Virginia Challenges Feds in First Health Care Lawsuit Hearing

The Obama administration is trying to have its cake and eat it too by arguing that the federal government is not taxing people to pay for health care, but then says state must comply with the new law because they can't avoid paying taxes, Virginia's attorney general's office argued in federal court Thursday.

In a hearing to determine whether Virginia has the standing to go forward with it lawsuit challenging the constitutionality of the Affordable Health Care Act, Deputy Assistant Attorney General Ian Gershengorn argued for the federal government that the Commonwealth of Virginia did not have the right to ignore the federal law because of the minimum coverage standard provision.

In brief, the provision says that if people don't buy health care insurance they must pay a fine. Gershengorn argued that the provision is a tax, which states can not ignore.

But Duncan Getchell, Virginia's solicitor general, argued that Congress was very careful not to classify any fees or penalties as taxes in the bill because President Obama opposed taxes on the middle class.

Getchell argued that the language in the law refers to the fine imposed for not obtaining health insurance as a penalty, which means it can not be classified as a tax.

The definition of a tax under the Commerce Clause is used to raise real revenue for the general purpose of the government. If the "penalty" works to get people to comply with the law, then it won't raise a dime, and therefore can not be considered a tax, the state argued.

"Congress called it a penalty in the bill, that is the word they used. Now mind you, this bill had taxes in it, when the judge asked the United States today is this a tax bill or is this a health care bill the answer was, it is both. That's very interesting given the insistence on part of the Legislature and the president prior to this bill that this is not a tax and not the position of the federal government is in face that this is a tax bill," Virginia Attorney General Ken Cuccinelli told reporters Thursday morning after arguments.

Making a separate argument, the federal government said the actual activity is uninsured citizens using the health care system without paying for it. Gershengorn said to keep health care from imploding the economy, they must regulate what could be classified as freeloading activity.

Getchell countered that the decision to not buy insurance is not "activity," and the federal government can't draft a regular citizen into commerce in order to regulate him or her.

"If not engaging in commerce is commerce there are no limits on federal power," Cuccinelli said.

The federal government argued that Virginia does not have standing to make its claims.

"Virginia cannot bring this suit against the federal government on the theory that the minimum coverage provision will burden or otherwise injure Virginia's citizens," the feds said in its brief to the court.

"Virginia claims standing on behalf of its citizens to challenge federal legislation, but citizens of Virginia are also citizens of the United States. The Commonwealth does not have standing to sue the federal government to exempt Virginians from the operation of federal law," the brief reads.

Judge Henry Hudson heard the arguments and has 30 days to release his written decision. 
If he allows the suit to go forward in the next 30 days, than the case will be heard in October, and after those arguments, he will have another 30 days to make his ruling.

It's entirely likely that whichever side loses the case will appeal the case to the 4th Circuit Court, and then whoever loses there will appeal to the Supreme Court.

Meanwhile, most pieces of legislation brought before Congress have a severability clause, which means if a portion of it is deemed unconstitutional than the rest of the bill can still stand. The health care law does not have this, which means if Virginia's lawsuit prevails at the highest levels, the entire law will go down.

Fox News' Gretchen Gailey contributed to this report.