Federal District Court Judge, Roger Vinson, for the Northern District of Florida, Pensacola Division struck down the Patient Protection and Affordable Care Act (“PPACA”), the Federal health reform law dubbed by its critics as “Obamacare,” on Constitutional grounds yesterday. Judge Vinson agreed with the Attorneys General of 26 states that the mandates of the law exceeded the authority granted to the Federal government under the Commerce Clause to the U.S. Constitution. See Bondi v. U.S. Dept. of Health and Human Services, (N.D. Fla. 1/31/2011). The decision follows three prior Federal District Court decisions, two upholding the law and one striking it down for similar reasons.

The essence of the decision is that the law’s “individual mandate” – which requires all Americans to purchase a minimum level of health insurance beginning in 2014 or incur a penalty, goes beyond the Federal government’s power to regulate interstate commence rooted in what is known as the “Commerce Clause” of the Constitution. The District Court also held, citing the Justice Department’s own arguments concerning the critical function the individual mandate serves with respect to the PPACA as a whole, that the law “cannot survive without the individual mandate” and must therefore fail along with the individual mandate. In so ruling, Judge Vinson wrote:

Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void. This has been a difficult decision to reach, and I am aware that it will have indeterminable implications. At a time when there is virtually unanimous agreement that health care reform is needed in this country, it is hard to invalidate and strike down a statute titled The Patient Protection and Affordable Care Act.

The Bondi decision, although it represents a significant victory for opponents of the health reform law, was not a total victory on all points for the Attorneys General and others who filed the lawsuit. Significantly, the District Court declined to order the Federal government to cease its activities in implementing the PPACA. It also rejected the plaintiff’s argument that the PPACA’s provisions requiring States to pay for a portion of the expansion of Medicaid beginning in 2014 improperly interfered with State sovereignty.

As a result of these limitations, Bondi will have little immediate practical effect on the implementation of the health reform law. The U.S. Justice Department immediately announced that it would appeal the District Court’s decision to the Eleventh Circuit.

It is unclear how the Eleventh Circuit or the Supreme Court will resolve these legal issues should the case proceed as most expect it will, or what changes might be made to the law in the coming days and weeks as Republicans buoyed by the decision are marshaling their forces in Congress to advance legislation to “repeal and replace.” We’ll all be staying tuned.

The following are some excerpts from the decision which provide a view into the reasoning of the Court . . .

The District Court distinguished Supreme Court precedent advanced by the federal agencies defending the law:

The individual mandate differs from the regulations in [prior cases], for example, in that the individuals being regulated in those cases were engaged in an activity (regardless of whether it could readily be deemed interstate commerce in itself) and each had the choice to discontinue that activity and avoid penalty. . . Here, people have no choice but to buy insurance or be penalized. And their freedom is actually more restricted as they do not even have a choice as to the minimum level or type of insurance to buy because Congress established the floor. A single twenty-year old man or woman who only needs and wants major medical or catastrophic coverage, for example, is precluded from buying such a policy under the Act.

In the Court’s opinion, the basic reason that the individual mandate exceeds the power available to the federal government under the Commerce Clause is that the law would regulate “inactivity” and the Commerce Clause only permits Congress to regulate “activity”:

It would be a radical departure from existing case law to hold that Congress can regulate inactivity under the Commerce Clause. If it has the power to compel an otherwise passive individual into a commercial transaction with a third party merely by asserting — as was done in the [health care law] — that compelling the actual transaction is itself “commercial and economic in nature, and substantially affects interstate commerce” [see Act § 1501(a)(1)], it is not hyperbolizing to suggest that Congress could do almost anything it wanted. It is difficult to imagine that a nation which began, at least in part, as the result of opposition to a British mandate giving the East India Company a monopoly and imposing a nominal tax on all tea sold in America would have set out to create a government with the power to force people to buy tea in the first place. If Congress can penalize a passive individual for failing to engage in commerce, the enumeration of powers in the Constitution would have been in vain for it would be “difficult to perceive any limitation on federal power.”

The government, however, argued that, given the “uniqueness” of the health care market, those sitting on the sidelines of the insurance market are not inactive:

First, as living and breathing human beings who are always susceptible to sudden and unpredictable illness and injury, no one can “opt out” of the health care market. Second, if and when health services are sought, hospitals are required by law to provide care, regardless of inability to pay. And third, if the costs incurred cannot be paid (which they frequently cannot, given the high cost of medical care), they are passed along (cost-shifted) to third parties, which has economic implications for everyone.

The Court rejected this argument finding similarities in other markets:

After all, there are lots of markets — especially if defined broadly enough — that people cannot “opt out” of. For example, everyone must participate in the food market. Instead of attempting to control wheat supply by regulating the acreage and amount of wheat a farmer could grow as in Wickard, under this logic, Congress could more directly raise too low wheat prices merely by increasing demand through mandating that every adult purchase and consume wheat bread daily, rationalized on the grounds that because everyone must participate in the market for food, non-consumers of wheat bread adversely affect prices in the wheat market. Or, as was discussed during oral argument, Congress could require that people buy and consume broccoli at regular intervals, not only because the required purchases will positively impact interstate commerce, but also because people who eat healthier tend to be healthier, and are thus more productive and put less of a strain on the health care system. Similarly because virtually no one can be divorced from the transportation market, Congress could require that everyone above a certain income threshold buy a General Motors automobile — now partially government-owned — because those who do not buy GM cars (or those who buy foreign cars) are adversely impacting commerce and a taxpayer-subsidized business.

Citing United States v. Lopez, 514 U.S. 549 (1995), a Supreme Court decision that reversed a longtime trend where the Court generally had acceded to the expansion of Federal powers under the Commerce Clause, Judge Vinson noted that:

the causal link between what is being regulated [here, inactivity] and its effect on interstate commerce cannot be attenuated and require a court “to pile inference upon inference,” which is, in my view, exactly what would be required to uphold the individual mandate. . . the mere status of being without health insurance, in and of itself, has absolutely no impact whatsoever on interstate commerce (not “slight,” “trivial,” or “indirect,” but no impact whatsoever) . . . The uninsured can only be said to have a substantial effect on interstate commerce in the manner as described by the defendants: (i) if they get sick or injured; (ii) if they are still uninsured at that specific point in time; (iii) if they seek medical care for that sickness or injury; (iv) if they are unable to pay for the medical care received; and (v) if they are unable or unwilling to make payment arrangements directly with the health care provider, or with assistance of family, friends, and charitable groups, and the costs are thereafter shifted to others. In my view, this is the sort of piling “inference upon inference” rejected in Lopez.

Judge Vinson went on to reason:

The important distinction is that “economic decisions” are a much broader and far-reaching category than are “activities that substantially affect interstate commerce.” While the latter necessarily encompasses the first, the reverse is not true. “Economic” cannot be equated to “commerce.” And “decisions” cannot be equated to “activities.” Every person throughout the course of his or her life makes hundreds or even thousands of life decisions that involve the same general sort of thought process that the defendants maintain is “economic activity.” There will be no stopping point if that should be deemed the equivalent of activity for Commerce Clause purposes.