Judicial Invalidation of the Affordable Care Act
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Judicial Invalidation of the Affordable Care Act

Since its enactment in 2010, the Affordable Care Act (ACA) has provided meaningful coverage for millions of Americans, reformed the national health insurance and health care delivery infrastructure, and assured basic public health services through core funding.

Enforcing the ACA has also entailed a multitude of political and legal challenges including (1) dozens of failed attempts by Congress to repeal its provisions, (2) multiple federal regulatory waivers, and (3) considerable judicial adjustments.

On December 14, 2018, the torrid history of the ACA added its newest chapter. In a federal district court in Fort Worth, Texas, Judge Reed O’Connor ruled that the entire ACA is unconstitutional. The decision in Texas v. United States, has been anticipated for months following oral arguments. If upheld on appeal, it could spell the end of every protection, program, subsidy, and incentive framed in the ACA not otherwise waived or dismantled by prior or current administrations.

This commentary explains the core premises for the court’s decision, disputes its legal foundations, and assesses future law and policy options for courts, Congress, and Americans facing the loss of popular ACA protections and benefits.

Legal Developments Leading to the Court’s Decision

The primary impetus for the court’s decision arose just under a year ago. After a series of legislative failures to repeal the ACA, including the indelible “thumbs down” vote of the late Senator John McCain, R-AZ in July 2017, Congress turned its attention to tax reform. It enacted massive changes via the Tax Cuts and Jobs Act (TCJA) through its budget reconciliation process. TCJA was subsequently signed by President Trump on December 22, 2017.

The inherent confines of the budget process bootstrapped Congress’ ability to amend substantive provisions of the ACA. However, TCJA included a core provision that eliminated the taxable amount charged to Americans who failed to acquire health insurance pursuant to the ACA’s individual mandate.

The U.S. Supreme Court determined in NFIB v. Sebelius (2012) that the individual mandate was a lawful exercise of Congress’ power to tax, but not regulate interstate commerce. The Court emphasized that the penalty imposed via the individual mandate could be viewed as a tax, in part, because it generated some revenue for the federal Treasury.

Congress’ withdrawal of monetary charges through TCJA for ACA’s individual mandate led Texas and nineteen other states to challenge the continued enforcement of ACA on multiple grounds, including a claim that the zeroing out of charges voided the individual mandate. Absent the collection of any revenue, so the argument goes, the tax authority underlying the individual mandate is negated. Because the individual mandate was so essential to the ACA, the entire act must be unconstitutional. It is a specious conclusion under existing constitutional theory, but the court bought it nevertheless.

The Heart of the Court’s Analyses

Judge Reed O’Connor’s decision invalidating the entire ACA relies on an obtuse application of principles of severability embedded within separation of powers.

The legal concept of severability is straightforward. To the extent a court determines that a provision of a legislative act is infirm, the remainder of the act is presumed to remain intact.  Only in narrow circumstances should a court’s finding that a statutory provision is unconstitutional work to nullify the entire act. Respect for the distinct functions of the legislative and judicial branches to create and interpret the law, respectively, sustains limited applications of severability.

In Texas, voiding the individual mandate should not mean the entire ACA is torpedoed. Judge O’Connor contrives this result through an overzealous assessment of Congress’ intent underlying the ACA. With no resistance from the federal Department of Justice (which refused to defend the issue), the court reasons that the individual mandate was rendered unconstitutional when Congress withdrew its monetary benefits. This finding alone is challengeable. Just because Congress later amends an exercise of its tax power does not make the original practice unconstitutional. As the court notes, Congress did not (in fact could not) void ACA’s individual mandate via TCJA, only its specific charge.

Judge O’Connor further opines that the individual mandate was so indispensable  to furthering Congress’ original intent of the ACA to control health care costs that it cannot be severed from its provisions. “In sum,” states the court, “the Individual Mandate ‘is so interwoven with [ACA’s] regulations that they cannot be separated. None of them can stand.’”

Congress and the Supreme Court acknowledge the critical role of the individual mandate to prevent adverse selection, analogizing it as the third leg of a stool regarding the larger act. The text of the ACA crafted by Congress, however, does not explicitly suggest the individual mandate provision is non-severable from the act. Nor would loss of the mandate completely thwart ACA implementation within the health care marketplace. Even as the effective date (January 1, 2019) of TCJA’s removal of the mandate exaction approaches, multiple ACA activities have continued unabated, including sales of millions of individual health insurance policies on the national and state exchanges in 2018 alone.

Judge O’Connor acknowledges constitutional limits of the role of courts in questioning and replacing Congressional policy with their own, but reads into the ACA conclusions under the premise of severability that Congress did not reach and the Supreme Court may not support. When the Supreme Court disabled core facets of Medicaid expansion in NFIB v. Sebelius (reducing states’ financial incentives to comply), it did not negate expansion entirely, much less the entire ACA. Expansion, like the individual mandate, is a severable component of the much larger act.

Current and Potential Impacts

Immediate legal impacts of the court’s decision are minimal. Judge O’Connor did not simultaneously issue the cessation of all ACA provisions in his decision. Forthcoming petitions to the Fifth Circuit Court of Appeals in New Orleans will likely stay any direct enforcement of the lower court opinion. President Obama, the White House, and others have already confirmed that key ACA protections will continue to apply into 2019. If the case winds its way to the U.S. Supreme Court, it will again face the daunting challenge of maintaining judicial independence against mounting political pressures.

Meanwhile federal legislators on both sides of the aisle are distancing themselves from the holding. Some Republicans sense the court has gone too far in pillaging ACA. Embracing support for health care popularized in the November elections, Democrats in the House of Representatives are mobilizing to advance legislative options to preserve the act. Although nothing will come easy in the next Congress, an initial fix may be to reinstate charges underlying the individual mandate. Authorizing even a minimal charge for failing to acquire health insurance would generate some revenue in defiance of the federal district court.

The larger effects of the Texas decision extend from political reactions from President Trump, his executive agencies, and similarly-minded state and local policymakers. President Trump immediately declared the court’s decision a “big, big victory.” Despite popular support for the ACA, the federal administration may use the Texas decision as grounds for invalidating, ignoring, or obviating enforcement of the ACA in 2019.

Since taking office, President Trump’s administration has demonstrated open hostility to ACA’s core provisions. Health insurance subsidies have been slashed while skimpy insurance plans have been promoted. States have been encouraged to seek Medicaid waivers to allow work requirements for beneficiaries or limit essential health benefits. Objections to ACA requirements grounded in religious or conscientious beliefs have materialized. Employer mandates to require coverage have stalled.

Collectively these maneuvers have led several jurisdictions to sue the U.S. Department of Health and Human Services to demand it actually enforce ACA’s provisions. A decision in the ongoing case, Maryland v. United States, could reach an inapposite conclusion from the federal district court in Texas. At the epicenter of the continued legal saga over the ACA is the health of millions of Americans immediately placed at risk.

 

James G. Hodge, Jr., JD, LLM, is Professor of Public Health Law and Ethics, and Director, Center for Public Health Law and Policy, Sandra Day O’Connor College of Law, ASU.

 

Suggested citation: James Hodge, Judicial Invalidation of the Affordable Care Act, JURIST – Academic Commentary, Dec. 10, 2018, https://www.jurist.org/commentary/2018/12/james-hodge-judge-invalid-aca/

 


This article was prepared for publication by Kelly Cullen, JURIST Managing Editor. Please direct any questions or comments to him at commentary@jurist.org


 

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