United States: The No-Legged Stool? ACA Declared Unconstitutional In Surprise Decision

Last Updated: December 27 2018
Article by Timothy G. Verrall

The Patient Protection and Affordable Care Act (ACA) has proven to be quite resistant to attempts to dismantle it, but on December 14, 2018, a federal judge in Fort Worth, Texas, may have finally accomplished what the president, Congress, various state and federal regulators, and assorted other statutory assassins have previously been unable to do. In Texas v. United States of America, Judge Reed O'Connor agreed with a key argument advanced by the attorneys general of Texas and 17 other states and concluded that the ACA in its entirety is invalid. For a law whose very existence now is largely attributable to the Supreme Court of the United States' prior focus on what a tax is, it is ironic that the argument that saved the ACA may ultimately prove to be its undoing, albeit with some unexpected help from Congress.

Background

The ACA's life thus far has been marked by controversy, uncertainty, and a number of near-death experiences, beginning with its first trip to the Supreme Court in National Federation of Independent Businesses v. Sebelius. In Sebelius, the Court considered a challenge to the constitutionality of the ACA's individual mandate under Congress's power to regulate interstate commerce and famously (or infamously, depending on one's perspective) found that this directive compelling most adults to purchase and maintain health insurance or pay a penalty was a tax despite never actually being thought of or labeled as such. Chief Justice John Roberts was the architect of this notion and effectively saved the ACA from ruination by finding that Congress did in fact have authority to impose the individual mandate under its taxing power. Crucially, Roberts's opinion essentially defined a "tax" as a government mandate that raises revenue, something the individual mandate has and will continue to do through December 31, 2018. Had the Tax Cuts and Jobs Act of 2017 (TCJA) not been passed, this might have been the final word on the matter.

As part of the TCJA, Congress left the individual mandate intact but reduced its penalty to zero, effective January 1, 2019. Technically, this means that people are still expected to maintain health insurance in 2019 and beyond, but there will no longer be a monetary penalty for failing to do so.

At the time the ACA was enacted, most of those who drafted and approved the law considered the individual mandate to be a fundamental component of its overall structure—perhaps so important to the success of the law as a whole that the ACA could not operate if the individual mandate were not included. By virtue of the fact that Congress was unable to actually repeal the ACA yet apparently believed that it could effectively gut the individual mandate via the TCJA without disturbing the rest of the ACA (a polite fiction, but one with some amount of truth to it, as it turned out), one might reasonably come to the conclusion that by mid-2017, the individual mandate's significance in the ACA firmament was significantly reduced from what it was in 2010.

The Latest Attempt

It is in this setting that Texas Attorney General Ken Paxton and his band of merry mischief-makers began yet another challenge to the ACA, this time seeking to turn the constitutional underpinnings of the ACA against the act itself, with an assist from the TCJA. The logic behind this is as follows: if the individual mandate is constitutional only because it is a tax (i.e., a government mandate that raises revenue), then once the TCJA eliminates the mandate's revenue-raising mission, it is no longer a tax and is therefore unconstitutional. Further, if the individual mandate is integral to the ACA but is invalid, so is the rest of the law, even the many aspects of it whose constitutional bona fides were never in dispute. While the ACA has spawned a sizable group of observers since its enactment, the members of which hold quite diverse views about its merits (or lack thereof), the conventional wisdom regarding this latest challenge was that it was too clever for its own good and wouldn't get anywhere. Enter Judge O'Connor.

The Decision

Judge O'Connor's opinion focuses on three primary areas, at least two of which are likely to receive close scrutiny during the inevitable appeals process: whether the parties advancing the challenge have standing and whether the individual mandate is severable from the remainder of the ACA. A prerequisite for remaining inside the federal courts is standing, essentially that the party making the claim has suffered a legally recognized and concrete injury that can be remedied by the court. The parties themselves were a bit late to the standing party and did not raise it as a substantial issue during the course of the preliminaries of the case, but Judge O'Connor assessed the issue and concluded that despite a very plausible argument that this is a no-harm, no-foul situation, the plaintiffs actually did suffer an injury as a result of the continued existence of the now-toothless individual mandate. For Judge O'Connor, the presence of an unconstitutional mandate on the plaintiffs was a sufficient offense to their constitutional sensibilities to confer standing for their claims. Standing is a complex aspect of federal jurisdiction, and reasonable minds differ regarding how to apply its doctrines, but early reaction to Judge O'Connor's decision on this point among the ACA commentariat suggests that the U.S. Court of Appeals for the Fifth Circuit—the appeals court that will probably next have custody of the case—may take a somewhat different view, potentially resulting in the dismissal of the case.

The bulk of Judge O'Connor's opinion focuses on the centrality of the individual mandate to the ACA's structure and whether it would be possible to sever that part of the law while leaving the remainder intact. This is no small issue since many of the most popular and widely used ACA provisions—e.g., coverage of adult children through age 26, prohibition of preexisting condition limitations, access to cost-free preventive care, extension of Medicaid benefits—would be eliminated along with the individual mandate. That this issue would be central to the case is not unexpected since the ACA's structure has been likened to a three-legged stool, balanced on the employer mandate, the individual mandate, and the healthcare exchange system. Moreover, the individual mandate was seen as a key bargaining chip to assure the insurance industry's support for the law; without that support, the ACA might never have been enacted.

As a general rule, federal courts are expected to exercise their powers to strike down constitutionally suspect laws with a certain amount of precision rather than rejecting them on a wholesale basis. The exception to this rule applies where the provision at issue is integral to the rest of the law; in other words, where it would be impossible to excise the offending provision without killing the statutory patient. Judge O'Connor dwelt at length on this issue and concluded that Congress did indeed consider the individual mandate to be essential to the ACA's overall structure, at least circa 2010. What the opinion does not do is spend much time assessing the congressional view of the individual mandate following its amendment in 2017 via the TCJA, and it may be that the absence of fuller consideration of the individual mandate's diminished status will ultimately doom Judge O'Connor's conclusions on appeal. However important the individual mandate may have been at the ACA's birth, it is difficult to ascribe great significance to it after the TCJA eliminated its sting.

While Judge O'Connor's resolution of the severability issue may not withstand close scrutiny, it is less clear if the individual mandate itself will survive even in its present, more modest circumstances. There has long been bipartisan agreement that the mandate was constitutionally infirm, and since its revenue-raising character was eliminated, it has been difficult to discern strong support for—or even a need to maintain—the mandate going forward.

Whither Goest Thou, ACA?

Judge O'Connor's decision appears to have been somewhat unexpected, and its issuance late on a Friday evening (and on the penultimate day of the open enrollment period for the healthcare exchanges) sent both pundits and administration officials scrambling. Complicating matters is the fact that Judge O'Connor's decision does not compel (or prohibit) any action, at least not yet. Although the plaintiffs had requested the issuance of a national injunction against further enforcement of the ACA, Judge O'Connor instead ruled in favor of the plaintiffs on a declaratory basis. Essentially, he concluded that the ACA in its entirety was unconstitutional, but he has not yet directed any further action in support of that conclusion. At the moment, it is unclear exactly how the decision may operate in practice, and it is possible that it will be supplemented with the requested injunction or else stayed by Judge O'Connor or the Fifth Circuit pending further proceedings. Following issuance of the decision, administration officials announced that business would be continuing as usual for the ACA until the legal process reaches a final resolution. Of course, if Judge O'Connor's decision is ultimately upheld by either the Fifth Circuit or the Supreme Court, all bets are off regarding the fate of the country's healthcare system. We do live in interesting times.

Key Takeaways

So what does all of this mean for employers right now?  We have said words to this effect in response to prior nearly-successful attempts on the ACA's life, and we repeat them now: until a final decision has been issued concluding that the ACA is repealed, unconstitutional, or otherwise invalid and ineffective, the ACA is the law of the land. This means that employers will want to continue counting hours, coding their Forms 1095-C, and otherwise complying with the many provisions of the ACA that are not the individual mandate until further notice. Rest assured that we will be keeping a close eye on developments in this case and providing more updates as the ACA's fate becomes clearer (or not).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Smith Gambrell & Russell LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Smith Gambrell & Russell LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions