Like Pulling Teeth - Orthodontics Practice Tries to Speed Up Obamacare

December 15, 2014 | Charles Bowen

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THE QUESTION:

Can an employer file a lawsuit in order to force the federal government to immediately enforce the employer mandate in the Affordable Care Act?

THE ANSWER

No.

MORE INFORMATION  

The federal Patient Protection and Affordable Care Act (commonly known both as the “Affordable Care Act” and “Obamacare”) imposes numerous and varied requirements (or “mandates”) on hospitals and physicians, insurers, drug companies, consumers and employers. In short, pretty much everyone involved in the delivery or consumption of health care services.

Of course, the Act has been controversial from the outset. As even casual followers of legal news know, several of the Act’s mandates have spawned court challenges. In each of the most prominent cases, affected individuals and businesses contended that a specific mandate violates their rights under the Constitution.

A very recent decision by the Eleventh U.S. Circuit Court of Appeals focuses on the Act's “employer” mandate. The employer mandate is applicable to most private employers with 50 or more full-time employees and requires those employers to make health insurance available to its employees. By the terms of the Act, the employer mandate was scheduled to become effective three years after enactment (i.e., late in 2013). In response to pleas from business interests, however, the federal government extended the deadline to 2014. For some employers it was further extended to 2015. Kawa Orthodontics was one of the employers for whom the deadline was extended to 2015. Kawa paid for extensive research to determine exactly what it would need to do in order to comply with the employer mandate in 2014. When the Treasury Department extended the deadline for Kawa and other employers, Kawa brought suit to recoup the costs of their initial research to comply with the mandate in 2014 (Kawa Orthodontics, LLP v. Secretary, U.S. Dept. of the Treasury, et al., No. 14-10296 (11th Cir. 2014)).

Unlike Hobby Lobby and similar cases brought against the Affordable Care Act, Kawa did not dispute the constitutionality or applicability of the employer mandate. Rather, in a somewhat novel twist, it challenged the right of the Treasury Department and IRS to delay enforcement of the mandate.

Instead of directly addressing the merits of Kawa's Complaint, the government responded with a motion for early dismissal of the case, challenging Kawa's right (regardless of the possible merits of the case) to proceed with the lawsuit. To understand this challenge, a little historical and constitutional law background is needed.

The founding fathers feared that, absent some limits on access to the federal courts created under Article III of the Constitution, judges' time would be consumed by an endless stream of frivolous disputes and imaginary grievances. Among other limitations, the framers therefore provided that the courts’ jurisdiction is to be limited to disputes in which the aspiring Plaintiff can meet certain threshold requirements. One who does is said to have “standing” to proceed. Because the court no longer has jurisdiction when a Plaintiff fails to demonstrate standing, that party faces prompt dismissal of its case.

To establish standing, an individual or business must show three things:

  • Injury - Actual (or in some case imminent) harm. This can, but need not be, the loss of money or property, but must always be “concrete and particularized.”

  • Causation - That the injury is the direct result of the challenged law or the Defendant's conduct (in this case, the delayed enforcement deadline); and

  • Redressability - The likelihood that the alleged injury will be redressed if the plaintiff gets a favorable ruling on the merits.

According to the Court, Kawa was precluded by law from suing for monetary damages because it only sought an order compelling the agencies to proceed with implementation. Nevertheless, in order to satisfy the “injury” prong of the standing test, it needed to identify some “concrete and particularized” loss. It sought to do so by pointing to the expenses it incurred in preparing to comply with the original 2013 employer mandate deadline. The trial court determined that this alleged loss was insufficient to give Kawa standing and dismissed the complaint. Kawa appealed.

By a vote of two to one, the appeals panel agreed with the trial court and affirmed its dismissal of the Complaint. Circuit Court Judge Susan H. Black concluded that Kawa's alleged injury was too “abstract and indefinite” to confer standing. He also noted that, while the alleged preparatory expenditures admittedly turned out to be premature, Kawa will still be subject to the employer mandate when it becomes effective. As such, the assertion by Kawa that these costs were wasted or of no value is questionable.

Unlike baseball, failure to establish standing is a case of one strike and you're out. In fact, a Plaintiff's failure to establish any one of the three standing requirements is fatal to its case. Nevertheless, the Kawa appeals court opinion goes on to address the “causation” and ability-to-redress aspects of Kawa's claim.

As to cause and effect, the Court concluded there was no direct link between the agencies' decision to delay the mandate and Kawa's expenditures. With regard to the question of redress, the court concluded that only an award of money damages would be appropriate redress, but it had already been determined that monetary redress was not available to Kawa in this case (as noted above). 

In a dissenting opinion, Circuit Court Judge Beverly B. Martin argued that Kawa's premature expenditure of resources–which she contended was in fact the direct result of the delayed implementation-deprived it of the use of those resources for investment or other business purposes, thus inflicting upon Kawa a sufficient monetary injury for standing purposes. With somewhat debatable logic, Judge Martin goes on to conclude that the relief requested–an order directing immediate implementation of the employer mandate–would cut off Kawa's continued loss of interest on the funds prematurely spent and would thus provide adequate redress.

THE BOTTOM LINE:

Business interests regularly complain that government regulation and mandates are destroying small and medium-sized enterprises. The Kawa case seems to be a rare and curious example of a business that wants more (or at least earlier) regulation. At least for now, however, the deadline for complying with the employer mandate remains unchanged.  Further, businesses are not eligible for compensation for costs they may incur for spending for compliance before it is actual necessary.

Topics: Georgia Employment Law