Appeals Court To Hear Argument Today In Case That Could Upend Obamacare
Later today, the Fifth Circuit Court of Appeals will hear argument in a case that could upend the Affordable Care Act.
Today, the Fifth Circuit Court of Appeals is scheduled to hear oral argument on a case that could have broad implications for the debate over health care reform and the 2020 election. At issue is a case filed by state State of Texas and several other states in which the Trump Administration has joined that seeks to have the entirety of the Affordable Care Act declared unconstitutional:
NEW ORLEANS — A federal appeals court panel will hear arguments Tuesday on whether a federal judge in Texas was correct in striking down the Affordable Care Act, a case with enormous stakes not only for millions of people who gained health insurance through the law but for the political futures of President Trump and other candidates in the 2020 elections.
The case, which could make its way to the Supreme Court ahead of those elections, threatens insurance protections for people with pre-existing medical conditions and many other sweeping changes the 2010 law has made throughout the health care system.
It was filed by a group of Republican governors and attorneys general against the federal government, which carries out the law.But the Trump administration refused to defend the full law in court and this spring said it agreed with the ruling that the law’s requirement for people to buy insurance was unconstitutional, and that as a result, the entire law must be dismantled.
That has left a group of 21 states with Democratic attorneys general to intervene to defend the law, along with the House of Representatives, which entered the case after Democrats won control of the chamber last fall.
A question at the heart of the case is whether the Affordable Care Act’s mandate requiring most Americans to buy health insurance or pay a tax penalty remained constitutional after Congress eliminated the penalty as part of the tax overhaul that Mr. Trump signed in 2017. When the Supreme Court upheld the mandate in its landmark 2012 ruling that saved the law, it was based on Congress’s power to impose taxes.
If the mandate is indeed unconstitutional, the next question is whether the rest of the Affordable Care Act can function without it. In December, Judge Reed O’Connor of the Federal District Court in Fort Worth said it could not and declared that the entire law must fall.
But in late June, the United States Court of Appeals for the Fifth Circuit asked for supplemental briefing from the parties on a third question: whether the Democratic states and House of Representatives even have standing to appeal Judge O’Connor’s ruling. To establish standing, a party has to show it has suffered a concrete injury that a ruling in its favor would redress.
The court also asked what the appropriate conclusion of the case should be if the intervening parties do not have standing and if the Justice Department, by no longer defending any part of the law, has “mooted the controversy.”
These recently raised questions will most likely be the first ones addressed during the arguments, which are before a three-judge panel in the appeals court in New Orleans: Carolyn Dineen King, appointed by President Jimmy Carter in 1979; Jennifer Walker Elrod, appointed by President George W. Bush in 2007; and Kurt Engelhardt, appointed by Mr. Trump in 2018.
If the appeals court ultimately decides that neither the House nor the intervening Democratic states have standing and that the case has become moot, it could either let Judge O’Connor’s ruling stand or vacate it. In any event, the losing party will almost certainly appeal to the Supreme Court.
“All of this is going to be playing out against the backdrop of the 2020 presidential election,” said Nicholas Bagley, a law professor at the University of Michigan. He was among a bipartisan group of professors who argued in an amicus brief last year that the rest of the law should survive even if its mandate to buy insurance was found unconstitutional, and who have criticized the plaintiffs’ case as weak.
The case that the Fifth Circuit will hear today involves a lawsuit that was filed last March by a group of conservative-leaning states who contended that the PPACA was unconstitutional, an argument that we last heard in 2011 when the matter was seemingly decided by the Supreme Court. In response to that lawsuit, the Trump Administration informed the Court that it would not defend the lawsuit and noted that it agreed with the contention of the Plaintiff states that the law was unconstitutional. In response Congressional Democrats stepped in to defend the lawsuit, a move that was accepted by the Federal Judge presiding over the case. In December, that same Federal Judge essentially agreed with the arguments of the states and declared the PPACA unconstitutional and, as it had a year earlier, the Trump Administration informed the Circuit Court of Appeals that it would not defend the case on appeal.
The states’ lawsuit and the ruling below by District Court Judge Reed O’Connor is essentially rooted in the basis upon which the law was upheld by the Supreme Court back in June 2012 in National Federation of Independent Business v. Sebelius. In that case, Chief Justice John Roberts wrote, in an opinion in which he was joined by the Court’s four liberal Justices, that the individual mandate that was at the core of the law could not be justified by the Congress’s power under the Interstate Commerce Clause. The Court went on, however, to rule that the PPACA’s constitutionality could be upheld pursuant to the broadly interpreted power granted by the Constitution to tax for the “general welfare.” The main reason for this was due to the fact that the PPACA provided that the mandate would be enforced via a penalty imposed on those who did not have insurance via the income tax. For the most part, this was the end of the legal challenges to the PPACA and the law went on to take full effect in 2014.
In December 2017, though, Congress took a step which provided a legal opening for those opposed to the law when it passed the tax reform bill. When Congress turned its attention to tax reform, which was always guaranteed to be much easier to pass both chambers of Congress, Republicans included in the bill the aforementioned provision that effectively eliminated the penalty for failure to obtain insurance. At the time, many analysts warned that this provision would ultimately have a negative impact on health care markets due to the fact that it would likely lead younger, healthier Americans to either drop their health insurance coverage if it wasn’t already provided to them via an employer. Whether or not that is true remains to be seen, especially since the penalty itself was almost always lower than the cost of private insurance coverage for most Americans so there was almost always a greater economic incentive for people to opt out of insurance coverage and simply pay the penalty.
Given the ruling of the Supreme Court in National Federation of Independent Business v. Sebelius, it does seem as though the states are correct in arguing that the individual mandate cannot be upheld as Constitutional now that there is no longer a penalty for failure to abide by that mandate. That’s a different argument, though, from the question of whether or not the entire PPACA is unconstitutional the answer to which revolves around the somewhat complicated question of severability. During the period before the Supreme Court’s opinion in June 2012 when the Supreme Court finally upheld the PPACA, Federal Courts that accepted the Plaintiff’s arguments against the mandate were of different minds on the issue of whether the mandate can be severed from the PPACA as a whole. The Supreme Court itself never addressed the issue because it ultimately upheld the mandate, but this lawsuit, if it makes it that far, would force them to either face the issue head-on or reverse that portion of their 2012 ruling that held that the mandate could not be upheld as an exercise of Congressional power pursuant to the Commerce Clause, which seems unlikely given the current makeup of the Court.
The major problem with the state’s argument is that it seems as though Congress has already answered the question of whether or not the mandate can be severed from the rest of the PPACA. While it failed in its effort to repeal Obamacare in its entirety, Congress succeeded in making the mandate a nullity simply by putting a small section in the tax bill that provides that the penalty for failure to abide by the mandate is $0.00 while leaving the rest of the law in place. This means that all of the law’s other provisions, including the parts that bar discrimination based on pre-existing conditions, extending parental plans to cover young Americans up to their 26th birthday, and elimination of lifetime caps on coverage, remain in place. In other words, Congress has shown that the mandate, or at least the ability to enforce it, is now a dead letter but the rest of the law remains in place. Because of that, it seems fairly clear that the best that the state Plaintiffs can hope for here is that they get an essentially meaningless ruling on the mandate itself that lets the rest of the law stand. While this may mean that the law itself becomes economically unsustainable in the future, that isn’t really a relevant consideration for the courts that will rule in this case. The only issue that they have to deal with is whether the PPACA as a whole can still stand even without the mandate, and it seems fairly clear that it can.
In his December ruling, Judge Reed O’Connor, who was appointed by former President George W. Bush, found that the remainder of the PPACA was not severable, but even conservative and libertarian-oriented law professors who are critical of the PPACA questioned that aspect of the ruling.
For example, Jonathan Adler at The Volokh Conspiracy had this to say:
The problems with Judge O’Connor’s opinion are evident at the outset where he summarizes his conclusion:
Resolution of these claims rests at the intersection of the ACA, the Supreme Court’s decision in NFIB, and the TCJA. In NFIB, the Supreme Court held the Individual Mandate was unconstitutional under the Interstate Commerce Clause but could fairly be read as an exercise of Congress’s Tax Power because it triggered a tax. The TCJA eliminated that tax. The Supreme Court’s reasoning in NFIB—buttressed by other binding precedent and plain text—thus compels the conclusion that the Individual Mandate may no longer be upheld under the Tax Power. And because the Individual Mandate continues to mandate the purchase of health insurance, it remains unsustainable under the Interstate Commerce Clause—as the Supreme Court already held
The problem with this analysis is that it’s central claim — that “the Individual Mandate continues to mandate the purchase of health insurance” — is false, both in law and in fact. As Chief Judge Roberts explicitly noted in his NFIB opinion, the “only consequence” of failing to obtain qualifying health insurance is paying a tax – a tax which is now set at zero. As Roberts wrote: “Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS.” In other words, there is nothing left in the ACA that mandates that people obtain health insurance.
Judge O’Connor is not content to claim the mandate must be invalidated, he goes on to claim that this justifies declaring the whole law invalid because Congress, in 2010, claimed the mandate was essential to the operation of the Act. Yet Congress in 2017 reached a different conclusion when it enacted legislation zeroing out the mandate penalty. The ACA today — the ACA as amended by Congress in 2017 — no longer relies upon an enforceable individual mandate to operate because there is none.
Despite this fact, Judge O’Connor concludes that the 2017 Congress’s decisions to leave the ACA without an enforceable mandate requires invalidation of the entire law because the 2010 Congress said so. In effect, Judge O’Connor concludes that the 2010 Congress precluded subsequent Congress’s from selectively amending the ACA. This would be crazy even if Congress had sought to do this in 2010 — it’s even more crazy as the 2010 Congress did no such thing.
The weakness of Judge O’Connor’s severability analysis becomes even more plain when one unpacks the actions of the two Congresses. Insofar as the 2010 Congress claimed the mandate played an essential role in the operation of the ACA, it was referring to a mandate that was enforced by a penalty. That is, the 2010 Congress believed that imposing a financial penalty on the failure to obtain qualifying health insurance would reduce the number of individuals who failed to comply. As there is no such penalty anymore, it is simply nonsensical to rely upon the 2010 Congress’s findings to make judgments about the law as subsequently amended in 2017. The 2010 findings concern a law that, for all practical purposes, ceases to exist. What matters is what Congress did — and what Congress did is create a law that regulates health insurance markets and lacks an enforceable mandate to purchase insurance. This may or may not be good policy, but it is what Congress did, and there’s no basis for a district court to undo it.
Adler’s blogging colleague Ilya Somin agreed:
Judge O’Connor’s analysis of the post-2017 version of the law is brief and cursory. He notes, correctly, that the 2017 Congress did not repeal the 2010 findings on the supposedly “essential” nature of the mandate, and that it did not make any new findings on this subject. But none of this changes the fact that the court’s job is to evaluate the essentiality (or lack thereof) of the present version of the mandate, not the one that existed before December 2017. The 2010 findings do not apply to the former, and Congress did not need to make any new findings to demonstrate the fairly obvious point that a virtually toothless mandate is not essential to anything. Under the 2010 version of the ACA, it was plausible to argue that the mandate was a nail for want of which the battle (or, in this case, the ACA) would be lost. The current version is akin to a rusty nail that no longer holds up anything, and indeed no longer even has a sharp point.
For those interested, there is a more extensive discussion of the severability issue in the amicus brief I joined with several other legal scholars, including Jonathan Adler, Nicholas Bagley, Abbe Gluck, and Kevin Walsh. But, to my mind, at least, the issue really comes down to the simple common-sense point that a mandate without teeth cannot be considered essential to anything. For what it is worth, Adler and I believe that the original Obamacare mandate was unconstitutional, and he was one of several legal scholars who joined the amicus brief I wrote against it (we also later coauthored a book about the case). Bagley and Gluck were on the other side of that issue. But we are on the same page when it comes to the severability question.
As already noted, I do not expect this ruling to survive on appeal. But I am not quite as confident on that subject as most other commentators seem to be. The fact that one federal judge has endorsed the states’ severability argument increases the odds that others might, as well. The history of ACA-related litigation is filled with surprises and failed predictions by experts. My own predictions about the original Obamacare case were right on some key points, but wrong on others. So it is certainly possible I could turn out to be wrong about a key aspect of this case, as well.
I tend to agree with Adler and Somin on the severability issue. Even in the original version of the PPACA, it was never self-evident that Congress had intended that the entire law would fail if the mandate were not upheld by the courts. Additionally, the Supreme Court has arguably already addressed the issue of severability in its previous ruling. Specifically, I am referring to that portion of the Court’s ruling that stated that Congress could not compel states to establish their own insurance marketplaces and could not compel them to expand Medicaid as provided under the law. Nonetheless, the Court let the PPACA itself stand although it’s fair to say that it did not fully address the severability issue.
Before it gets to those issues, the Judges in the three-judge panel, which consist of a Judge appointed by President Carter, a Judge appointed by President George W. Bush, and a Judge appointed by President Trump, will have to decide on the question of whether or not the House of Representatives, which took over defense of the PPACA when the Trump Administration decided not to defend it on appeal, has standing to be in the case at all. If the Court rules that the House, and the Democratic-controlled states that have joined that effort, does not have standing, then the ruling below and its finding that the entire PPACA is unconstitutional would stand and the case will likely head to the Supreme Court, although that’s likely to happen regardless of the outcome of the case.
These are the issues that the Fifth Circuit will have to deal with today and in its subsequent opinion. The case itself will be argued in the Fifth Circuit Court of Appeals in New Orleans at 2 pm. In anticipation of that argument, Jonathan Adler has a good round-up of the arguments made by both sides in the court and the commentary on the proceedings from other legal analysts. The Court will release a recording of oral argument at some point after the hearing, and I’ll no doubt have a follow-up post on the matter later this week/