Wednesday, July 14, 2010

The ACA’s employer mandates and their incursion on state sovereignty

One of the grounds on which the 20 states in the Florida lawsuit contend that the ACA unconstitutionally intrudes on the independent sovereignty of the states is by imposing several mandates and reporting requirements related to their provision of health insurance to their employees. (This is Count 6 in their amended complaint.)

To simplify a bit, ACA §1513 requires employers with at least 50 employees to offer their employees a minimum level of health insurance coverage, imposing tax assessments for the failure to meet this obligation. If employees choose instead to obtain coverage through a health insurance exchange, the employer is required to subsidize that coverage. ACA §1511 requires employers with at least 200 employees to automatically enroll all new full-time employees in a health insurance plan (if the employer offers one), though employees may opt out. And ACA §1514 requires most large employers to file a return with the IRS containing information about the health coverage they offer employees.

The states contend that these requirements—and the tax assessments that accompany non-compliance—will “interfere with their ability to perform governmental functions.” Amend. compl. ¶ 48. Because of the Act’s individual mandate, the ACA “effectively will force many more State employees into State insurance plans than the Plaintiff States now allow, at a significant added cost to the States.” Id. In addition, “the States will be subject to substantial penalties and taxes prescribed by the Act, at a cost of thousands of dollars per employee, for State employees who obtain subsidized insurance from an exchange instead of from a State plan, or if the State plan offers coverage that is either too little or too generous as determined by the federal government.” Id. Finally, the tax reporting requirements “also will burden the Plaintiff States’ ability to source goods and services as necessary to carry out governmental functions.” Id.

Critically, each of the employer mandates contained in §§1511, 1513, and 1514 apply to all employers of a certain size, private and public alike. That is, these provisions do not regulate state governments any differently that they regulate all large employers in the United States. This fact is fatal to the states’ claim, at least under existing law.

The states’ claim may well have been viable between 1976 and 1985. Then, the governing precedent was National League of Cities v. Usery, 426 U.S. 833 (1976), which held that the Tenth Amendment prohibited Congress from regulating the employment practices of the states to the extent it interfered with the states’ “traditional governmental functions.” But the Court expressly overruled Usery only nine years later, in Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985), holding that Congress could impose the minimum-wage and maximum-hour requirements of the Fair Labor Standards Act on the states, no matter the function of the employee.

Moreover, in the Court’s decisions since Garcia invalidating federal laws on Tenth Amendment grounds (namely New York v. United States, 505 U.S. 144 (1992), and Printz v. United States, 521 U.S. 898 (1997)), the justices have distinguished “generally applicable laws”: laws by which “Congress has subjected a State to the same legislation applicable to private parties.” New York, 505 U.S. at 160. The laws struck down in New York and Printz were invalid, at least in part, because they singled out the states and regulated them as sovereigns. The so-called “anti-commandeering” principle (which the Court articulated in New York and Printz) by its terms does not extend to laws that regulate public and private employers alike. Indeed, the Court unanimously reaffirmed Congress’s authority to regulate the conduct of states through “generally applicable” legislation in Reno v. Condon, 528 U.S. 141 (2000).

Because the ACA’s employer mandates (§§1511–1514) apply to all large employers, they are “generally applicable,” and thus plainly constitutional under current law.

Of course, nothing other than stare decisis precludes the Court from revisiting Garcia and reinstating a rule akin to that articulated in Usery. Indeed, the dissenters in Garcia wrote then that they were “confident” that the principle of Usery would “in time again command the support of a majority of this Court.” Garcia, 469 U.S. at 580 (Rehnquist, J., dissenting). But none of those dissenters—Burger, Rehnquist, Powell, and O’Connor—remains on the Court. Nor have any of the current justices signaled a significant interest in overruling Garcia.

And perhaps for good reason. Doing so would create a host of messy doctrinal problems for the Court. Namely, at what level of intrusiveness would the federal regulation of the states cross the line into unconstitutionality? What metric could courts use to measure such intrusiveness? Would the rule apply to all federal regulation of the states, or only that reaching the states’ “traditional governmental functions”? If the latter, what defines those functions? To be sure, all constitutional principles are a bit vague around the edges. But these questions seem particularly difficult to answer in a principled and consistent manner, and they would implicate hundreds (if not thousands) of federal statutes. It was precisely these problems of judicial administrability that led the Court to jettison Usery as “unworkable.” See Garcia, 469 U.S. at 543–547.

In short, the claim that the ACA’s employer mandates violate the states’ constitutionally protected sovereignty is plainly foreclosed by current law. And it seems unlikely that a majority of the present Court would be interested in overruling this entrenched precedent. If the states’ sovereignty-related challenge to the ACA is to succeed, it is apt to be on a different basis.