Appeals court tosses healthcare lawsuits

A federal appeals court dismissed two lawsuits over President Obama’s healthcare law Thursday, including the high-profile challenge from the conservative Virginia Attorney General Ken Cuccinelli.

It was already seen as inevitable that the Supreme Court would decide whether the healthcare law is constitutional, and legal experts said Thursday’s decisions make it all the more certain that the justices will intervene.

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A three-judge panel of the 4th Circuit Court of Appeals ruled that Cuccinelli (R) does not have a legal right to sue over the healthcare law’s requirement that most people buy insurance. The court also dismissed a suit filed by the conservative Liberty University and several individuals.

The decision in Cuccinelli’s case wasn’t a huge surprise: People who attended the 4th Circuit’s oral arguments said at the time that the judges seemed highly skeptical of Virginia’s right to challenge the mandate.

As Congress moved toward passing healthcare reform, Virginia passed a state law that says its residents can’t be forced to buy insurance. Cuccinelli said he was suing over the coverage mandate because it conflicts with state law.

But the 4th Circuit panel rejected that rationale. States aren’t allowed to sue the federal government on behalf of their residents, and the court said Cuccinelli was simply using the legal system as a vehicle for political disagreements.

“If we were to adopt Virginia’s standing theory, each state could become a roving constitutional watchdog of sorts; no issue, no matter how generalized or quintessentially political, would fall beyond a state’s power to litigate in federal court,” the 4th Circuit said.

The mandate has a mixed record in federal appeals courts. The 6th Circuit upheld the requirement in a June decision, while the 11th Circuit — which heard the high-profile challenge filed by 26 state attorneys general — ruled the mandate is unconstitutional.

Those 26 states didn’t use the same argument as Cuccinelli, so they’re likely unfazed by the 4th Circuit’s decision in that case. But the dismissal of the Liberty University suit added a new layer of complexity as the mandate marches toward the Supreme Court.

“It seems to me the main effect of the Liberty decision is to deepen the already existing circuit split,” said Gregory Katsas, a partner at Jones Day. Katsas represents the National Federation of Independent Business, which is part of the 26-state lawsuit against the healthcare law.

Before the 4th Circuit ruled, one court had upheld the mandate and one had ruled it unconstitutional, and both cases at least had private parties involved. Now there’s a third outcome, Katsas noted. The 4th Circuit said it couldn’t decide the merits of the mandate in the Liberty suit because of a federal law that prohibits suing the federal government to prevent a tax or fee from going into effect.

The Obama administration has argued that the penalty for going without insurance is a tax, rather than a regulatory fee, but even courts that upheld the mandate have rejected that argument. 

The 4th Circuit didn’t validate that position, either. Although it ruled that the mandate can’t be challenged, it didn’t address the merits of whether the policy constitutes a tax.

“The 4th Circuit decision sort of underscores the need for immediate Supreme Court review,” Katsas said.

Legal analysts expect the Supreme Court to hear the case early next year and issue a ruling next summer.