Opinion ID: 223249
Heading Depth: 3
Heading Rank: 3

Heading: Severability of Individual Mandate from Two Insurance Reforms

Text: The severability inquiry is not so summarily answered, however, with respect to two of the private insurance industry reforms. [137] The two reforms are: guaranteed issue, 42 U.S.C. § 300gg-1 (effective Jan. 1, 2014); and the prohibition on preexisting condition exclusions, id. § 300gg-3. Our pause over the severability of these two reforms is due to the fact that the congressional findings speak in broad, general terms except in one place that states, as noted earlier, that the individual mandate is essential to creating effective health insurance markets in which improved health insurance products that are guaranteed issue and do not exclude coverage of pre-existing conditions can be sold. Id. § 18091(a)(2)(I). The findings in that paragraph add that if there were no mandate, many individuals would wait to purchase health insurance until they needed care. [138] Id. As discussed earlier, a significant number of the uninsured with preexisting conditions voluntarily tried to buy insurance but were denied coverage or had those conditions excluded, resulting in uncompensated health care consumption and cost-shifting. Congress also found that insurers' $90 billion in underwriting costs in identifying unhealthy entrants represented 26% to 30% of premium costs. Id. § 18091(a)(2)(J). The two reforms reduce the number of the uninsured and underwriting costs by guaranteeing issue and prohibiting preexisting condition exclusions. To benefit consumers, Congress has improved health insurance products and required insurers to cover consumers who need their products the most. It is not uncommon that government regulations beneficial to consumers impose additional costs on the industry regulated. These two reforms obviously have significant negative effects on the business costs of insurers because they require insurers to accept unhealthy entrants, raising insurers' costs. The individual mandate, in part, seeks to mitigate the reforms' costs on insurers by requiring the healthy to buy insurance and pay premiums to insurers to subsidize the insurers' costs in covering the unhealthy. Further, if there were no mandate, the argument goes, the healthy people can wait until they are sick to obtain insurance, knowing they could not then be turned away. [139] In this regard, our severability concern is not over whether the two reforms can fully operate as a law. They can. Rather, our severability concern is only whether it is evident that Congress would not have enacted the two insurance reforms without the individual mandate. Alaska Airlines, 480 U.S. at 684, 107 S.Ct. at 1480. At the outset, we note that Congress could easily have included in the Act a non-severability clause stating that the individual mandate should not be severed from the two reforms. Under the legislative drafting manuals, the one instance in which a severability clause is important is where it provides in detail which related provisions are to fall, and which are not to fall, if a specified key provision is held invalid. Office of Legislative Counsel, U.S. House of Representatives, House Legislative Counsel's Manual on Drafting Style, § 328; accord Office of Legislative Counsel, U.S. Senate, Legislative Drafting Manual, § 131. Congress did not include any such non-severability clause in the Act, however. It is also telling that none of the insurance reforms, including even guaranteed issue and coverage of preexisting conditions, contain any cross-reference to the individual mandate or make their implementation dependent on the mandate's continued existence. See United States v. Booker, 543 U.S. 220, 260, 125 S.Ct. 738, 765, 160 L.Ed.2d 621 (2005) (stating that 18 U.S.C. § 3742(e) contains critical cross-references to the (now-excised) § 3553(b)(1) and consequently must be severed and excised for similar reasons); Alaska Airlines, 480 U.S. at 688-89, 107 S.Ct. at 1482 (Congress did not link specifically the operation of the first-hire provisions to the issuance of regulations.). Indeed, § 300gg-3's prohibition on preexisting condition exclusions was implemented in 2010 with respect to enrollees under 19, despite the individual mandate not taking effect until 2014. This is a far cry from cases where the Supreme Court has ruled provisions inseverable because it would require courts to engage in quasi-legislative functions in order to preserve the provisions. See, e.g., Randall v. Sorrell, 548 U.S. 230, 262, 126 S.Ct. 2479, 2500, 165 L.Ed.2d 482 (2006) (declining to sever Vermont's campaign finance contribution limits because doing so would require [the Court] to write words into the statute); see also Free Enter. Fund, 561 U.S. at ___, 130 S.Ct. at 3162 (cautioning courts against blue-pencil[ing]). [T]he remedial question we must ask is which alternative adheres more closely to Congress' original objective in passing the Act: (1) the Act without the individual mandate but otherwise intact; or (2) the Act without the individual mandate and also without these two insurance reforms. See Booker, 543 U.S. at 263, 125 S.Ct. at 766-67. As discussed earlier, a basic objective of the Act is to make health insurance coverage accessible and thereby to reduce the number of uninsured persons. See, e.g., 42 U.S.C. § 18091(a)(2) (stating the Act will increase the number and share of Americans who are insured and significantly reduc[e] the number of the uninsured). Undoubtedly, the two reforms seek to achieve those objectives. All other things being equal, then, a version of the Act that contains these two reforms would hew more closely to Congress's likely intent than one that lacks them. But without the individual mandate, not all things are equal. We must therefore look to the consequences of the individual mandate's absence on the two reforms. See Booker, 543 U.S. at 260, 125 S.Ct. at 765 (considering whether excision of one part of statute would pose a critical problem); Regan, 468 U.S. at 653, 104 S.Ct. at 3269 (asking whether the policies Congress sought to advance by enacting § 504 can be effectuated even though the purpose requirement is unenforceable). In doing so, several factors loom large. First, the Act retains many other provisions that help to accomplish some of the same objectives as the individual mandate. See Booker, 543 U.S. at 264, 125 S.Ct. at 767 (The system remaining after excision, while lacking the mandatory features that Congress enacted, retains other features that help to further these objectives.); New York v. United States, 505 U.S. at 186, 112 S.Ct. at 2434 (Common sense suggests that where Congress has enacted a statutory scheme for an obvious purpose, and where Congress has included a series of provisions operating as incentives to achieve that purpose, the invalidation of one of the incentives should not ordinarily cause Congress' overall intent to be frustrated.). For example, Congress included other provisions in the Act, apart from and independent of the individual mandate, that also serve to reduce the number of the uninsured by encouraging or facilitating persons (including the healthy) to purchase insurance coverage. These include: (1) the extensive health insurance reforms; (2) the new Exchanges; (3) federal premium tax credits, 26 U.S.C. § 36B; (4) federal cost-sharing subsidies, 42 U.S.C. § 18071; (5) the requirement that Exchanges establish an Internet website to provide consumers with information on insurers' plans, id. § 18031(d)(4)(D); (6) the requirement that employers offer insurance or pay a penalty, 26 U.S.C. § 4980H; and (7) the requirement that certain large employers automatically enroll new and current employees in an employer-sponsored plan unless the employee opts out, 29 U.S.C. § 218A, just to name a few. Second, the individual mandate has a comparatively limited field of operation vis-a-vis the number of the uninsured. In Alaska Airlines, the Supreme Court found that the unconstitutional legislative veto provision of the Airline Deregulation Act (permitting Congress to veto the Labor Secretary's implementing regulations) was severable because, among other things, the statute left little of substance to be subject to a veto. 480 U.S. at 687, 107 S.Ct. at 1481. The Supreme Court noted the ancillary nature of the Labor Secretary's obligations and the limited substantive discretion afforded the Secretary. [140] Id. at 688, 107 S.Ct. at 1482. Thus, the limited field of operation of an unconstitutional statutory provision furnishes evidence that Congress likely would have enacted the statute without it. Cf. Booker, 543 U.S. at 249, 125 S.Ct. at 759 (considering whether the scheme that Congress created would be so transform[ed] ... that Congress likely would not have intended the Act as so modified to stand). Here, as explained above, the operation of the individual mandate is limited by its three exemptions, its five exceptions to the penalty, and its stripping the IRS of tax liens, interests, or penalties and leaving virtually no enforcement mechanism. Even with the mandate, a healthy individual can pay a penalty and wait until becoming sick to purchase insurance. Further, the individual mandate's operation and effectiveness are limited by the fact that, although the individual mandate requires individuals to obtain insurance coverage, the mandate itself does not require them to obtain the essential health benefits package or, indeed, any particular level of benefits at all. Although the chosen term minimum essential coverage appears to suggest otherwise, when the lofty veneer of the term is stripped away, one finds that the actual coverage the individual mandate deems essential is nothing more than coverage essential to satisfying the individual mandate. The multiple features of the individual mandate all serve to weaken the mandate's practical influence on the two insurance product reforms. [141] They also weaken our ability to say that Congress considered the individual mandate's existence to be a sine qua non for passage of these two reforms. There is tension, at least, in the proposition that a mandate engineered to be so porous and toothless is such a linchpin of the Act's insurance product reforms that they were clearly not intended to exist in its absence. We are not unmindful of Congress's findings about the individual mandate. But in the end, they do not tip the scale away from the presumption of severability. As observed above, the findings in § 18091(a)(2) track the language of the Supreme Court's Commerce Clause decisions. But the severability inquiry is separate, and very different, from the constitutional analysis. The congressional language respecting Congress's constitutional authority does not govern, and is not particularly relevant to, the different question of severability (which focuses on whether Congress would have enacted the Act's other insurance market reforms without the individual mandate). An example makes the point. Section 18091(a)(2)(H) of the same congressional findings provides: Under the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.), the Public Health Service Act (42 U.S.C. 201 et seq.), and this Act, the Federal Government has a significant role in regulating health insurance. The requirement is an essential part of this larger regulation of economic activity, and the absence of the requirement would undercut Federal regulation of the health insurance market. 42 U.S.C. § 18091(a)(2)(H). By its text, § 18091(a)(2)(H) states that the individual mandate is essential to this larger regulation of economic activitythat is, regulating health insurance, which it does through ERISA and the Public Health Service Act. If applied to severability, this would mean that Congress intended the individual mandate to be essential to, and thus inseverable from, ERISA (enacted in 1974) and the entire Public Health Service Act (or at least all parts of those statutes that regulate health insurance). This is an absurd result for which no party argues. [142] These congressional findings do not address the one question that is relevant to our severability analysis: whether Congress would not have enacted the two reforms but for the individual mandate. Just because the invalidation of the individual mandate may render these provisions less desirable, it does not ineluctably follow that Congress would find the two reforms so undesirable without the mandate as to prefer not enacting them at all. The fact that one provision may have an impact on another provision is not enough to warrant the inference that the provisions are inseverable. This is particularly true here because the reforms of health insurance help consumers who need it the most. In light of all these factors, we are not persuaded that it is evident (as opposed to possible or reasonable) that Congress would not have enacted the two reforms in the absence of the individual mandate. [143] In so concluding, we are mindful of our duty to refrain from invalidating more of the statute than is necessary. [144] Regan, 468 U.S. at 652, 104 S.Ct. at 3269; see also Booker, 543 U.S. at 258-59, 125 S.Ct. at 764 ([W]e must retain those portions of the Act that are (1) constitutionally valid, (2) capable of functioning independently, and (3) consistent with Congress' basic objectives in enacting the statute. (quotation marks and citations omitted)). And where it is not evident Congress would not have enacted a constitutional provision without one that is unconstitutional, we must allow any furtherand perhaps even necessaryalterations of the Act to be rendered by Congress as part of that branch's legislative and political prerogative. See Free Enter. Fund, 561 U.S. at ___, 130 S.Ct. at 3162 ([S]uch editorial freedomfar more extensive than our holding todaybelongs to the Legislature, not the Judiciary. Congress of course remains free to pursue any of these options going forward.). We therefore sever the individual mandate from the remaining sections of the Act.