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Business Bankruptcy in Florida Could Undermine Supreme Court Health Care Case

The conservative bid to find the Affordable Care Act unconstitutional hit a serious snag yesterday when the women in the main lawsuit filed for bankruptcy on her business. The business was the lead plaintiff in the lawsuit against the federal government, and its dissolution has unclear implications for the suit, which will be heard before the Supreme Court next year:

(Mary) Brown closed her five-year-old Panama City, Fla., shop, Brown & Dockery Inc., in August, the same month she and the state coalition prevailed in front of the 11th U.S. Circuit Court of Appeals. On Sept. 30, Ms. Brown and her husband filed for personal bankruptcy. They later listed $62,972.04 in debts, most of which were business expenses.

Without owning a business, it could be harder for Ms. Brown to argue she is harmed by the legislation. Meanwhile, her recent financial woes suggest the possibility she would be exempt from penalties for noncompliance with the individual mandate. That raises questions about whether the suit can be based on her experience.

How much of a problem this could cause is hard to predict. If her standing is voided and no replacement can be found, the suit could falter. The 11th Circuit specifically cited the government’s acknowledgment of Ms. Brown as a legitimate plaintiff in permitting the suit to proceed. That court is the only one of the four federal appeals courts to have ruled on the law that found any aspect of it unconstitutional.

“There is at least a suggestion that her case is now moot, even if she had standing when it was originally filed,” said David Levine, a professor at Hastings College of the Law in California.

The only other plaintiff named in the suit is a retired investment banker. NFIB believes they can replace the plaintiff with another business owner, but at this late date that would seem to violate some legal precedents.

This could lead the Supreme Court to where they may have wanted to go anyway – to reject the suit based on standing, rather than the underlying merits of the case, arguing that the plaintiffs cannot yet prove harm. I don’t think this would be a satisfying conclusion for anyone involved; they want the constitutionality determined. But Brown’s bankruptcy makes things difficult.

Jon Cohn writes that there are other implications to the Brown bankruptcy which touch on the law as a whole:

The legal case against the health care reform really boils down to one question: Does the government infringe upon your freedom when it demands that you obtain insurance or pay a penalty, as long as you have the money to afford it? Or is the government merely asking you to help bear the cost of medical care you will inevitably consume – a cost that, otherwise, the rest of society would have to pick up, chiefly in the form of higher taxes, higher insurance premiums, and lost income?

Brown adheres to the former point of view: “No one has the right to try to control how you spend your money,” Brown told the Journal. But the bankruptcy filing that she and her husband made, and which TNR obtained via online court records, lists among the couple’s unsecured creditors several providers of medical care – a hospital and a physician group in Florida; an anesthesiology group based in Mississippi; and an eye care center in Alabama. The total, based on the court filing, appears to be a little less than $5,000. The bankruptcy filing also indicates that the couple has $400 in expected monthly “medical and dental” expenses […]

That is all too typical of the insurance market today. Small business owners frequently struggle to find decent health benefits, particularly as they get older, because the market for both individuals buying on their own and small businesses is extremely dysfunctional. Insurers jump in and out of the market, broker fees drive up premiums, and plans tend to have spotty benefits. Most important of all, carriers are practice aggressive forms of “risk selection” – that is, altering coverage, raising premiums, or simply denying coverage to people with pre-existing conditions and other signs of medical risk.

I wouldn’t speculate about health care being the source of Brown’s bankruptcy. But it’s the source of quite a lot of them, the data show. It’s a national problem that demands a national solution. And regardless of what you think of the ACA, the argument made by the likes of Brown and her confreres appears to cut against the reality of her life.

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David Dayen

David Dayen

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