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The Affordable Care Act (ACA)

The ACA at the Supreme Court

On Nov. 10, 2020, the U.S. Supreme Court heard oral argument in California v. Texas, the latest challenge to the Affordable Care Act (ACA). The plaintiffs, states led by Texas and two individuals, allege the individual mandate to purchase health insurance is unconstitutional, and that because the mandate is so integral to the entire ACA, the rest of the law must be struck down as well. Defendants are a team of states, led by California, that argue for preserving the ACA; they argue that even if the individual mandate is determined unconstitutional, it is “severable” from the rest of the ACA, meaning the other provisions of the law could remain in effect even if the mandate is struck down.


Why is the ACA an issue now?

California v. Texas centers around the ACA’s individual mandate, which requires individuals to obtain minimum health insurance coverage or face a tax penalty. In 2012, the Supreme Court issued a decision in National Federation of Independent Businesses (NFIB) v. Sebelius, upholding the individual mandate as a permissible exercise of Congress’ authority to tax and spend. In order to make laws, Congress must act on one of its enumerated authorities or implied powers afforded to it in the Constitution, such as the power to tax or power to regulate interstate commerce. The NFIB decision specifically held the individual mandate could not be justified under Congress’ commerce clause authority.

Subsequently, the Tax Cuts and Jobs Act of 2017 (TCJA) was signed into law on Dec. 22, 2017 and reduced the individual mandate’s tax penalty to $0 starting in 2019, without eliminating the mandate itself. Meaning, what remains is the requirement for individuals to ensure they maintain minimum health coverage, however there is no penalty for failing to do so.

Plaintiffs in the current case argue that the TCJA eliminated the tax consequences associated with the individual mandate, meaning it can no longer be justified under Congress’ authority to tax. Because the individual mandate is unconstitutional, the plaintiffs argue the rest of the ACA must be found unconstitutional as well, because the mandate can’t be “severed” from the entire legislative scheme.


When will we know the outcome of the case?

Even though oral argument occurred on for Nov. 10, a decision on the outcome of the case will not be reached until the Supreme Court issues an opinion. Justices posed questions to counsel representing both sides of the case during the hearing, however, it is difficult to use oral argument proceedings to predict possible outcomes.

The Supreme Court relies on a calendar that predetermines days in which it announces opinions deciding the argued cases. We do not expect to see an opinion on California v. Texas until sometime in 2021; the Court’s term ends in late June, so that is the latest we will know the outcome of the case.

Typically, Supreme Court decisions are effective immediately, meaning any opinion and strikes down parts, or all of, the ACA will be immediate.


What are the possible outcomes of the case?

The court is set to evaluate three questions:

  • Whether the plaintiffs have established standing to challenge the individual mandate
To bring a case to any court, there must be “standing,” which means the plaintiffs have been harmed in some way by the law in question. If the Supreme Court determines the plaintiffs do not have standing, the case is dismissed without hearing the merits 
  • Whether the individual mandate is constitutional
If the Court determines there is standing to bring the case, it moves on to the next question. If the Court determines the mandate is constitutional, the mandate remains in effect, as should the rest of the law. If the Court strikes down the mandate as unconstitutional, the Court moves to the third question
  • If the mandate is unconstitutional, whether it is severable from the rest of the ACA
If the individual mandate is unconstitutional and therefore unenforceable, the Supreme Court must decide whether it can be severed from the rest of the law. Severability is essentially a question of congressional intent. The Supreme Court must consider whether Congress would have preferred what remains of the statute to stand, absent the unconstitutional provision, or whether Congress would have intended for the entire law to be invalidated without the unenforceable provision. Supreme Court precedent establishes a presumption that Congress would want to uphold the statute, even absent the invalid/unconstitutional provision.. In the words of Chief Justice John Roberts in a recent case evaluating severability, this doctrine is “a scalpel rather than a bulldozer.”

How did the case get to the supreme court?

The case was appealed from the Fifth Circuit Court of Appeals. In an opinion issued Dec. 18, 2019, the Fifth Circuit upheld a district court ruling that the ACA’s individual mandate is unconstitutional. The opinion did not determine whether the rest of the ACA should be invalidated in light of this holding and instead remanded the case to the lower court to determine its fate.

Before the Fifth Circuit decision, the Northern District of Texas district court heard the case. On Dec. 14, 2018, the district court judge issued an order ruling for the plaintiffs, holding the entire ACA is unconstitutional because it cannot be severed from the unconstitutional individual mandate. On Dec. 30, 2018, the judge clarified that the ACA is still in effect pending the outcome of subsequent appeals.

How does the election impact the case?

Congress could at any time pass a law that addresses and attempts to preserve the ACA, notwithstanding the outcome of the Supreme Court case. For example, one possibility is to simply reinstate a monetary tax penalty for not maintaining minimum coverage, which existed pre-TCJA. Other avenues include enacting legislation that preserves only certain aspects of the ACA (in the event the law is overturned), such as protecting pre-existing conditions. If the Supreme Court upholds the ACA, these legislative efforts would be unnecessary.

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