The ruling is the first decision in what may be years of litigation over the question of whether Congress has the power to regulate – and tax – a citizen’s decision not to buy health insurance.
“Given the presence of some authority arguably supporting the theory underlying each side’s position, this court cannot conclude at this stage that the complaint fails to state a cause of action,” Judge Hudson wrote in a 32-page opinion.
The action came in response to a request by Justice Department lawyers that the Virginia lawsuit be dismissed. The ruling clears the way for an Oct. 18 federal court hearing in Richmond on whether the national health care law complies with requirements of the Constitution or exceeds the powers granted to Congress.
“This lawsuit is not about health care, it’s about our freedom,” said Virginia Attorney General Ken Cuccinelli. “The government cannot draft an unwilling citizen into commerce just so it can regulate him under the commerce clause.”
The Obama health care plan requires Americans to purchase private health insurance at a certain level of coverage or pay a penalty or tax for their refusal.
The mandatory insurance provision takes effect in 2014.
According to Hudson, the core underpinning of the new law “is the notion that every individual will need medical services at some point. Everyone, voluntarily or otherwise, is therefore either a current or future participant in the heath care market.”
Those challenging the law argue that the measure exceeds congressional power to regulate interstate commerce. The health care law seeks to regulate not only economic activity, but also economic inactivity – extending to a citizen’s decision to avoid participation in a program, opponents say.
The law marks the first time the national government will order Americans to purchase a product from a private business and impose a tax on those who refuse, opponents say.
Administration lawyers counter that Congress has broad authority under the commerce clause to regulate private decisions about health care since those private decisions affect the health care system affects and interstate commerce. In addition, they say, federal lawmakers have the power to tax individuals who refuse to participate in programs mandated by the federal government.
“Never before has the [Constitution’s] commerce clause and associated necessary and proper clause been extended this far,” Hudson wrote.
The judge added that it was an “even closer and equally unsettled issue” whether the health care law’s individual mandate was authorized under Congress’s taxing powers.
The Obama administration is asking the courts to embrace an expansive view of Congressional power. Justice Department lawyers say Congress's power to impose a tax for the general welfare is checked only by the voters. Administration lawyers also told Hudson that the “courts are without authority to limit the exercise of the taxing power.”
Congress’s authority to impose a tax is broad enough to extend into areas that would exceed the national legislature’s limited powers under Article 1 of the Constitution, administration lawyers said.
Lawyers for Virginia counter that the health care law imposes a penalty – rather than a tax – on citizens who decide not to participate. While Congress has broad powers to impose a tax, its powers to impose a penalty are more constrained, they say.
The Virginia lawyers are also defending a state law passed earlier this year that sought to preserve the right of Virginia residents to decide for themselves whether to purchase health insurance. The law is in direct conflict with the individual mandate imposed in the Obama reform law. Under the Constitution’s supremacy clause, any clash between a federal law and a conflicting state law must be resolved in favor of the federal law.
But Virginia lawyers argue that the federal health care law is unconstitutional and that the state’s law should be upheld.
The Virginia lawsuit is one of several legal challenges pending in the courts testing the Obama health care plan. In addition to the Virginia suit, a group of attorneys general are joined together in a suit filed in Florida raising similar issues. There has been no ruling in that case yet.
In noting the national significance of the issues and the murky state of the law, Hudson suggested there may be many legal twists and turns in the case ahead. “While this court’s decision may set the initial judicial course of this case, it will certainly not be the final word,” he said.