By: Nicki Lawsen, Business Committee Chair, American Journal of Trial Advocacy
On Friday, December 14, 2018, United States District Judge Reed O’Connor deemed the Affordable Care Act as unconstitutional, ruling that the individual mandate should no longer be classified as a tax, which in turn causes the Act to be an impermissible exercise of congressional authority.[1] In addition, Judge O’Connor held that the individual mandate was not able to be detached from the rest of the Act, thus rendering the entire Act unconstitutional.[2] Consequently, millions of Americans are faced with the question of “what now?”[3]
The lawsuit was originally filed earlier in the year, on February 26, 2018, by both state attorney generals and governors alike.[4] The plaintiffs rested their argument on the grounds that the individual mandate was due to be reduced to nothing in 2019 as a part of the Tax Cuts and Jobs Act in 2017.[5] Therefore, they argued, because of the mandate being lessened to zero, it no longer raised revenue for the government, which removed its classification as an exercise of Congress’ taxing power.[6] As a result, the plaintiffs challenged the entirety of the Act as it related to the removal of the tax determination.[7]
Judicial Review of the Affordable Care Act
This is not the first time the Affordable Care Act has been under scrutiny. Six years earlier, the Supreme Court upheld the constitutionality of the Act in its 2012 opinion, National Federation of Independent Business v. Sebelius.[8] In the 5-4 decision, Chief Justice John Roberts provided the deciding vote for two rulings with regard to the individual mandate.[9] First, he maintained that the mandate could not be sustained as a valid exercise of Congress’ power to regulate interstate commerce, articulating that it failed to regulate “existing commercial activity”; rather, it aimed to induce individuals to “become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce.”[10] However, the Court ultimately upheld the Act with Chief Justice Roberts providing the swing vote in regard to the second ruling.[11] In authoring the Court’s opinion, he declared that because (1) “the payment is not so high that there is really no choice but to buy health insurance”; (2) “the payment is not limited to willful violations, as penalties for unlawful acts often are”; and (3) “the payment is collected solely by the IRS through the normal means of taxation,” the mandate was to be considered as a valid exercise of Congress’ taxing power.[12]
Fast forward to 2017, where Congress essentially repealed the individual mandate in question, thereby eliminating any financial penalties associated with failing to purchase health insurance.[13] As a naturally occurring result, this lawsuit was brought. In his decision, Judge O’Connor relied on the mandate being brought down to zero in determining that it was no longer a tax.[14] He then went on to articulate that the individual mandate is so crucial to the law that it is the basis of the entire Act; thus, he declined to sever the mandate from the remaining parts of the Act, rendering it unconstitutional in entirety.[15] Whereas the law remains in effect while the case moves through the appeals process, many Americans are left wondering what will happen to their healthcare coverage.[16]
What Does this Mean for Insureds?
There is no question that if Judge O’Connor’s ruling is upheld by the higher courts, the impact would reach far past the over 20 million people covered by the Act and go on to affect over 170 million Americans.[17] Regarding Americans who are covered by employers, no-cost preventative care, such as colonoscopies, could potentially cease.[18] Furthermore, millions who gained subsidized private insurance through the law could potentially lose their coverage as well.[19] In addition, individuals with pre-existing conditions could lose coverage, companies will not be compelled to cover children of insureds up to age 26, and Medicare could be negatively affected.[20] Abbe Gluck, a professor at Yale Law School specializing in health law, noted that the Act contained provisions which lowered the bills of senior with high prescription drug costs.[21] Gluck went on to state that “people will be paying more and losing coverage.”[22] Moreover, Xavier Becerra, the California attorney general, referred to Judge O’Connor’s ruling as “an assault on 133 million Americans with pre-existing conditions, on the 20 million Americans who rely on the A.C.A.’s consumer protections for health care, on America’s faithful progress toward affordable health care for all Americans.”[23]
Will Higher Courts Agree?
While it seems almost inevitable that the case will make its way to the Supreme Court, the chances are significantly lessened if the Fifth Circuit—the appeals court set to review the ruling—elects to reverse the decision.[24] If the Fifth Circuit reverses Judge O’Connor’s ruling, then it is highly likely that the Court could potentially decline to review the decision and the constitutionality of the Act will once again be established.[25] However, in the event the Fifth Circuit rules to affirm Judge O’Connor’s opinion, the Supreme Court will likely hear the case on a writ of certiorari with the task of ultimately settling the law.[26]
Given that the five Supreme Court justices who ruled to uphold the Act on constitutional grounds in 2012 remain on the bench, it remains a plausible inference that the decision will be overturned if and when it reaches that point.[27] Furthermore, considering the recent placement of five conservative judges on the Fifth Circuit bench by President Trump, there arises a substantial likelihood that the ruling with be affirmed on appeal, thus making its way to the Supreme Court.[28]
So is it Constitutional?
The individual mandate required persons who refused to buy insurance to pay a penalty; the reason being, the goal of the Act was to preclude insurance companies from refusing coverage to individuals with pre-existing conditions or from charging them a higher rate because of those conditions, and the sole way to pay for these provisions was to require everyone to buy health insurance.[29]
While the Supreme Court struck down the Act in regard to its violation of the commerce clause, as mentioned above, it upheld it as a proper exercise of Congress’ taxing power.[30] Now with the mandate removed, the question remains pertinent as to whether the mandate severs itself from the rest of the Act.[31]
Given that the Act’s main goals are to (1) increase the number of insureds; (2) “streamline the delivery of healthcare services”; and (3) reduce the costs of healthcare, it is notable that a serious attempt to induce people to buy health insurance is to penalize them if they do not.[32] Consequently, it requires no stretch of the mind to relate the mandate to the entirety of the Act, being that “the entire point of Obamacare’s individual mandate is to make sure that its not just sick people who are buying health insurance in these markets. By widening insurance risk pools to include a mix of young and old, healthy and sick, premiums go down in the overall market.”[33] This ties in with the goal of increasing the amount of people who have health insurance. As a result, the individual mandate is a prominent part of the Act.
This is further emphasized in, not just Judge O’Connor’s ruling, but in Justices Scalia’s, Kennedy’s, Thomas’, and Alito’s joint dissenting opinion in Sebelius.[34] In the opinion, the Justices stated that “[this] part[] of the Act [is] central to its design and operation, and all the Act’s other provisions would not have been enacted without [it]”; as a result, “the entire statute is inoperative.”[35] When faced with the question of whether or not the mandate could lend itself to severance from the rest of the Act, it must be considered how crucial the provision is at accomplishing the goals of the main Act.[36] Because of the requirement for people to either buy health insurance or pay a penalty, the incentive for individuals to become insured rises. It all boils down to a simple concept: people do not like to pay any more in taxes than they already do. Therefore, giving people such an unpopular choice is highly likely to enable them to purchase health insurance; in fact, statistics show that 20 million more people have gained insurance since the Act became law.[37] Thus, the mandate is what enables the Act to perform to its highest function.
Because the Act is not likely to be severed from the individual mandate, the question then becomes is it still unconstitutional? At this point, there is no clear answer. Although the Supreme Court struck down the Act on the grounds that it violated the commerce clause, Justice Ginsburg’s dissenting opinion is worth noting.[38] In her dissent, she explained that the market for healthcare is not necessarily nonexistent; just because a person does not need healthcare right now does not mean that they will not need it in the future, because healthcare is an inevitable need for everyone.[39] She concluded that because Congress is not creating their own market, the Act does not violate the commerce clause.[40]
Justice Ginsburg’s take on the constitutionality of the Act as it relates to the commerce clause is significant because she is essentially debunking the basis of the majority’s opinion: that Congress is attempting to create their own market.[41] While her opinion did not become the controlling law, it still provides a plausible avenue for supporters of the Act to argue for its constitutionality absent the individual mandate. Will this argument succeed? The likely answer is no, considering the same justices from that case still reside on the bench; however, given the ever-changing realm of the law, it is safe to say that nothing is impossible.
[1] David K. Li, Federal Judge in Texas Strikes Down Affordable Care Act, NBC News (Dec. 14, 2018), https://www.nbcnews.com/news/us-news/federal-judge-texas-strikes-strikes-down-affordable-care-act-n948306.
[2] Abby Goodnough & Robert Pear, Texas Judge Strikes Down Obama’s Affordable Care Act as Unconstitutional, NY Times (Dec. 14, 2018), https://www.nytimes.com/2018/12/14/health/obamacare-unconstitutional-texas-judge.html.
[3] William Cummings, A Federal Judge Has Ruled the Affordable Care Act Unconstitutional. So Now What Happens?, USA Today (Dec. 17, 2018) https://www.usatoday.com/story/news/politics/2018/12/17/what-next-affordable-care-act/2330715002/.
[4] Jordan Grushkin, Matthew Goldman, & Melissa Gertler, Texas v. United States: Texas Federal Court “Strikes Down” the ACA, SheppardMullin (Dec. 19, 2018) https://www.sheppardhealthlaw.com/2018/12/articles/affordable-care-act-aca/texas-v-united-states-texas-federal-court-strikes-down-the-aca/#_ftn1.
[5] Id.
[6] Id.
[7] Id.
[8] 567 U.S. 519 (2012).
[9] Id.
[10] Id. at 520.
[11] Id. at 522.
[12] Id.
[13] Christine Eibner & Sarah Nowak, The Effect of Eliminating the Individual Mandate Penalty and the Role of Behavioral Factors, The Commonwealth Fund (July 11, 2018) https://www.commonwealthfund.org/publications/fund-reports/2018/jul/eliminating-individual-mandate-penalty-behavioral-factors.
[14] Mark Sherman, After Judge’s Ruling Against “Obamacare,” What Happens Now?, AP News (Dec. 17, 2018) https://www.apnews.com/29fe47c1079342eca4ea269b5ee8c9e8.
[15] Id.
[16] William Cummings, A Federal Judge Has Ruled the Affordable Care Act Unconstitutional. So Now What Happens?, USA Today (Dec. 17, 2018) https://www.usatoday.com/story/news/politics/2018/12/17/what-next-affordable-care-act/2330715002/.
[17] Id.
[18] Tara Law, A Judge Ruled Obamacare is Unconstitutional, Here’s How it Could Impact Your Health Insurance, Time (Dec. 18, 2018) http://time.com/5482004/affordable-care-act-court-ruling/ (“The Affordable Care Act will stay in place until the appeals process is completed . . ..”); Mark Sherman, After Judge’s Ruling Against “Obamacare,” What Happens Now?, AP News (Dec. 17, 2018) https://www.apnews.com/29fe47c1079342eca4ea269b5ee8c9e8;
[19] Abby Goodnough & Robert Pear, Texas Judge Strikes Down Obama’s Affordable Care Act as Unconstitutional, NY Times (Dec. 14, 2018), https://www.nytimes.com/2018/12/14/health/obamacare-unconstitutional-texas-judge.html.
[20] Id.
[21] Tara Law, A Judge Ruled Obamacare is Unconstitutional, Here’s How it Could Impact Your Health Insurance, Time (Dec. 18, 2018) http://time.com/5482004/affordable-care-act-court-ruling/.
[22] Id.
[23] Abby Goodnough & Robert Pear, Texas Judge Strikes Down Obama’s Affordable Care Act as Unconstitutional, NY Times (Dec. 14, 2018), https://www.nytimes.com/2018/12/14/health/obamacare-unconstitutional-texas-judge.html.
[24] Will the Supreme Court Save Obamacare Again? NY Times (Dec. 28, 2018), https://www.nytimes.com/2018/12/28/opinion/trump-obamacare-supreme-court.html.
[25] Id.
[26] Id.
[27] Supreme Court to Rule “in 2020 at the Earliest” After Judge Finds Obamacare Unconstitutional, MarketWatch (Dec. 17, 2018), https://www.marketwatch.com/story/supreme-court-to-rule-in-2020-at-the-earliest-after-judge-finds-obamacare-unconstitutional-2018-12-17.
[28] Will the Supreme Court Save Obamacare Again? NY Times (Dec. 28, 2018), https://www.nytimes.com/2018/12/28/opinion/trump-obamacare-supreme-court.html.
[29] Paul Larkin, Reconsidering the Constitutionality of Obamacare, The Heritage Foundation (Mar. 20, 2018), https://www.heritage.org/the-constitution/report/reconsidering-the-constitutionality-obamacare.
[30] Sebelius, 567 U.S. 519 at 522.
[31] Judge Strikes Down ACA as Unconstitutional, Modern Healthcare (Dec. 14, 2018), https://www.modernhealthcare.com/article/20181214/NEWS/181219936.
[32] Bill Fay, Obamacare & Associated Costs, Debt.org. https://www.debt.org/medical/obamacare/.
[33] Sy Mukherjee, The GOP Tax Bill Repeals Obamacare’s Individual Mandate. Here’s What That Means for You, Fortune (Dec. 20, 2018) http://fortune.com/2017/12/20/tax-bill-individual-mandate-obamacare/.
[34] 567 U.S. 519 (2012).
[35] Sebelius, 567 U.S. 519 at 648-49.
[36] Judge Strikes Down ACA as Unconstitutional, Modern Healthcare (Dec. 14, 2018), https://www.modernhealthcare.com/article/20181214/NEWS/181219936.
[37] Since Obamacare Became Law, 20 Million More Americans Have Gained Health Insurance, Fortune (Nov. 15, 2018) http://fortune.com/2018/11/15/obamacare-americans-with-health-insurance-uninsured/.
[38] Sebelius, 567 U.S. 519 at 589.
[39] Id. at 590-91.
[40] Id. at 596-97.
[41] Id.
American Journal of Trial Advocacy 