New Year Reset: The ACA's Status After a Pre-Christmas Surprise

In the waning days of 2018, Judge Reed C. O'Connor of the Northern District of Texas sent shockwaves through the American health care industry by his decision in Texas v. United States. On the Friday before Christmas, Judge O’Connor found the individual mandate unconstitutional and inseverable from the remainder of the Patient Protection and Affordable Care Act. But the decision has limited immediate effects. 

Any lingering questions on the ACA’s current status subsided on Sunday, December 30, when Judge O’Connor agreed to formally stay his earlier ruling while plaintiffs appealed to the US Court of Appeals for the Fifth Circuit and stayed the remainder of the case, which he had not yet ruled on, pending appellate review.

Summary Judgment Order Invalidating ACA

The underlying challenge to the ACA was filed by a coalition of two individuals, two governors, and 20 states, including Alabama, Arizona, Arkansas, Florida, Georgia, Indiana, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, and Wisconsin. The Trump administration declined to defend the law. Sixteen states, led by California Attorney General Xavier Becerra, joined the lawsuit as intervenor-defendants.

In a 55-page opinion issued on December 14, the Texas district court granted summary judgment on Count I of plaintiffs’ complaint, based on the finding that the individual mandate could no longer be fairly read as an exercise of Congress’s Tax Power following the reduction of the individual mandate’s tax penalty to $0 by the Tax Cuts and Jobs Act of 2017 (TCJA). Judge O’Connor explained that the mandate itself was only permissible under Congress’s taxing power. Since the TCJA eliminated the tax, the mandate could no longer be supported by any of Congress’s constitutional authority and therefore was not valid.

The Texas court also determined that the individual mandate is so interwoven with the ACA, that it cannot be separated. Jude O’Connor reasoned:

That requirement—the Individual Mandate—was essential to the ACA's architecture. Congress intended it to place the Act's myriad parts in perfect tension. Without it, Congress and the Supreme Court have stated, that architectural design fails.…

…Yet the parties focus on particular provisions. It is like watching a slow game of Jenga, each party poking at a different provision to see if the ACA falls. Meanwhile, Congress was explicit: The Individual Mandate is essential to the ACA, and that essentiality requires the mandate to work together with the Act's other provisions.

On those grounds, the federal court declared the entire ACA unconstitutional. However, Judge O’Connor did not enjoin the law or direct the Trump administration to dismantle it.

 

December 14 Order is Stayed During Pendency of Appeal

Three days after the ruling, the intervenor-defendants moved to have the court clarify whether its December 14 order is immediately binding on the parties, and to stay or certify the order for appeal. After expedited briefing on the issue, on December 30, the district court granted the intervenor-defendant’s requests.

In a 30-page opinion, the court issued final judgment on the December 14 order declaring the individual mandate unconstitutional and inseverable. Judge O’Connor also agreed to stay the December 14 ruling “because many everyday Americans would otherwise face great uncertainty during the pendency of appeal.” 

On New Year’s Eve, the court also entered a separate order to stay the remainder of the case and administratively close the case. The case now moves on to the Fifth Circuit.   

Next Steps and Implications for the Stakeholders

Judge O’Connor’s order declaring the entire 2,700 page federal law invalid raises significant uncertainty for the ACA's viability. The Obama administration’s signature health care legislation now rests on the federal judiciary. On January 3, the US House of Representatives filed a motion to join the appeal of Judge O’Connor’s order "as soon as a docket number exists that would permit it to do so."

But the ruling has no immediate effects for stakeholders. Although plaintiffs had sought an injunction, the court did not enjoin the ACA. In the days following the December 14 ruling, HHS publicly stated that it “will continue administering and enforcing all aspects of the ACA as it had before the court issued its decision,” and that the “decision does not require that HHS make any changes to any of the ACA programs it administers or its enforcement of any portion of the ACA at this time."

Review of the case by the Fifth Circuit will take some time to play out. On January 3, the intervenor-defendants formally filed their appeal. The key issue on appeal will likely be whether the individual mandate can be severed from the rest of the ACA. The case could also potentially be further appealed to the US Supreme Court.

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