The Strategy in NFIB v. Sebelius, Part II: The Commerce Clause Limiting Principle

September 4th, 2013

In my previous post, I discussed how the government decided to argue that the Anti-Injunction Act was not a barrier to the Court hearing the case in 2012.  The Solicitor General’s second big decision, after staying the course with the AIA, was how to frame the commerce clause issue.

When asked in the courts of appeals what the government’s limiting principle was, Acting Solicitor General Neal Katyal offered two “rock-solid” limiting principles:  “We agree completely with Lopez and Morrison. There are two rock-solid limits on [the] ability of [the] federal government to act on commerce power. First, it can’t act in attenuated ways, [as in] Morrison. Second, it can’t infringe on areas of traditional state responsibility. There is a distinction between what is truly local and truly national. This is a market that is truly national in scope.” Katyal repeated these two principles to the 4th, 6th, and 11th Circuits.

The attorneys in the Solicitor General’s office were “under no illusion from the outset that the Commerce Clause argument was not going to be challenging.” Internally, the government conceded that there “wasn’t anything quite like the individual mandate.” Even they knew it was unprecedented.

After “careful consideration,” the government determined that the two principles advanced in the lower court were  “ultimately [] not going to be helpful as a limiting principle.”  Lopez and Morrison “wouldn’t seem robust enough [as] a limiting principle under these circumstances.” Deeming the principles in Lopez and Morrison too “capacious,” the Solicitor General’s office came to the conclusion that those cases “were not going to be enough, and they needed to give a narrower answer.” If Lopez and Morrison represented the outer bounds of government power, the government could impose any economic mandate that addressed a national problem. If the government drew the line at these cases, the justices, potentially worried that the government could do too much, might not buy the argument.

This was a very big gamble for the government, and the Solicitor General was criticized from departing with the standards advanced in the lower court. In NFIB,  five justices rejected the two limiting principles advanced in the lower courts.  After the case was decided, a government lawyer told me that the joint dissent validated the decision not to continue with that argument.

The Solicitor General’s commerce clause argument took a very different direction. Departing from Katyal’s clear and concise response to the limiting principle question (the question we all knew was coming), he offered a confusing and meandering answer. As many will recall, Justice Alito asked, “Could you express your limiting principle as succinctly as you possibly can?”

Here is the Solicitor General’s answer in its entirety:

We got two and they’re—they’re different. Let me state them. First, with respect to the comprehensive scheme. When Congress is regulating—is enacting a comprehensive scheme that it has the authority to enact, that the [1] Necessary and Proper Clause gives it the authority to include regulation, including a regulation of this kind, if it is necessary to counteract risks attributable to the scheme itself that people engage in economic activity that would undercut the scheme. It’s like—it’s very much like Wickard in that respect. Very much like Raich in that respect. With respect to the—with respect to the—considering the [2] Commerce Clause alone and not embedded in the comprehensive scheme, our position is that Congress can regulate the method of payment by imposing an insurance requirement in advance of the time in which the—the service is consumed when the class to which that requirement applies either is, or virtually most certain to be, in that market, when the timing of one’s entry into that market and what you will need when you enter that market is uncertain, and when— when you will get the care in that market, whether you can afford to pay for it or not and shift costs to other market participants. So, those—those are our views as to—those are the principles we’re advocating for, and it’s, in fact, the conjunction of the two of them here that makes this, we think, a strong case under the Commerce Clause.

Verrilli’s response was winding, circuitous, and unsatisfactory to nearly everyone in the Court. It was definitely not “succinct.” This performance followed his opening, where he choked, literally. It is the practice of the solicitor general to argue before a moot court twice for each case, so he can test out ideas and field questions from other attorneys acting as judges. Verrilli was scheduled to argue three cases, which required six moots. Each had lasted several hours. After all of that talking the previous week, his throat was sore. As a result, he would take an ill-advised sip of water right before he rose to speak. Unfortunately, it went down the wrong pipe, and he choked for about six seconds, as the Court waited in silence.

Though Verrilli certainly stumbled through his answer to Alito’s question, what he said was no different from what he had stated in the SG brief, where he offered two discernible standards.

First, pursuant to Congress’s powers under the Necessary and Proper Clause, Congress could impose the mandate to ensure that essential provisions of the ACA—guaranteed issue and community rating—would be effective. From the summary of the argument:

Congress had authority under the Commerce and Necessary and Proper Clauses to enact the minimum coverage provision. The Affordable Care Act expands access to health care services and controls health care costs by reforming the terms on which health insurance is offered and rationalizing the timing and means of payment for health care services. …

The minimum coverage provision plays a critical role in that comprehensive regulatory scheme by regulating how health care consumption is financed. It creates an incentive for individuals to finance their participation in the health care market by means of insurance, the customary way of paying for health care in this country, and it works in tandem with the Act’s other provisions to expand the availability and affordability of health insurance coverage. In particular, the minimum coverage provision is key to the viability of the Act’s guaranteed issue and community-rating provisions.

Second, under its commerce power, Congress could regulate how people choose to finance the purchase of health care. That is, Congress could ensure that people purchase health insurance before they need it, as virtually everyone will need health care.  Also from the summary of the argument:

The minimum coverage provision is within Congress’s power to enact not only because it is a necessary component of a broader scheme of interstate economic regulation, see e.g., Hodel v. Indiana, 452 U.S. 314, 329 n.17 (1981); United States v. Darby, 312 U.S. 100, 119- 120 (1941), but also because, within that scheme, the provision itself regulates economic conduct with a substantial effect on interstate commerce, namely the way in which individuals finance their participation in the health care market, 42 U.S.C.A. 18091(a)(2)(A). Individuals without insurance actively participate in the health care market, but they pay only a fraction of the cost of the services they consume. As Congress found, the uninsured consumed approximately $116 billion in health care services in 2008, and providers were not compensated for $43 billion of that total. 42 U.S.C.A. 18091(a)(2)(F). Those costs are shifted to other market participants, raising the average family’s annual health insurance premiums by more than $1000. Ibid. In sum, the uninsured as a class presently externalize the risks and costs of much of their health care; the minimum coverage provision will require that they internalize them (or pay a tax penalty). This is classic economic regulation of economic conduct

The position articulated in Court was the same position articulated in the briefs. And, like Katyal’s argument, this position would not get five votes. Verrilli executed this strategy, though inartfully. And the strategy didn’t work.

In my next post, I will explain the significance of taking this position, in the broader context of the saving construction argument advanced by the government, and how it fit in with the government’s broader strategy of not articulating a “capacious” limiting principle.

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