Justice Department Files Brief in Texas Lawsuit Supporting Challenge to the Constitutionality of the ACA

Co-authored by Cecilia G. Vazquez, Summer Law Clerk, Breazeale, Sachse & Wilson, L.L.P.

Depending on how a Texas federal court rules in a lawsuit filed February 2018, by 20 state attorneys general (including Louisiana), all or part of the Affordable Care Act (ACA) could be declared unconstitutional. On June 7, 2018, the Justice Department filed a brief in Texas v. the United States (N.D. Texas 2018) (the “Texas lawsuit”) that largely supported the challenge to the constitutionality of the Individual Mandate in the ACA requiring individuals to maintain essential health insurance coverage.

The Trump administration had previously announced that it will not defend the ACA against the legal challenge in the Texas lawsuit to the ACA’s constitutionality, which is a break from the executive branch’s tradition defending existing statutes. In the brief filed in the Texas federal court and an accompanying letter to the House and Senate leaders of both parties, the Justice Department agrees in large part with the 20 state attorneys general that brought the suit that the Individual Mandate in the ACA requiring individuals to purchase and maintain health insurance was unconstitutional as a result of the 2017 tax legislation’s reduction of the tax penalty formula to zero.

The Justice Department’s brief also received considerable attention because of the Justice Department’s request that the ACA’s guaranteed-issue and community-rating requirements also be declared invalid as of January 1, 2019. Sixteen states and the District of Columbia have intervened in the Texas lawsuit to defend the lawsuit against the ACA since the Justice Department filed its brief in early June.

Background

The Supreme Court ruled in the 2012 landmark decision in NFIB v. Sebelius, 567 U.S. 519 (2019), that Congress lacked the constitutional authority to impose a mandate on individuals to obtain health insurance which required that most Americans “shall” insure that they are “covered under minimum essential coverage.”  The Supreme Court rejected the Obama administration’s argument that Congress was authorized to impose the Individual Mandate under its constitutional power to regulate interstate commerce. However, the Supreme Court also ruled that the Individual Mandate and the tax penalty imposed on individuals for not having coverage was a lawful exercise of Congress’s taxing power. A majority of the Supreme Court noted in the Sebelius decision that the court’s decision under Congress’s taxing-power interpretation was only “fairly possible” because the tax-penalty raised “at least some revenue for the Government.”

In December 2017, Congress enacted the Tax Cuts and Jobs Act of 2017 (2017 Tax Act), which in part reduced the tax penalty under the Individual Mandate to zero for not having health insurance starting in January 2019. Subsequently, on February 26, 2018, the Texas lawsuit was filed by the 20 state attorneys general arguing that the ACA and the Individual Mandate are unconstitutional now that Congress has repealed the tax-based penalty that supported the constitutionality of the ACA under the Sebelius ruling as a valid exercise of Congress’s taxation power.

The Texas Lawsuit

In the Texas lawsuit, the complaint filed by the 20 state attorneys general argues that “Because the tax penalty raises $0 after the enactment of the 2017 Tax Act, the Individual Mandate lacks “the essential feature of any tax,” and the interpretation by the Supreme Court in Sebelius to save the Individual Mandate from its unconstitutionality is no longer “fairly possible.” The complaint further argues that if the Individual Mandate is unconstitutional then the remainder of the entire ACA is also unconstitutional.

The Texas lawsuit asks the court to: (1) declare the ACA, as amended by the 2017 Tax Act, unconstitutional; (2) declare all rules and regulations promulgated under the ACA to be unlawful; and (3) to enjoin the government from implementing and enforcing the ACA.

The Justice Department Brief Filed in the Texas Lawsuit

In the brief filed in the Texas lawsuit, the Justice Department takes the position that “As of 2019, the Individual Mandate will be unconstitutional under controlling Supreme Court precedent (from the Sebelius case) holding that “the Federal Government does not have the power to order people to buy health insurance.”  Thus, the Justice Department essentially agrees with the plaintiffs in the Texas lawsuit that the Individual Mandate is unconstitutional absent the collection of any revenue under the tax penalty as a result of the Tax Act of 2017, except that the Justice Department asserts that the Individual Mandate will not be unconstitutional until the tax penalty becomes zero on January 1, 2019.

The Justice Department also argued in its brief the guaranteed-issue and community-rating provisions of the ACA are not severable from the minimum coverage provisions, and therefore are also invalid. However, contrary to the plaintiffs’ argument in the Texas lawsuit, the Justice Department also argues that the remainder of the ACA is severable from the Individual Mandate and should remain intact. The Justice Department noted that the ACA’s other major provisions, such as various insurance regulations, health insurance exchanges and associated subsidiaries, the employer mandate and Medicaid expansion, and reduced federal healthcare reimbursement rates for hospitals are severable from the Individual Mandate.

While the Texas lawsuit has to play out from here, the position of the Justice Department in its brief does raise the possibility that the ACA, or at least the Individual Mandate and other major provisions could be struck down and no longer enforceable.

Written by: Clay Countryman

Countryman, Clay headshot

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