For those of you following the court system’s decisions on the Obama Healthcare act, the news continues to evolve. With so much going on in the world right now, particularly with concerns over Egypt’s unrest, this news has passed rather quietly. I am confident there will be nothing quiet about the Congressional response to these decisions once they tackle the issue. The below is a summary of the court’s decision issued by Ed Fensholt, JD, of Lockton’s Compliance Services division. – Eric

In an opinion not wholly unexpected but nevertheless dramatic for its scope, yesterday afternoon a federal district judge in Florida struck down the entirety of last year’s federal health reform law on constitutional grounds.

The decision forges a 2-2 tie in federal trial court decisions regarding the constitutionality of the Patient Protection and Affordable Care Act.  Last year two Democratic-appointed trial judges, one in Michigan and one in Virginia, upheld the “individual mandate” aspect of the law in separate cases, while a Republican-appointed judge in Virginia struck down the mandate.  But yesterday’s decision by Judge Roger Vinson, a Republican-appointee, has a different flavor from the first three decisions.

First, the case was brought by 26 state attorneys general, as well as private parties, all asserting the unconstitutionality of the individual mandate.  Second, unlike the judge in the Virginia case (who found the individual mandate unconstitutional but was willing to allow other portions of the law to survive if not dependent on the individual mandate), Judge Vinson struck the mandate but also ruled that the balance of the law could not be separated from the mandate, so he ruled the entire law unconstitutional.

The Obama Administration has already appealed the Virginia decision, and the matter will be argued in May before the federal Fourth Circuit Court of Appeals.  The Administration is likely to appeal yesterday’s decision as well.  But the Florida decision will be heard by a different federal appeals court (the Eleventh Circuit), perhaps increasing the chance that at least one of the courts of appeals will side with the trial court, setting the stage for what is widely seen as an inevitability: an argument before, and decision by the U.S. Supreme Court.

As we noted in our Alert in December regarding the Virginia decision (click here), the individual mandate is acknowledged by both sides as the linchpin of the entire law.  Without a mechanism to get all Americans into the risk pool – into the “insurance boat” as it were – the likelihood that the various state “Insurance Exchanges” can operate viably is threatened.  Without an individual mandate, only the sickest Americans without insurance will likely gravitate to the Exchanges, creating an intolerable and expensive risk pool.  It would undermine the central goal of the Exchanges:  to bring robust and affordable coverage to the uninsured.

So what now?  Republicans in Congress are calling hearings on the reform law’s impact on individuals and American business, and proposing legislation to repeal all or portions of the law.  Coincidentally, Sen. Orrin Hatch (R-UT) introduced a bill yesterday that would repeal the employer mandate to either offer full-time employees qualifying and affordable coverage, or face penalties.

The President said last week he did not intend to re-fight the health reform battle, a sentiment clearly shared by most Congressional Democrats.  Yet some centrist Democrats have expressed a willingness to at least consider proposals to tweak the reform law.  Yesterday’s court decision, in conjunction with recent and sobering reports on the federal deficit and its implications for more entrenched entitlement programs, may supply some measure of political cover for centrist Democrats to support even broader changes.  This is particularly true for those Democrats up for re-election in 2012, and who may still be spooked by the GOP’s landslide victories in November.

So hold on to your hats.  As the Economist magazine wrote in this week’s issue, “the stage is set for a savage spring.”

Lockton Compliance Services

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