No. 13-306 IN THE SUPREME COURT OF THE UNITED STATES LIBERTY UNIVERSITY, MICHELE WADDELL and JOANNE V.

MERRILL, Petitioners. v. G.

JACOB J. LEW, KATHLEEN SEBELIUS, SETH D. HARRIS, ERIC H. HOLDER, Jr., Respondents. ___________________________________________ On Petition for Writ of Certiorari to the United States Court of Appeals for the Fourth Circuit _________________________________________ PETITIONERS BRIEF IN REPLY ____________________________________________ Mathew D. Staver Stephen M. Crampton (Counsel of Record) Mary E. McAlister Anita L. Staver Liberty Counsel Horatio G. Mihet PO Box 11108 Liberty Counsel Lynchburg, VA 24506 1055 Maitland Center (434) 592-7000 Commons, 2d Floor court@lc.org Maitland, FL 32751 (800) 671-1776 court@lc.org

TABLE OF CONTENTS TABLE OF CONTENTS .................................. i TABLE OF AUTHORITIES ......................... iii INTRODUCTION ............................................ 1 REASONS FOR GRANTING THE PETITION ......................................................... 3 I. THIS IS THE ONLY CASE WHICH PRESENTS THE FULL ARRAY OF CONSTITUTIONAL QUESTIONS LEFT UNANSWERED BY NFIB. ..... 3 SIGNIFICANT CONSTITUTIONAL QUESTIONS RELATED TO THE PREVENTIVE CARE MANDATE ARE SQUARELY PRESENTED IN THIS CASE. .......................................... 5 A. The Preventive Care Mandate Was Part Of The Employer Mandate At The Time Of Remand.................. 5 This Is The Only Case That Addresses The Religious Liberties Of Non-Profit Employers. ............................ 6

II.

B.

ii III. THE TAXING AND SPENDING ISSUES POSED BY THE EMPLOYER MANDATE ARE SIGNIFICANTLY DIFFERENT FROM THOSE IN THE INDIVIDUAL MANDATE AND REQUIRE THIS COURTS REVIEW ................................................ 7 THIS CASE PERMITS A HOLISTIC REVIEW OF THE RELIGIOUS LIBERTY ISSUES POSED BY THE INSURANCE MANDATES. ............. 10 THE FOURTH CIRCUITS FINDING THAT THE EMPLOYER MANDATE COMPORTS WITH CONGRESS COMMERCE CLAUSE POWER CONFLICTS WITH NFIB. ............... 13 THERE ARE NO JURISDICTIONAL BARRIERS TO THIS COURTS REVIEW. ............................................. 14

IV.

V.

VI.

CONCLUSION ................................................. 6

iii TABLE OF AUTHORITIES Cases Autocam Corp. v. Sebelius, 2013 WL 5182544 (6th Cir. 2013) ................ 16 Autocam Corp. v. Sebelius, petition for cert. pending, No. 13-482 .................................... 1, 9 Bailey v. Drexel Furniture Co., 259 U.S. 20 (1922) ........................................... 7 Conestoga Wood Specialties Corp. v. Sebelius, petition for cert. pending, No. 13-356 ........ 1, 9 Conestoga Wood Specialties v. Secretary, 724 F.3d 377 (3d Cir. 2013) ................................. 16 Henderson v. United States, 133 S. Ct. 1121 (2013) ..................................... 5 Hobby Lobby v. Sebelius, 723 F. 3d 1114 (10th Cir. 2013) ................... 16 Liberty University v. Lew, 2013 WL 3470532 (4th Cir. 2013) ............... 15 Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) ....................................... 16 Natl Treasury Employees Union v. Von Raab, 489 U.S. 656 (1989) ...................................... 5-6 NFIB v. Sebelius, 132 S.Ct. 2566 (2012) ............... 1, 3, 7, 9, 13-14

iv Sebelius v. Hobby Lobby Stores, Inc., petition for cert. pending, No. 13-354 .................. 1, 7, 9 Thorpe v. Housing Authority, 393 U.S. 2683 (1969) ....................................... 5 Virginia v. Am. Booksellers Assn., 484 U.S. 383 (1988) ....................................... 16 Statutes 26 U.S.C. 4980D .......................................... 8-10 26 U.S.C. 4980H ............................................... 9 26 U.S.C. 5000A ............................................... 9 26 U.S.C. 9815 .................................................. 8 26 U.S.C. 9834 .................................................. 8 29 U.S.C. 1132 ................................................ 10 29 U.S.C. 1185d ................................................ 8 42 U.S.C. 18023(b) .................................... 11-12 42 U.S.C. 300gg-22 ................................. 6, 8, 10 Other Authorities H.R. 3279 IH 113th Congress (1st Session October 9, 2013 ............................................. 12

v http://www.providencejournal.com/news/health/ 20130622-abortion-coverage-in-all-r.i.-healthbenefits-exchange-plans-draws-objections.ece .................................................................. 11-12

INTRODUCTION Unlike the other Petitions pending before this Court, this case provides a single vehicle to resolve the constitutional questions related to the Patient Protection and Affordable Care Act (the Act) which remain unanswered after this Courts decision in NFIB v. Sebelius, 132 S.Ct. 2566 (2012). Petitioners challenge includes the religious liberty issues posed by regulations requiring that employer-provided health insurance include no-cost coverage of contraceptives and abortifacients, the religious liberty issues posed by requiring individuals to pay for abortions, and the overarching constitutional questions raised by mandating that employers provide health insurance or face crippling penalties. The challenges raised in Sebelius v. Hobby Lobby Stores, Inc., petition for cert. pending, No. 13-354, Conestoga Wood Specialties Corp. v. Sebelius, petition for cert. pending, No. 13-356, and Autocam Corp. v. Sebelius, petition for cert. pending, No. 13-482, address one aspect of the Employer Mandate, i.e., the requirement for no-cost contraceptive and abortifacient coverage. Liberty Universitys petition includes the issue presented by the foregoing, but also addresses whether Congress has authority to pass the Employer Mandate. This case also addresses issues related to the Individual Mandate left unanswered in NFIB,

2 i.e., whether, even if it is considered a valid tax, it violates religious liberty encompassed in the First Amendment and the Religious Freedom Restoration Act (RFRA). The Administration raises rejected claims related to standing and application of the AntiInjunction Act (AIA), but offers no basis for overturning the Fourth Circuits jurisdictional decisions that comport with this Courts precedents. In contrast to its jurisdictional rulings, the Fourth Circuits substantive rulings conflict with this Courts precedents, including NFIB, and with cases in other circuits. The Administration fails to recognize significant differences between the Employer Mandate and the Individual Mandate that affect the constitutional arguments, and thereby fails to appreciate the extent of the conflict between the Fourth Circuits decision and this Courts precedents. That conflict is also apparent in the Fourth Circuits rejection of the religious liberties challenges to the Employer and Individual Mandates. The lower court failed to address the mandates as they existed at the time of its review on remand, which included the final definitions of essential health benefits to include contraceptives and abortifacients that violate Petitioners sincerely held religious beliefs. Because of the extent of the constitutional challenges presented in this case and the depth of the conflict between the

3 Fourth Circuits decision and this Courts precedents on foundational constitutional issues, this Court should grant the Petition. REASONS FOR GRANTING THE PETITION I. THIS IS THE ONLY CASE WHICH PRESENTS THE FULL ARRAY OF CONSTITUTIONAL QUESTIONS LEFT UNANSWERED BY NFIB. Before reaching the question of whether the Administration can compel religiouslybased employers to provide no-cost coverage for contraceptives and abortifacientsthe issue addressed in Hobby Lobby, Conestoga Wood, and Autocamthis Court should consider the more foundational question of whether Congress can constitutionally compel employers to provide health insurance or face excessive penalties. That question is presented squarely and solely in this case, making this the proper vehicle for this Courts consideration of the constitutional questions left unanswered by NFIB. In NFIB, this Court answered the question of whether the Individual Mandate comports with Congress enumerated powers, but did not review the Employer Mandate. NFIB, 132 S.Ct. at 2585-2594. As was true with the Individual Mandate, the question of whether Congress had the authority to enact

4 the Employer Mandate is of paramount importance in determining whether and to what extent the Administration can implement the Act. In light of the devastating penalties assessed against employers under the Employer Mandate, the constitutional validity of the directive must be analyzed precisely and consistently with this Courts precedents. Precise analysis is all the more critical in light of the significant religious liberty issues posed by regulations that define the insurance obligation placed upon employers to include free contraceptives and abortifacients as preventive care. Those religious liberty issues are relevant only if this Court determines that the Employer Mandate is a valid exercise of Congress enumerated powers. If the mandate is found to exceed Congress power, then it and the concomitant preventive care regulations are invalid and would no longer threaten religious liberty. Only if the Court finds that the mandate is a valid exercise of Congress power would the validity of the preventive care regulations and the religious liberty issues they pose become critical. That being the case, this Court should grant the Petition and undertake analysis of the constitutionality of the Employer Mandate upon which resolution of the questions presented in Hobby Lobby, Conestoga Wood and Autocam hinges. Granting review of this case

5 will also resolve remaining questions related to the Individual Mandate, i.e., whether the directive violates religious liberty guaranteed under the First Amendment and RFRA. For these reasons, this is the ideal vehicle for this Courts review. II. SIGNIFICANT CONSTITUTIONAL QUESTIONS RELATED TO THE PREVENTIVE CARE MANDATE ARE SQUARELY PRESENTED IN THIS CASE. A. The Preventive Care Mandate Was Part Of The Employer Mandate At The Time Of Remand.

When, as occurred in this case, a statute is amended or clarified through implementing regulations during the pendency of an appeal, the court of appeals is required to analyze the law as it exists at the time of appellate review. Thorpe v. Housing Authority, 393 U.S. 268, 281-83 (1969) Natl Treasury Employees Union v. Von Raab, 489 U.S. 656, 661 n. 1 (1989); Henderson v. United States, 133 S. Ct. 1121, 1129, (2013). On remand the Fourth Circuit was required to analyze Petitioners religious liberty challenges to the Employer Mandate in light of its requirement that employers provide contraceptives and abortifacients at no cost, see

6 42 U.S.C. 18022(a); 42 U.S.C. 300gg-13. Von Raab, 489 U.S. at 661. The preventive care regulations were not new issues raised for the first time on appeal, but were part of the Employer Mandate as it existed at the time of the Fourth Circuits review. Any analysis of the constitutionality of the mandate could not be complete without considering the effect of requiring employers to provide contraceptives and abortifacients at no cost. Since the Fourth Circuit refused to do so, its decision conflicts with established precedent and should be reviewed. This Is The Only Case That Addresses The Religious Liberties Of Non-Profit Employers. This Courts analysis of the constitutional validity of the Employer Mandate will also be incomplete without consideration of how requiring free contraceptives and abortifacients will affect the religious liberty interests of nonprofit employers such as Liberty University. The other cases pending before this Court, Hobby Lobby, Conestoga Wood and Autocam, involve for-profit employers challenging the preventive care regulations in the Employer Mandate. The Administration argues that the for-profit nature of those businesses raise unique religious liberty questions. Hobby Lobby, Case No. 13-354, Petition for Writ of B.

7 Certiorari at 16-32. The question of whether for-profit enterprises can assert religious liberty claims is a primary question in those cases. Id. Therefore accepting review of only those cases will necessarily result in an incomplete analysis of the constitutionality of the preventive care regulations within the Employer Mandate. By contrast, granting review of this case will ensure a more complete analysis of the religious liberty issues posed by the Employer Mandate. III. THE TAXING AND SPENDING ISSUES POSED BY THE EMPLOYER MANDATE ARE SIGNIFICANTLY DIFFERENT FROM THOSE IN THE INDIVIDUAL MANDATE AND REQUIRE THIS COURTS REVIEW. Unlike the single financial penalty under the Individual Mandate that this Court found to be small in comparison to the cost of health insurance, and therefore a permissible tax, NFIB, 132 S.Ct. at 2594, the multiple and potentially crippling levels of fines under the Employer Mandate are impermissible penalties under Bailey v. Drexel Furniture Co., 259 U.S. 20 (1922). As the Administration explains in Hobby Lobby, Conestoga Wood and Autocam, but fails to mention in this case, the penalties imposed under the Employer Mandate extend beyond an in-lieu tax for not having insurance

8 to multi-level penalties enforced by various administrative agencies.1

In Hobby Lobby, Conestoga Wood and Autocam, the Administration explains that the preventive care regulations apply to employment-based group health plans covered by ERISA and therefore will be subject to ERISAs enforcement mechanisms under 29 USC 1185d. It is also enforceable through imposition of tax penalties on the employers that sponsor such plans. 26 U.S.C. 4980D; see 26 USC 9815(a)(1), 9834 (Supp. 2011). With respect to health insurers in the individual and group markets, States may enforce the Acts insurance market reforms, including the preventive-services coverage requirement. 42 USC 300gg-22(a)(1) (Supp. 2011). If the Secretary of Health and Human Services determines that a State has failed to substantially enforce one of the insurance market reforms with respect to such insurers, she conducts such enforcement herself and may impose civil penalties. 42 U.S.C. 300gg-22(a)(2) (Supp. 2011); see
1

9 Employers which do not provide health insurance are assessed a penalty of $2,000 per employee per year under 26 U.S.C. 4980H. This penalty, standing alone, might arguably be comparable to the in-lieu tax assessed against individuals under 26 U.S.C. 5000A, NFIB, 132 S.Ct. at 2594. However, the penalties under the Employer Mandate go much farther. Even employers who provide health insurance could face fines of $3,000 per employee per year if the coverage does not satisfy the Administrations definitions of minimum coverage and maximum value. 26 U.S.C. 4980H. More importantly, employers face penalties of $100 to as much as $15,000 per employee per day under 26 U.S.C. 4980D if the insurance provided fails to meet the Administrations standards.2 Those penalties, along with other fines, are not only administered by the IRS, but also the Departments of Labor and Health and 42 U.S.C. 300gg-22(b)(1)(A) (Supp. 2011); 42 U.S.C. 300gg-22(b)(2). Hobby Lobby, No. 13-354, Petition for Writ of Certiorari, at 3 n. 3; Conestoga Wood, No. 13356, Brief in Response at 3 n.3; Autocam, No. 13-482, Brief in Response, at 3 n.3. 2 The Administration failed to include Section 4980D and the other provisions listed in footnote 1 in its Response in this case.

10 Human Services. 29 U.S.C. 1132(a)(5), 42 U.S.C. 300gg-22.3 In addition, daily penalties are increased if non-compliance occurs after a notice of deficiency or is deemed more than de minmis, creating a scienter factor. 26 U.S.C. 4980D(b)(3). The exorbitant fines, scienter provision and multi-departmental enforcement in the Employer Mandate differentiate it from the Individual Mandate and place the Employer Mandate squarely in the definition of an impermissible penalty under Drexel Furniture. The Fourth Circuits contrary conclusion conflicts with Drexel Furniture and with NFIB and should be reviewed by this Court. IV. THIS CASE PERMITS A HOLISTIC REVIEW OF THE RELIGIOUS LIBERTY ISSUES POSED BY THE INSURANCE MANDATES. This is the only case that provides this Court with the opportunity to fully address the threats to religious liberty posed by the Act. Those threats go beyond the preventive care regulations within the Employer Mandate addressed in Hobby Lobby, Conestoga Wood, Autocam and this case to include subsidization of surgical abortions under both the employer and individual mandates and individualized
3

See footnote 1.

11 exemptions favoring certain believers. As the only case that raises all of those religious liberty issues, this is the only vehicle that offers this Court the opportunity to preserve individuals and employers religious liberties against the full array of threats posed by the healthcare law. Among those threats is a requirement that enrollees in health insurance exchange plans make separate payments to be used exclusively for surgical abortions. 42 U.S.C. 18023(b). The Fourth Circuit and the Administration dismissively claim that there is no burden upon Petitioners religious beliefs because employers and individuals can simply choose policies without abortion coverage. (Appx. 61a n.9, Brief in Response, p. 19). However, neither employers nor individuals necessarily have that option. The Act provides that states may, but are not required to, enact laws prohibiting abortion coverage in health insurance exchange plans. 42 U.S.C. 18023(a). Employers and individuals in states which have not enacted such laws will not necessarily be able to choose a plan that excludes abortion coverage. Id.4 Therefore, they will be compelled For example, in Rhode Islands health insurance exchange, there are no plans that exclude coverage for abortions. http://www.providencejournal.com/news/health/ 20130622-abortion-coverage-in-all-r.i.-health4

12 to pay the separate premiums for abortion coverage in violation of their religious beliefs. Section 18023 does not provide any exemptions from the abortion premium payments. Id. The Administration also claims that Petitioners religious rights are not burdened because insurers must provide notice of abortion coverage. (Brief in Response, p. 19). However, insurers need only mention abortion coverage at initial enrollment and even then, need only state the total premium price, not the separate abortion payment. 45 CFR 156.280. Consequently, Petitioners and others whose religious beliefs proscribe paying for abortions will be unable to ensure that their rights are protected. Notably, some members of Congress have recognized the danger posed by the lack of appropriate notice and have introduced legislation to provide the clear notice that religious adherents need to avoid violating their religious beliefs.5 The Administrations selective exemption of certain religious sects and members of health care sharing ministries from the Individual Mandate and selective exemption and accommodation of certain religiously based benefits-exchange-plans-draws-objections.ece (last visited October 30, 2013). 5 H.R. 3279 IH 113th Congress (1st Session October 9, 2013).

13 employers from the Employer Mandate also pose significant religious liberty concerns which should be resolved by granting Petitioners Petition. This case is the only vehicle which provides the Court with the opportunity to address the myriad threats to religious liberty present throughout the Act. Consequently, this Court should grant review. V. THE FOURTH CIRCUITS FINDING THAT THE EMPLOYER MANDATE COMPORTS WITH CONGRESS COMMERCE CLAUSE POWER CONFLICTS WITH NFIB. Nothing about the Employer Mandate justifies the Fourth Circuits deviation from this Courts conclusion that Congress Commerce Clause authority does not extend to compelling a party to enter into commercial activity. NFIB, 132 S.Ct. at 2587. As was true with the Individual Mandate, the Employer Mandate authorizes Congress to use its commerce power to compel citizens to act as the Government would have them act in derogation of the intent of the Commerce Clause. Id. at 2589. The Employer Mandate is not merely a logical extension of existing laws regulating employers who voluntarily provide and can discontinue providing employee benefits. Instead, it is an unprecedented regulation that compels all employers with fifty or more

14 employees to provide government-defined benefits at government-defined prices with no possibility of exiting save going out of business. Congressional regulation of voluntary marketplace participation does not authorize Congress to direct employers to purchase particular products any more than regulation of health insurance authorizes Congress to compel individuals to enter the market. Id. at 25902591. The Commerce Clause is not a general license to regulate an individual from cradle to grave, simply because he will predictably engage in particular transactions. Id. Neither is it a general license to regulate employers, and the Fourth Circuits contrary conclusion should be reviewed by this Court. VI. THERE ARE NO JURISDICTIONAL BARRIERS TO THIS COURTS REVIEW. The Administration attempts to erect jurisdictional barriers to this Courts review, but offers no justification for overturning the Fourth Circuits conclusions, consistent with NFIB, that Petitioners have standing and the AIA is not applicable. The Fourth Circuits AIA ruling is also consistent with the lower courts rulings in Hobby Lobby, Conestoga Wood and Autocam. There is no basis for review of the Fourth Circuits conclusion that the employer mandate exaction, like the individual mandate

15 exaction, does not constitute a tax for purposes of the AIA, so that the AIA does not bar this suit. Liberty University v. Lew, 2013 WL 3470532 at *6 (4th Cir. 2013). As the Fourth Circuit said: To adopt the Secretarys position would lead to an anomalous result. The Supreme Court has expressly held that a person subject to the individual mandate can bring a pre-enforcement suit challenging that provision. But, under the Secretarys theory, an employer subject to the employer mandate could bring only a post-enforcement suit challenging that provision. It seems highly unlikely that Congress meant to signalwith two isolated references to the term taxthat the mandates should be treated differently for purposes of the AIAs applicability. Tellingly, the Government has pointed to no rationale supporting such differential treatment. Id. The same is true here. The Administration offers no rationale for this Court to review the Fourth Circuits finding that is consistent with NFIB.

16 Furthermore, the Fourth Circuits ruling is consistent with the lower court rulings in Hobby Lobby, Conestoga Wood and Autocam, in which the Tenth, Third and Sixth circuits, respectively, agreed that the AIA did not bar the challenges to the Employer Mandates preventive care regulations. Hobby Lobby v. Sebelius, 723 F. 3d 1114, 1126-1127 (10th Cir. 2013); Conestoga Wood Specialties v. Secretary, 724 F.3d 377, 396 n.9 (3d Cir. 2013) (Jordan, J. dissenting); Autocam Corp. v. Sebelius, 2013 WL 5182544 at *3 (6th Cir. 2013). Notably, in each case, the Administration had stipulated that the AIA did not apply. Hobby Lobby, 723 F. 3d at 1126; Conestoga Wood, 724 F.3d at 396; Autocam, 2013 WL 5182544 at *3. There is also no basis for review of the Fourth Circuits conclusion that Petitioners have standing. The Fourth Circuit correctly followed this Courts precedents in Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992) and Virginia v. Am. Booksellers Assn., 484 U.S. 383, 39293 (1988) to find that Petitioners have standing. The Administration offers no authority to the contrary. CONCLUSION This is the only case pending before this Court which addresses the fully array of unresolved issues related to the healthcare law. Because of the unique scope of issues presented by this case and the conflicts between the

17 Fourth Circuits conclusions and established precedent, this Court should grant the Petition. November 2013 Mathew D. Staver (Counsel of Record) Anita L. Staver Horatio G. Mihet LIBERTY COUNSEL 1055 Maitland Center Commons, 2d Floor Maitland, FL 32751 (800) 671-1776 court@lc.org Stephen M. Crampton Mary E. McAlister LIBERTY COUNSEL PO Box 11108 Lynchburg, VA 24506 (434) 592-7000 court@lc.org