On July 11, 2013, the Fourth Circuit dismissed a constitutional challenge to the employer mandate established by the Affordable Care Act (“ACA”)), holding that it was a valid exercise of Congress’s power under the Commerce Cause. Liberty University Inc. v. Lew, No. 10-2347 (4th Cir. July 11, 2013).
The ACA’s employer mandate requires employers with 50 or more employees to provide health care coverage to their employees and dependents, or alternatively pay a federal tax. (The effective date of this mandate, originally set for 2014, was recently pushed back to 2015.) Liberty University and two individual plaintiffs brought their constitutional challenge to the employer mandate in a West Virginia federal court. After the district court dismissed the case on procedural grounds as a prohibited pre-enforcement tax challenge, Liberty appealed. The Supreme Court soon thereafter rejected the same procedural grounds for dismissal in a similar case challenging the ACA’s individual mandate, NFIB v. Sebelius, 132 S. Ct. 2566 (2012). After that decision, Liberty successfully petitioned the Court to allow the Fourth Circuit to address the constitutional issues in its case.
The Fourth Circuit held that the employer mandate plainly fell within Congress’s authority under the Cmmerce Clause. According to the court, Congress has the power to impose conditions on the terms of employment that substantially affect interstate commerce. The ACA’s employer mandate covers employee compensation, a term of employment that has a substantial impact on interstate commerce; and the court noted that employer-provided health insurance “is a significant part of the national economy.” The Fourth Circuit distinguished the employer mandate from the ACA’s individual mandate which the Supreme Court found invalid under the Commerce Clause in the NFIB case (though the Court upheld the individual mandate as a valid exercise of Congress’s taxing authority). Unlike the individual mandate, that essentially compels individuals to participate in interstate commerce, the court found that employers are already engaged in economic activity, thus substantially affecting interstate commerce.
The Fourth Circuit also rejected Liberty’s claims that the ACA violated their rights under the Free Exercise of religion and Establishment Clauses of the First Amendment, the Fifth Amendment’s Equal Protection clause, and the Religious Freedom Restoration Act.