Texas Judge Rules Obamacare (ACA) Invalid

A ruling from the federal district court in the Northern District of Texas, penned by Judge Reed O’Connor, held a part of the Patient Protection and Affordable Care Act (“ACA”) (commonly referred to as Obamacare) unconstitutional, and the remaining parts invalid. Unsurprisingly, this decision has attracted much attention and quickly become one of the most watched cases.

In Texas, et. al. v. United States of America, et. al., the Plaintiffs—comprised of 20 states (including Louisiana, Texas, and Mississippi) and two individuals—requested an injunction finding the Individual Mandate of the ACA, without the penalty to enforce it, was unconstitutional. The Individual Mandate is the requirement for individuals to maintain a minimum level of health insurance coverage, previously enforced by a tax penalty for those who disobeyed (called the shared-responsibility penalty). Some Defendants argued a judgment on the issue was more appropriate. Agreeing, the Court reviewed the matter on summary judgment.

While the constitutionality of the Individual Mandate sounds like a tired and tried issue, the changes to the shared-responsibility penalty enacted by the Tax Cuts and Job Act of 2017 (“TCJA”), passed by Congress and signed into law in December of 2017, reinvigorated the debate. Importantly, the TCJA reduced the shared-responsibility penalty to zero beginning January 1, 2019, meaning there was no true enforcement mechanism for the Individual Mandate.  The Plaintiffs argued that the TCJA’s alteration rendered the Individual Mandate in the ACA unconstitutional because the law will no longer function as a tax.

Previously, the United States Supreme Court, in the 2012 National Federation of Independent Businesses v. Sebeluis (NFIB) decision, held that Congress had constitutional authority to enact the ACA and the Individual Mandate under its tax powers. The NFIB decision also made clear that the Interstate Commerce Clause, the other authority touted by the government, was not applicable to the ACA. Now, with the Individual Mandate having been stripped of its tax by the TCJA, the Plaintiffs argued Congress lacked constitutional authority to promulgate the ACA.

In its decision, the Court began by discussing the importance of constitutional limits. It explained that if Congress exceeds its constitutionally granted authority, “the fruit of that unauthorized action cannot stand.” Thus, the Plaintiffs’ challenge could not be ignored.

Finding first that the Plaintiffs had standing to challenge the ACA, the Court went on to address the constitutionality of the Individual Mandate and whether it was severable from the other ACA provisions.  Remarking on the responsibility of federal courts to enforce the limits on Congress’ power, the Court agreed with Plaintiffs that the Individual Mandate is now unconstitutional. Lacking the tax/penalty aspect of the Individual Mandate, the ACA cannot be construed as an exercise of Congress’ tax power, the constitutional authority it used to justify commanding individuals to purchase health insurance. Consistent with the NFIB decision, the Court also found the ACA did not implicate Congress’ authority under the Interstate Commerce Clause.

Generally, a court reviewing provisions of a statute for constitutionality will refrain from invalidating more of the statute than is necessary, the idea of severing out the unconstitutional provision. This can occur when the statutes’ provisions are separable from the unconstitutional provision. If a provision is inseverable, the whole statute must be struck down because a federal court lacks the authority to re-write a law. That function is reserved for Congress.

Being as the Individual Mandate was declared unconstitutional, the Court last evaluated whether the Individual Mandate provision could be severed from the ACA (and allow the ACA to stand), or if the whole Act was now unconstitutional. The Court analyzed whether Congress intended for the ACA to exist if there was no Individual Mandate or penalty. Plainly, the Court held the Individual Mandate was an essential part of the ACA as a whole, rendering the provision inseverable.

The Individual Mandate had been hailed numerous times before by Congress as the ACA’s “essential” provision. In the NFIB decision, dissenting justices (which found the Individual Mandate unconstitutional) stated that the other provisions of the ACA were inseverable from the Individual Mandate. With the changes to the penalty made by the TCJA, the ACA will now mandate for all individuals to purchase health insurance, but will not tax or penalize anyone for their failure to do so. Congress never intended this outcome.

Relying on the intent of the 2010 Congress, as stated in the plain language of the ACA, and the findings of the Supreme Court in the NFIB decision, the Court held the Individual Mandate was inseverable from the ACA. Noting that Congress would not have promulgated the “ACA’s delicately balanced regulatory scheme without the Individual Mandate,” it found the remaining provisions inseverable from the unconstitutional Individual Mandate. Those remaining provisions of the ACA were held to be invalid.

Surprisingly, the Court did not issue an injunction preventing the continued operation of the ACA. Lacking an injunction immediately halting the law, this decision leaves it to government officials and Congress to decide how to wind down the law. President Trump has already expressed his hopes that this ruling will pave the way for another opportunity to repeal and replace the ACA.

Political analysts instantly began to speculate regarding what actions the Democrats—recently gaining control of the House—or Republicans will take.  Undoubtedly, though, a decision as politically charged and important as this one will not stand unchallenged. This decision will be appealed to the United States Fifth Circuit and potentially the Supreme Court.

December 19, 2018 Update

The Plaintiffs originally filed suit against the government entities responsible for the ACA, including the United States, the Department of Health and Human Services, the Internal Revenue Service, and the corresponding officials. In response, 16 states and the District of Columbia intervened in the suit as defendants (the “State Defendants”). On December 17, 2018, in the wake of last week’s ruling invalidating the ACA, the State Defendants requested the Court quickly to take measures that would maintain the ACA in place until all appeals are final.

First, the State Defendants asked the Court to clarify whether its ruling relieves the parties of their rights and obligations under the ACA until the appeal process is complete. If the Court will not issue the clarification, the State Defendants asked for an order staying the effect of the ruling until the appeals are final. In other words, no party needs to act on the ruling at this time. The State Defendants cited confusion generated by the ruling as the basis for its request and asking the Court to “quell concerns . . . and provide peace of mind to millions of Americans relying on the ACA for health insurance in 2019.” If the ruling was immediately effective, the State Defendants argue “widespread harm and confusion” would result.

Second, the State Defendants requested a response by December 21, 2018, giving the Court a mere four-day timeframe. For this request, the State Defendants cited the “possibility of a federal government shutdown”.

In response, on December 18, 2018, the Court ordered the Plaintiffs and the government entity Defendants to respond to the State Defendants’ request by December 21, 2018, and the State Defendants to reply by December 26, 2018. Thus, the State Defendants will not receive relief as quickly as requested, but the Court’s order shows an intention to review and rule on the request in an expedited manner.  Presumably, any order issued would be most effective if issued before January 1, 2019. The watch party continues.

January 3, 2019 Update

On December 30, 2018, the Court issued the clarity the Defendants and bystanders sought. Upon request of the Defendants, and after an expedited briefing by the parties, the Court held that the judgment invalidating the ACA was a final judgment and would be stayed until the appeals of the issue were complete. In essence, this order allows the parties to immediately proceed with appealing the Court’s decision, and to do so while the ACA remains in place as before.

In asserting that the Court’s ruling was a partial final judgment, the Court was clear that the Plaintiffs had argued several other grounds on which the ACA could be found unconstitutional, grounds which were not considered in the Court’s original ruling. Therefore, if the Court’s ruling is overturned in the appeals process, the Plaintiffs still have several arguments for the Court to consider.

In granting the Defendants’ request to stay the original ruling until appeals are complete, the Court articulated that it did not believe the Defendants arguments—summarized by the Court as “No harm, no foul.”—would be successful on appeals. However, the equities of the situation—cited by Defendants as chaos for patients, providers, insurance carriers, and governments—supported the stay.

The arguments made by the Defendants offer a glimpse into those that can be expected in the coming appeals. Defendants will argue that the Plaintiffs do not have standing to challenge the ACA. As to the merits, Defendants will argue that the Individual Mandate continues to be a lawful exercise of Congress’ taxing powers or, alternatively, the amendment which zeroed out the penalty was itself unconstitutional. Regardless of the constitutionality of the Individual Mandate, the Defendants will argue it is severable from the ACA and the rest of the ACA can continue to operate intact. While the Court addressed each of these arguments, opining on why the Fifth Circuit would not agree, it is the decision of the Fifth Circuit or Supreme Court that will definitely resolve these contentions.

Interestingly, this Court decision also offered several Easter eggs. First, the Court commended both sides for their professional demeanor and crisps briefing, something rarely seen in a written final judgment. Second, the Court in its reasoning and to conclude its judgment cites and quotes now Justice Brett Kavanaugh on the importance of impartial judges and interpreting the written text of a law. This battle will remain one of the most watched cases as the appeals progress. We can only hope that the appeals proceed at a speed resembling that of the quick and efficient Northern District of Texas.

Written by: Danielle Borel

Borel, Danielle headshot


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