U.S. Appeals Ruling Striking Down Obama’s Health Law

(Updates with earlier appeal in third paragraph.)

Jan. 18 (Bloomberg) -- The U.S. asked a federal appeals court to overturn a Virginia judge’s ruling that the Obama administration’s health-care overhaul is unconstitutional because it requires some Americans to buy health insurance.

The government filed a notice of appeal today with U.S. District Judge Henry Hudson, who struck down the linchpin of President Barack Obama’s health-care legislation, finding its insurance mandate beyond Congress’s power to regulate interstate commerce. The notice is the first step in asking the appeals court in Richmond, Virginia to reverse Hudson’s Dec. 13 ruling.

The court is already reviewing a Nov. 30 ruling by U.S. District Judge Norman Moon, in Lynchburg, Virginia, who upheld the health-care act in a lawsuit brought by the evangelical Liberty University and five individuals. The appellate court may assign the two Virginia cases to the same panel of three judges to avoid conflicting rulings, said lawyers who practice in the jurisdiction.

“I think they will be put together,” said Carl Tobias, a professor of law at the University of Richmond, in an interview.

Hudson’s ruling is the government’s first loss in a series of challenges to the law mounted in federal courts in Virginia, Michigan and Florida, where 20 states have joined an effort to have the statute thrown out. Constitutional scholars said unless Congress changes the law, its fate in the end will probably be determined by the U.S. Supreme Court.

Supreme Court

A spokesman for Virginia Attorney General Ken Cuccinelli, who brought the suit on behalf of his state, said the attorney general is considering whether to ask the U.S. Supreme Court to take the case without a review by the Richmond court, the U.S. Court of Appeals for the Fourth Circuit.

“We have not made a decision on expediting to the Supreme Court, although we are leaning in that direction,” Brian Gottstein, a spokesman for Cuccinelli, said in an e-mail before the appeal was filed.

The Fourth Circuit, once among the most conservative in the country, shifted to a majority of Democratic appointees after President George W. Bush left open four seats that Obama has filled.

The case will be randomly assigned to a three-judge panel whose members won’t be disclosed to the parties until the day of the argument. Legal scholars and activists said they expect the case will be decided ultimately by a vote of all 14 judges on the court during a second round of appeal.

Outcome Predictable

At that point, “you can just about predict,” the outcome, said Curt Levey, a lawyer with the Committee for Justice, a conservative judicial activist group. “The numbers pretty much tell the tale,” he said.

So far, decisions on challenges to the law have broken along party lines. Two Democrat-appointed judges upheld it while Hudson, appointed to the bench by President George W. Bush, ruled against it.

U.S. District Judge Roger Vinson in Pensacola, Florida, heard arguments Dec. 16. Vinson, named to the bench in 1983 by Republican President Ronald Reagan, said during the hearing that “there are lots of alternative ways to provide health care to the needy without imposing on individual liberties and freedom of choice.”

In his 42-page opinion, Hudson said the “unchecked expansion” of congressional power represented by the insurance requirement “would invite unbridled exercise of federal police powers.” No Supreme Court decision has authorized Congress to “compel an individual to involuntarily enter the stream of commerce by purchasing a commodity in the private market,” he wrote.

Mandatory Insurance

Hudson, who didn’t order the government to stop work on implementing the law during an appeal, limited his ruling to the mandatory insurance provision, which is set to become effective in 2014.

In order to prevail, the Obama administration ultimately may have to persuade at least one of the five Republican- appointed justices on a Supreme Court that in recent years has curbed Congress’s power to regulate interstate commerce.

The court hasn’t directly considered a challenge to Congress’ power under the Constitution’s commerce clause since John Roberts became chief justice in 2005.

Overhaul’s Cornerstone

Justice Department lawyers in court papers called the mandatory insurance measure the cornerstone of the overhaul as it pushes younger and healthier people into the insurance pool. Through the individual mandate and expansions of Medicaid and employer-based coverage, the law is estimated to provide 32 million more people with coverage by 2019, according to the Congressional Budget Office.

The law bars insurers from denying coverage to people who are sick or imposing lifetime limits on costs. Without payments generated from the required policies, the health-insurance market would face extinction, the government argued. The mandate falls under Congress’s power to regulate interstate commerce as $43 billion in unpaid medical bills are absorbed by the market each year, Justice Department lawyers said.

Virginia’s suit claimed Congress has only the power to tax, not to force participation in a market. Its case defended the Virginia Health Care Freedom Act, a state law barring compulsory purchase of health insurance by its citizens.

The case is Commonwealth of Virginia v. Sebelius, 10-cv-00188, U.S. District Court, Eastern District of Virginia (Richmond).

--Editors: Fred Strasser, Michael Hytha.

To contact the reporter on this story: Tom Schoenberg in Washington, at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.