Nullification Redux: South Carolina and Obamacare

Last week, the South Carolina Senate debated House Bill H-301, H. 3101, 120th Sess. (S.C. 2014), fast tracked for passage and likely soon to become “law”—or at least make its way on to the statute books—when Governor Nikki Haley adds her much anticipated signature to a measure all but certain to pass in the Senate as it passed in the House last year. The South Carolina Bill, titled the Health Care Protection Act, purports to nullify—or at least mitigate the effects of—the federal Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 (2010) commonly called Obamacare. Last summer, when State Senator Tom Davis announced on Facebook his appointment as chair the State Senate’s “Obamacare Nullification Committee,” he outlined three strategies for South Carolina to pursue to stop Obamacare: 1) refuse to expand Medicaid, 2) challenge the “illegal” subsidies through Exchanges created by the federal government, and 3) suspend the licenses of insurers that accept the subsidies. Each of these measures purported to shield the state against the baneful effects of an allegedly unconstitutional law, notwithstanding that law’s passage by both houses of the federal Congress, signature by the President of the United States, and substantial validation by the Supreme Court in Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. ___, 132 S. Ct. 2566 (2012).

The question naturally arises whether Davis’s three strategies to protect South Carolina against claimed constitutional usurpation are themselves compatible with the United States Constitution. The answer is not straightforward or one sided. Davis is right about the first point. As Chief Justice Roberts and four concurring justices made clear in Sebelius, states are free to decline to expand Medicaid and the federal government lacks the authority to “coerce” them into expanding the program. That said, South Carolina gains relatively little in this process, except denial of care to tens of thousands of state residents that would be fully financed by federal dollars for two years and funded 90% by federal monies thereafter.

As for Davis’ second point, South Carolina and other states may file any non-frivolous law suits they wish, but chances of success with this claim are slim indeed. The Federal Spending Power conveyed by Article I Section 8 clause 1 of the Constitution clearly embraces federal subsidies for any purpose deemed to fall within the “general welfare,” and since 1937 the Supreme Court has left the determination of what satisfies the “general welfare” requirement to Congress. Helvering v. Davis 301 U.S. 619 (1937).

Davis’ third point is thoroughly misguided. Article VI Section 2 of the Constitution, known as the Supremacy Clause, provides that the “Constitution, and the Laws of the United States made in Pursuance thereof . . . shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” In Sebelius, the Supreme Court struck down those provisions of the Affordable Care Act that stripped states of all federal Medicaid funding if they chose not to participate in Medicaid expansion. 567 U.S. ___, 132 S. Ct. 2566 (2012). The Court allowed the federal government to incentivize states to participate by offering them additional funding, but not to penalize them for failure to participate by stripping them of existing funding. All other provisions of the Affordable Care Act remain in place, and state laws interfering with enforcement of those provisions are preempted under the Supremacy Clause. Any South Carolina law purporting to punish insurers for complying the federal law is therefore void.

H-3101 itself is even more problematic constitutionally than Senator Davis’ glib mission statement on nullification. The Bill consists of a Preamble and Section 1 outlining a fanciful states’ rights vision of the federal Constitution and Section 2 reciting a string of operational provisions most of which are permissible and not particularly consequential, but at least one of which is criminal and incendiary. The Bill begins by proclaiming boldly that the “people of the several states . . . created the federal government to be their agent for certain enumerated purposes, and nothing more” which is a tendentious gloss to place on the actual Constitution’s Preamble that reads “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, and provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

A problematic paraphrase of the Tenth Amendment follows, adding a few choice adjectives suggesting a far stricter reservation of power to the people and states and prohibition of it to the federal government than the actual constitutional text provides, and at the same time conveniently ignoring the deliberate choice made by the Tenth Amendment’s framers to avoid the more confining formulation of the Articles of Confederation which had limited Congress to powers expressly granted. More grievously, H-3101 inverts the Supremacy Clause into a self-judging reservation which allows states to opt out of federal laws that those states deem unconstitutional or inconvenient, which is precisely the opposite of what the real Supremacy Clause does – i.e. impose duly passed federal laws on objecting states. The Supreme Court has strongly repudiated H-3101’s nullification friendly contortion of the Supremacy Clause on many famous occasions, dating back to the seminal cases of McCulloch v. Maryland, 19 U.S. 264 (1821), Martin v. Hunter’s Lessee, 14 U.S. 304 (1816), and Cohens v. Virginia, 19 U.S. 264 (1821), decided during the Chief Justiceship of John Marshall early in the nineteenth century. Seasoned Court watchers will remember also the twentieth century’s most famous instance of nullification repudiation, the 1958 case of Cooper v. Aaron, 358 U.S. 1 (1958), in which the Supreme Court unanimously commanded Arkansas Governor Orville Faubus to integrate Little Rock’s schools, notwithstanding the Governor’s decision that Brown v. Board of Education , 347 U.S. 483 (1954), was wrongly decided and that the Equal Protection Clause, correctly construed, permitted “separate but equal” public schools.

Moving from Preamble to Operational Clauses, SC H-3101 is a patchwork of non-problematic and constitutionally dubious provisions. The Section requiring South Carolina officials to refrain from enforcing the Affordable Care Act is entirely legitimate, the Supreme Court having held per Justice Scalia in Printz v. United States , 521 U.S. 898 (1997), that the federal government may not “commandeer” state civil servants into enforcing federal law with state consent. Equally unobjectionable are provisions of 3101 granting state taxpayers a credit for the “shared responsibility payment” or penalty imposed on large classes of uninsured persons by the Federal Act. Sections of H3101 confirming the state’s decision not to establish a state exchange or authorize establishment of non-profit exchanges are similarly unexceptionable, assuming they do not interfere with establishment of a non-profit exchange authorized by federal law, in which case the state law would be preempted under the Supremacy Clause.

The Affordable Care Act contemplates some states electing to join the federal exchange, and that is in effect what South Carolina has done – forsaking all the advantages of local control and efficiency in the process. Much more alarming constitutionally is the provision of H3101 that declares a “health insurance contract purchased or established in violation of the this section is void and must not be enforced by the courts of this State,” which appears to facially contradict the Contracts Clause, Article I Section 10, Clause 1 of the U.S. Constitution. More dubious still is language in H3101 authorizing the Attorney General of South Carolina to bring an action in the name of the State to restrain or enjoin any person enforcing the Affordable Care Act when the A.G. has reasonable cause to believe that a person or business may be harmed by the Act’s enforcement. More radical language included in earlier versions of the Bill provided for lengthy prison terms for federal officials enforcing Obamacare, but the upshot and consequences of this measure and the earlier language are the same: Interference with federal officials attempts to enforce federal law is a federal crime under 18 USC 111. To be sure, militant states rights advocates relish visions of a showdown with federal officials, but the Attorney General and injunction minded state officials should have no illusions about the real world consequences of violating and conspiring to violate federal criminal law.

Obamacare may well be a terrible program—if program is not too bold a term for a hodgepodge of partly contradictory measures. Even before it truly gets off the ground, Obamacare may collapse under its own weight. But one could well say similarly pessimistic things about the broader health care delivery system in the United States. For all of the brilliant, hardworking, and caring researchers, doctors, nurses and technicians in this country, spending significantly more money on health care than other nations has not led the United States to the best health care delivery results in world. Far from it. Inefficiencies, and channeling too much money to insurers and administrators, has caused the U.S. to tumble far in the world rankings based on health of the population, and in the process generated significant competitive disadvantages vis a vis other advanced economies. Obamacare may or may not be part of the answer. The jury is not yet out, and not all the evidence is in. If Obamacare fails, it can be repealed by democratic means. But in a crisis of this significance, attempting repeal by appeal to constitutional fictions about state sovereignty forged two centuries ago to defend slavery is both dishonest and unconstructive. For a South Carolinian to speak the language of nullification is to summon the ghost of John Calhoun, and that spectral proponent of race based slavery as a positive good worth killing and dying for is far better left undisturbed in his slumbers and reveries about causes lost and worlds gone by. Racist code speak adds nothing constructive to meaningful debate on fixing our broken health care system.

More by | William Merkel William Merkel , Law.com Contributor
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