A federal judge’s decision striking down a key provision of the health care reform law, along with the near-certain repeal of the 1099 information reporting requirements in the law, indicate that President Obama’s signature achievement of the past year is likely to be chipped away in the years ahead before many of its provisions even take effect.
On Monday, U.S. District Judge Henry E. Hudson ruled that the provision requiring most Americans to have health insurance or pay a penalty of up to $2,085 a year was unconstitutional. The ruling striking down the so-called “individual mandate” would not prevent states or the federal government from implementing the law. Indeed, Judge Hudson declined to grant an injunction against the law as that provision is not set to take effect until 2014 anyway.
However, Hudson wrote forcefully against the provision, saying, “The unchecked expansion of congressional power to the limits suggested by the Minimum Essential Coverage Provision would invite unbridled exercise of federal police powers.” Those police powers would in part be exercised by the Internal Revenue Service, whose job it would be to make sure that taxpayers were claiming the proper amount of health care tax credits.
The ruling in the case, which was brought by Virginia Attorney General Ken Cuccinelli, is almost certain to be appealed by the Justice Department, and the matter probably won’t be decided until it comes up before the Supreme Court in the years ahead. So far, the Justice Department has won most of the court challenges brought against the law by other Republican attorneys general, so it has a pretty good batting average to date.
However, both Democratic and Republican lawmakers are seemingly united in repealing another controversial provision of the health care reform law that would require businesses to begin reporting any purchases of goods or services of over $600 a year from another vendor to the IRS on a 1099-MISC form. Even President Obama is beginning to sound like he thinks that provision went too far. A repeal of the expanded 1099 reporting requirements has been introduced numerous times as a provision or amendment by lawmakers on both sides of the aisle in various bills in recent months (see Senate Again Fails to Repeal 1099 Requirements). While they have not yet succeeded in repealing the provision because of partisan wrangling, the provision’s nearly universal unpopularity seems certain to doom it before it takes effect in 2012 for most types of businesses.
However, the 1099 requirements were hardly a cornerstone of the health care reform bill and were only included as a way to help pay for its costs. To be sure, the implications of the new requirements took many people by surprise when the bill finally passed after a protracted struggle of nearly a year.
That’s not the case with the individual mandate, which has literally been a subject of debate since before Obama was even elected president. During the 2008 presidential campaign, Candidate Obama himself argued forcefully against the individual mandate during his debates with his then-rival, Hillary Clinton. Once he got into office and the health care reform bill began taking shape, the individual mandate re-emerged as a way to help pay for the substantial costs of insuring another 30 million or so of the uninsured.
The idea was that by requiring the so-called “young invincibles” to carry health insurance, even if they seldom needed to use it, their premiums would help pay for insuring the rest of the population. The health insurance industry also favored that part of the bill, even as it campaigned vigorously to sink much of the rest of the legislation. The math would not work unless there was a large enough pool of people helping pay for the costs. That was one key reason why the state of Massachusetts also required people to carry health insurance as part of its effort, under then-Governor Mitt Romney, to institute “universal” health insurance.
That requirement now appears to be in doubt with Judge Hudson’s ruling. Notwithstanding the accusations that the judge is tied to a political consulting firm that has done work for Republicans, including the Virginia attorney general who brought the lawsuit, according to The Wall Street Journal, his ruling strikes a blow against that provision of the health care reform law. Whether the ruling survives an appeal by the Justice Department will probably depend on the political leanings of the judges on the appeals court. The two judges who ruled in favor of the law in earlier court decisions were Clinton administration appointees.
To be sure, even under Judge Hudson’s ruling, the larger health care reform law would still remain intact. He indicated that the individual mandate provision could be “severed” from the majority of the mammoth legislation, leaving intact other key provisions such as the tax credits that individuals and businesses could claim to help pay for the cost of health insurance.
Indeed, the ruling, if it stands, could leave the health care reform effort stronger, even if its funding mechanism would be shakier. From an individual liberty standpoint, the requirement that people buy health insurance (or get the government to buy it for them through generous tax credits that are then subject to scrutiny by the IRS) was one of the key factors driving opposition to the whole health care reform effort last year and helped fuel the rise of the Tea Party movement.
For Democrats who lost their seats in Congress because of some voters’ concerns about the spread of unchecked federal powers, the defeat of the individual mandate could help calm some of those fears by the time of the next election. Indeed, the Obama administration may want to think twice before it appeals Judge Hudson’s ruling if it wants the health care reform effort to enjoy broader support among voters in 2012.
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