columbia v. Greater


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Wash. Bd. of Trade , 506 U.S. 125, 127 (1992) (quoting29 U.S.C. 1002(1)). ERISAs pre-emption provisionassures that federal regulation of covered plans will be

exclusive, ibid. , subject to specified exceptions such asthat for state regulation of insurance, see 29 U.S.C.1144(b)(2)(A). In addition, through ERISA and HIPAA,a group health plan may not exclude individuals basedon health status-related factors or charge differentpremiums for similarly situated employees based onsuch factors. See p. 5, supra .

Most people have health insurance through coveragethat is federally financed, subsidized, or regulated, in-cluding Medicare, Medicaid, and employer plans. In2009, the only health insurance option available to the

45 million people who were not eligible for governmentprograms or employer plans was the non-group mar-ket. Key Issues 46. Of this group, nine million pur-chased insurance and the remaining 36 million were un-insured. Ibid.

Insurers in the non-group market have generallybeen free to deny coverage or vary premiums based onan applicants medical condition or history. As a result,approximately thirty-six percent of applicants in themarket for individual health insurance are denied cover-age, charged a substantially higher premium, or offeredonly limited coverage that excludes pre-existing condi-tions. Thomas More Law Ctr. v. Obama , 651 F.3d 529,546 (6th Cir. 2011) (Martin, J.), petition for cert. pend-ing, No. 11-117 (filed July 26, 2011). Along with restric-tive underwriting practices, high administrative costs inthis market have drastically limited access to coverage.

The guaranteed-issue and community-rating provi-sions of the Affordable Care Act remove those obstaclesto coverage and extend to the non-group market norms


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of non-discrimination parallel to those applicable togroup health plans. But achieving those results in theindividual insurance market required different regula-

tory tools than those for employer-based plans. In par-ticular, Congress found that without a minimum cover-age provision, many individuals would wait to purchasehealth insurance until they needed care, taking advan-tage of the Acts guaranteed-issue and community-rating provisions, 42 U.S.C.A. 18091(a)(2)(I), therebydriving up costs in the non-group market (and, indeed,threatening the viability of that market). Congresstherefore determined that the minimum coverage provi-sion is essential to creating effective health insurancemarkets in which improved health insurance products

that are guaranteed issue and do not exclude coverageof pre-existing conditions can be sold. Ibid. Notingthat [u]nder [ERISA], the Public Health Service Act,and this Act, the Federal Government has a significantrole in regulating health insurance, Congress furtherfound that the minimum coverage provision is an essen-tial part of this larger regulation of economic activity,and that the absence of the requirement would under-cut Federal regulation of the health insurance market.42 U.S.C.A. 18091(a)(2)(H) (internal citations omitted). 6

Ample evidence before Congress supported its con-clusion that the minimum coverage provision is indis-pensable to the viability of the Acts guaranteed-issueand community-rating reforms, which were unquestion-

6 Congress also found that, [b]y significantly increasing health in-surance coverage, the minimum coverage provision, together with theother provisions of this Act, will minimize * * * adverse selection[,]broaden the health insurance risk pool to include healthy individuals who could otherwise exploit the system, and, in turn, lower healthinsurance premiums. 42 U.S.C.A. 18091(a)(2)(I).


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ably within Congresss commerce power to enact. See South-Eastern Underwriters Assn , 322 U.S. at 539-553;see also Comstock , 130 S. Ct. at 1967 (Kennedy, J., con-

curring in the judgment) (discussing a demonstratedlink in fact, based on empirical demonstration). Forexample, citing New Jerseys experience, Princeton Uni- versity Professor Uwe Reinhardt explained that [i]t is well known that community-rating and guaranteed issuecoupled with voluntary insurance tends to lead to adeath spiral of individual insurance. Making HealthCare Work for American Families: Hearing Before the

Subcomm. on Health of the House Comm. on Energy &Commerce, 111th Cong., 1st Sess. 10 (Mar. 17, 2009). Inthe wake of such legislation in New York without a mini-

mum coverage provision, [t]here was a dramatic exodusof indemnity insurers from New Yorks individual mar-ket. Mark A. Hall, An Evaluation of New Yorks Re-

form Law , 25 J. Health Pol. Poly & L. 71, 91-92 (2000);see Pet. App. 230a-231a (Marcus, J.) (discussing similarfailures in Kentucky, Maine, New Hampshire, Vermont,and Washington).

In contrast, Congress found that Massachusettsavoided these perils by enacting a minimum coverageprovision as part of broader insurance reforms. ThatMassachusetts law has strengthened privateemployer-based coverage: despite the economic down-turn, the number of workers offered employer-basedcoverage has actually increased. 42 U.S.C.A.18091(a)(2)(D). There is therefore substantial supportfor Congresss conclusion that the minimum coverageprovision is necessary to the end of regulating insur-ers underwriting practices without running insurers outof business. Pet. App. 231a (Marcus, J.).


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3. More broadly, the minimum coverage provisionand the insurance reforms for the non-group market willcontribute to the success of other measures in the Af-

fordable Care Act that further the Acts goals in other ways. For example, the Act provides for the creation of exchanges, either by a State (or a group of States) or thefederal government, to enable individuals and smallbusinesses to leverage their collective buying power toobtain insurance at rates competitive with those of typi-cal large employer plans. 42 U.S.C.A. 18031-18044.These exchanges will function as an organized andtransparent marketplace for the purchase of health in-surance where individuals and employers * * * canshop and compare health insurance options. H.R. Rep.

No. 443, 111th Cong., 2d Sess. Pt. 2, at 976 (2010) (2010House Report) (quotation marks and footnote omitted).Insurers offering policies in the exchanges must comply with the Acts insurance market reforms; Congress thuscontemplated that all insurers in the exchanges wouldcompete [not] based on risk selection but insteadbased on quality and efficiency. Id. at 975-976; cf.

Darby , 312 U.S. at 115 (Congress can use its commercepower to restrict competition on grounds injurious to* * * commerce). The exchanges would be less effec-tive in promoting competition and lowering costs with-out those reforms.

To take another example, the Act will provide sub-stantial tax credits for insurance purchased by eligibletaxpayers in the insurance exchanges, 26 U.S.C.A. 36B,and federal cost-sharing reduction payments to defrayeligible individuals co-payments and deductibles inplans purchased through an exchange, 42 U.S.C.A.18071. Those tax credits and payments will subsidizemany individuals who maintain insurance coverage,


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while the minimum coverage provision operates in paral-lel by requiring payments to the government by thosenon-exempted individuals who do not maintain coverage.

The minimum coverage provision similarly complementsprovisions of the Act (as well as pre-existing measures)that encourage employers to offer health insurance totheir employees. See pp. 4-5, 9, supra . It provides anextra incentive for employees to seek and accept, andemployers to offer, coverage through the workplace.See Matthew Buettgens et al., Why the Individual Man-date Matters: Timely Analysis of Immediate Health

Policy Issues 5 (2010) (Act without minimum coverageprovision would result in nearly seven million fewer individuals covered by employer-sponsored insurance than

Act with it).In sum, the Act closes a gap that has underminedCongresss longstanding system of regulation and finan-cial incentives in the health care market and that hasimpeded the ability of millions of Americans to obtainservices in that market. The minimum coverage provi-sion is key to the insurance reforms that were designedto fill that gap. The provision is therefore within Con-gresss commerce power. 7

7 Instead of deferring to Congresss judgments, the court of appealsmade its own de novo assessment and concluded that, in its view, theminimum coverage provision will not adequately accomplish Congresssobjectives because of its exemptions and enforcement mechanisms.Pet. App. 151a-152a. That analysis was startlingly like strict scrutinyreview and has no place in review of an Act of Congress under thecommerce power. Id. at 218a (Marcus, J.). It is for Congress, not thecourts, to decide how to balance its legislative goals with other con-cerns. See Preseault v. ICC , 494 U.S. 1, 19 (1990). In the CBOs expert judgment, by 2019, the Act will reduce the number of non-elderlyindividuals without insurance by approximately 33 million, resulting in95% of Americans having coverage (up from 83% today); the CBO has


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C. The Minimum Coverage Provision Itself Regulates Eco-nomic Conduct With A Substantial Effect On InterstateCommerce

The minimum coverage provision is within Con-gresss power to enact not only because it is a necessarycomponent of a broader scheme of interstate economicregulation, but also because, within that scheme, it regu-lates economic conduct with a substantial effect on inter-state commerce: the way in which individuals financetheir participation in the health care market.

1. The minimum coverage provision reasonably regulates the financing of participation in the health care market and is a reasonable means to prevent the shifting of costs and risks to other market participants

a. As Congress expressly found, the minimum cover-age provision regulates activity that is commercialand economic in nature: economic and financial deci-sions about how and when health care is paid for, and when health insurance is purchased. 42 U.S.C.A.18091(a)(2)(A). In the absence of the requirement,some individuals would make an economic and financialdecision to forego health insurance coverage and at-tempt to self-insure, which increases financial risks tohouseholds and medical providers. Ibid. Congress hadfar more than a rational basis for concluding that the

attributed about half of that projected decrease in the number of non-elderl

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