The United States Court of Appeals for the Fourth Circuit is set to hear oral arguments in Liberty University vs. Geithner. Although this case is only one of a plethora of lawsuits challenging various aspects of the Patient Protection and Affordable Care Act (PPACA), it is one that may hold significant importance for employers if it reaches the Supreme Court. Back in 2011, the Fourth Circuit determined that Liberty University’s lawsuit was premature due to the Anti-Injunction Act, which can prevent federal courts from hearing legal challenges to prevent collection of a tax before any tax is actually assessed. However, when the Supreme Court upheld the Individual Mandate in June 2012 and determined that Congress did not intend for the Anti-Injunction Act to apply, the tables turned. In November 2012, the Supreme Court ordered the Fourth Circuit to reconsider the case.
Why is this case different from all the others? It is one of the few specifically challenging the employer shared responsibility provision of PPACA, which requires employers to offer employees health insurance coverage that meets certain minimum standards, or pay excise tax penalties. The parties will address whether the Anti-Injunction Act applies to the employer mandate (after the Supreme Court’s decision that it did not apply to the dispute involving the individual mandate), whether the employer mandate exceeds Congress’ powers under the Commerce, Necessary and Proper, and Taxing and Spending clauses of the Constitution, and the impact of the Equal Protection, Free Exercise of Religion, and Establishment Clauses on the employer mandate and other insurance mandates, such as the requirement to cover preventative care, including contraceptive drugs. Importantly, Liberty University’s claims regarding Congress’ power to enact the employer mandate under the Commerce, Necessary and Proper and/or Taxing and Spending clauses of the Constitution apply to all employers – both secular and religious.
A decision regarding the constitutionality of the employer mandate would be big news for employers. At best, employers are facing huge administrative burdens tracking waiting periods and administering measurement periods and stability periods for seasonal and variable hour employees. At worst, employers may face crippling excise taxes that may apply if any full time employee receives a premium tax credit through the purchase of health insurance through a Health Insurance Marketplace.
If one recalls Chief Justice John Roberts’ opinion, he writes, “The Affordable Care Act is constitutional in part and unconstitutional in part. The individual mandate cannot be upheld as an exercise of Congress’ power under the Commerce Clause.” It was, however, upheld under the Taxing and Spending clause. Part of Chief Justice Roberts’ tax analysis surrounded the relative weakness of the individual mandate – although it is labeled as a penalty in PPACA, it is not severe enough to rise to the level of being punitive. How will this piece of the analysis apply to the employer mandate? Unlike the individual mandate, the employer mandate provides that an employer who does not offer health insurance to substantially all of its full time (30+ hours per week) employees may face excise taxes of $2,000 per year per full time employee, minus the first thirty. For some industries who have historically not offered health insurance to all or a portion of their employee populations, the magnitude of such a penalty has the potential to be devastating to the employer’s bottom line.
There is no doubt that the opinion upholding the individual mandate will likely impact the Fourth Circuit’s review, and ultimately the Supreme Court’s analysis if Liberty University’s case makes it to the nation’s high court. It will be interesting to see if the Fourth Circuit views the employer mandate the same as the individual mandate in light of the Supreme Court’s decision last June.
For updates on Liberty University vs. Geithner, keep an eye on SCOTUSblog. For more information on the case, see these articles from the Washington Post and Politico.
UPDATE: The Fourth Circuit has rejected Liberty University’s claims and upheld the employer mandate as valid under both the Commerce Clause and the Taxing and Spending Clause. The Fourth Circuit also determined that the employer mandate does not violate the First Amendment’s free exercise of religion clause. While the Fourth Circuit’s ruling is consitent with the United States Supreme Court decisions on the individual mandate with regard to the application of the Anti-Injunction Act and the Taxing and Spending Clause, the decision diverges from the Supreme Court’s decision regarding the application of the Commerce Clause. Last summer, five justices held that the individual mandate could not be supported constitutionally under the Commerce Clause. This decision clears the way for Liberty’s appeal to the Supreme Court.
