Tag: epstein

Obamacare at the Supreme Court: Can the Individual Mandate Be Severed?

The Obamacare litigation has arrived on the big stage: the Supreme Court. The first opportunity for those opposing the legislation to weigh in comes on the issue that will be the last one the Court considers, “severability.” That is, if the individual mandate is struck down as unconstitutional, what (if any) of the rest of the law must fall with it?

On one hand, even in the absence of a severability clause, the Court should avoid striking down an entire law when only one small part is declared unconstitutional, particularly if the remainder of the law is unrelated to the defective bit (imagine an omnibus spending bill). On the other, the Court cannot go provision-by-provision and execute some sort of judicial line-item veto (creating a new law completely unrecognizable from what Congress enacted).

Many think that the rules in this area are unclear, but the analysis boils down to two questions:

  1. Can the remainder “fully operate as law”?
  2. Would Congress have passed the remainder?

In our brief, joined by the Texas Public Policy Foundation and co-authored by Prof. Richard Epstein, we examine these questions with a focus on Titles I and II of the law, which contain all the key provisions relating to Obamacare’s fundamental transformation of the national health care system: the requirement that insurers cover people with preexisting conditions (“guaranteed issue”), the requirement that premiums be assessed by a “community rating” formula, the creation of state insurance exchanges, Medicaid expansion, premium supports, etc.

Put simply, knocking out the individual mandate renders this whole package inoperable; the brave new health care world would not work as a matter of basic economic principle. As policy experiments in various states have proven, without an individual mandate, guaranteed-issue and community-rating provisions foster a “death spiral” because healthy people wait until they get sick or injured before buying under-priced insurance that they cannot then be refused, causing premiums to increase and costs to explode. The individual mandate is thus so interwoven with other crucial provisions that it cannot be excised without destroying the entire Obamacare structure.

Appreciating this mechanism, the government has conceded that guaranteed-issue and community-rating are indeed inextricably tied to the individual mandate—it has to, given its constitutional claim that the mandate is a necessary means of implementing a lawful regulation of interstate commerce. But a close analysis of the law reveals that the interoperability goes much further. And Congress knew this; there is no way it would have otherwise passed this law.

Thus, to aid the plaintiffs’ arguments regarding broader non-severability, our brief shows that the individual mandate is so central to the overall legislation that if it falls, those key Titles I and II must go with it.

The Court will consider the severability question for 90 minutes on March 28, the last of the three consecutive days it hears oral argument in the Obamacare cases.

Property Rights Are Not Second-Class Rights

When state and local governments violate federal constitutional rights (e.g., First Amendment free speech), they can be sued in federal court — except when that government action violates the Fifth Amendment’s protections for property rights.  Under the Supreme Court’s decision in Williamson County v. Hamilton Bank, individuals and businesses alleging unconstitutional takings by state or local governments are required to exhaust state review procedures — seeking redress from the very officials who harmed them — before turning to federal courts.

This constitutional anomaly is evident in Colony Cove v. City of Carson, where the operators of a rental property in California alleged an unconstitutional taking when the local rent control board refused to approve an increase in rent to allow their business to operate profitably. California law forecloses judicial review of the findings of rent control boards, so municipal governments have an unchecked license to determine whether such businesses may operate: A property owner’s sole recourse is to appeal to the very rent control board who forbade her from charging a profitable rent in the first place.

These “review” procedures, like some others across the nation, are wildly insufficient. Even more significantly, once a takings claim has been fully heard in state proceedings per Williamson County’s command, it is usually barred from federal review based on various prudential doctrines. The result is the indiscriminate exclusion of takings claims from federal courts, a situation that invites opportunist states to usurp private property rights.

Seeking to afford citizens across the nation the opportunity to assert Takings Clause claims in parity with other constitutional rights, Cato joined the New England Legal Foundation, National Federation of Independent Business, Institute for Justice, Goldwater Institute, and Professors James Ely and Richard Epstein in filing an amicus brief supporting the California property owners’ petition for Supreme Court review of the Ninth Circuit’s ruling against them.

We argue that Williamson County should be overruled because it relegates takings claims to second-class status despite the constitutional first principle that uniform protection of individual rights is vital to our system of government. At the very least, the Court should require federal reprieve when state procedures for rectifying a taking are futile — as they were here. Finally, we argue that the Court should correct lower courts’ misinterpretation of Williamson County, which puts property rights jurisprudence at odds with Section 1983 of the Civil Rights Act of 1871 (a statute that gives people access to federal courts when a state denies them their constitutional rights).

The Court will decide whether to review Colony Cove v. City of Carson later this year.  Thanks to legal associate Anna Mackin for her help with the brief, whose counsel of record is Cato adjunct scholar Ilya Somin.