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U.S. Court Questions Its Authority in Virginia Health-Care Cases

May 24 (Bloomberg) -- The U.S. Court of Appeals in Virginia questioned whether it has the authority to decide the constitutionality of the Obama administration’s health-care overhaul.

The three-judge panel in Richmond said yesterday the question is whether the Anti-Injunction Act, which generally bars decisions on tax law before taxes are collected, prevents the court from ruling on a challenge to the statute’s requirement that most Americans buy health insurance.

“It’s an interesting twist,” said Kevin Walsh, a law professor at the University of Richmond and a former clerk to Supreme Court Justice Antonin Scalia. “This is an apparent resurrection of an issue the parties once argued about and seemingly put behind them.”

The judges are reviewing one lower-court ruling that upheld the health-care law and another that struck down part of it. On May 10, during back-to-back arguments lasting about two hours, the issue of the court’s jurisdiction was touched on by one of the lawyers then dropped without questions from the court.

The Virginia appeals stem from a challenge to the law by the state of Virginia and another by Liberty University, a Christian school founded in Lynchburg, Virginia, by the late Reverend Jerry Falwell.

Power to Tax

In court, the government argued that the legislation is an extension of Congress’s power to tax, as people who fail to buy coverage starting in 2014 would face a penalty to be included on an individual’s tax return.

In the lower court, Justice Department attempts to win dismissal of the cases on the Anti-Injunction Act were rejected. The government didn’t cite the law on appeal.

Tracy Schmaler, a Justice Department spokeswoman, and Brian Gottstein, a spokesman for Virginia Attorney General Ken Cuccinelli, declined to comment.

“We will file our response and see what happens when the court issues its ruling,” said Mathew Staver, dean of Liberty University School of Law.

The Virginia court is the first appeals court to review the health-care law. Two other appeals will be heard next month in Cincinnati and Atlanta.

Linchpin of Mandate

The U.S. calls the insurance mandate the linchpin of the Patient Protection and Affordable Care Act, claiming that the insurance industry can’t meet its obligations for coverage under the law without expanding the pool of younger, healthier customers. Absent the mandate, the health-insurance market would wither, the government said in court papers.

U.S. District Judge Henry Hudson ruled that the mandate represented an “unchecked expansion” of congressional power. No Supreme Court decision authorized Congress to force an individual to “enter the stream of commerce by purchasing a commodity in the private market,” he wrote.

Liberty University is appealing the decision by U.S. District Judge Norman Moon, in Lynchburg, on Nov. 30 upholding the act. In a 54-page opinion, Moon compared the insurance mandate to minimum wage laws.

Moon, in his ruling, said the Anti-Injunction Act wouldn’t apply because Congress specifically chose not to label violations of the health insurance mandate as taxes when drafting the law.

“I conclude that the better characterization of the exactions imposed under the act for violations of the employer and individual coverage provisions is that of regulatory penalties, not taxes,” Moon wrote.

The appeals judges set a May 31 deadline for the attorneys to respond to the court’s request.

The cases are Liberty University v. Geithner, 10-02347, and Commonwealth of Virginia v. Sebelius, 11-01057 and 11-01058, U.S. Circuit Court of Appeals for the Fourth Circuit (Richmond).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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