Federal Judge Rules Affordable Care Act Unconstitutional
U.S. District Judge Reed O'Connor contends that a recent change in tax law unravels the basis for the Supreme Court's upholding of Obamacare.
A bizarre ruling by a Texas judge has people scrambling.
WaPo (“Federal judge in Texas rules entire Obama health-care law is unconstitutional“):
A federal judge in Texas threw a dagger into the Affordable Care Act on Friday night, ruling that the entire health-care law is unconstitutional because of a recent change in federal tax law.
The opinion by U.S. District Judge Reed O’Connor overturns all of the sprawling law nationwide.
The ruling came on the eve of the deadline Saturday for Americans to sign up for coverage in the federal insurance exchange created under the law. If the ruling stands, it would create widespread disruption across the U.S. health-care system — from no-charge preventive services for older Americans on Medicare to the expansion of Medicaid in most states, to the shape of the Indian Health Service — in all, hundreds of provisions in the law that was a prized domestic achievement of President Barack Obama.
President Trump, who has made the dismantling of the ACA a chief goal since his campaign, swiftly tweeted his pleasure at the opinion. “As I predicted all along, Obamacare has been struck down as an UNCONSTITUTIONAL disaster!” the president wrote just after 9 p.m. “Now Congress must pass a STRONG law that provides GREAT healthcare and protects pre-existing conditions.”
Later, the White House issued a statement on the ruling, saying: “We expect this ruling will be appealed to the Supreme Court. Pending the appeal process, the law remains in place.”
For their part, congressional Democrats, who defended the law and its protections for people with preexisting medical problems as a major theme leading up to last month’s midterm elections, lambasted the Texas judge and portrayed themselves as champions of American health-care consumers.
House Minority Leader Nancy Pelosi (D-Calif.), who is expected to become speaker next month, issued a statement that said: “When House Democrats take the gavel, the House of Representatives will move swiftly to formally intervene in the appeals process to uphold the life-saving protections for people with pre-existing conditions and reject Republicans’ effort to destroy the Affordable Care Act.”
A spokeswoman for California Attorney General Xavier Becerra (D), who leads a group of states opposing the lawsuit, said that the Democratic defenders of the law are ready to challenge the ruling in the U.S. Court of Appeals for the 5th Circuit.
It was not immediately clear what the legal path will be from here. Technically, O’Connor granted summary judgment to the lawsuit’s plaintiffs — the Texas attorney general, with support from 18 GOP counterparts and a governor. Because the judge did not grant an injunction, as the plaintiffs had asked for, “it’s unclear whether this is a final judgment, whether it’s appealable, whether it can be stayed,” said Timothy Jost, a health-law expert who is a professor emeritus at Washington and Lee University. Jost, an ACA proponent, predicted that a stay would lock in the law during appeals, saying that, otherwise, “it’s breathtaking what [O’Connor]’s doing here on a Friday night after the courts closed.”
Major segments of the health-care industry also decried the ruling. “The judge got it wrong,” said Charles N. “Chip” Kahn III, president of the Federation of American Hospitals. “This ruling would have a devastating impact on the patients we serve and the nation’s health-care system as a whole. . . . Having this decision come in the closing hours of open enrollment also sows seeds of unnecessary confusion.”
“Today’s decision is an unfortunate step backward for our health system that is contrary to overwhelming public sentiment,” said Barbara McAneny, president of the American Medical Association. “No one wants to go back to the days of 20 percent of the population uninsured and fewer patient protections, but this decision will move us in that direction.”
And calling the opinion “misguided and wrong,” America’s Health Insurance Plans, the industry’s main trade group, sought to reassure consumers that their health coverage would remain “strong and stable” while the ruling is appealed.
These reactions are histrionic. Public sentiment and the desirability of the policy really have nothing to do with the matter. If the law is outside the scope of Congress’ Constitutional authority, it is invalid. But, of course, the law has been litigated for years and ruled Constitutional in a controversial opinion written by Chief Justice John Roberts. So, what gives?
The lawsuit was initiated by Texas Attorney General Ken Paxton, who describes himself as a tea party conservative. The plaintiffs argue that the entire ACA is invalid. They trace their argument to the Supreme Court’s 2012 ruling in which Chief Justice John G. Roberts Jr. wrote for the majority that the penalty the law created for Americans who do not carry health insurance is constitutional because Congress “does have the power to impose a tax on those without health insurance.”
As part of a tax overhaul a year ago, congressional Republicans pushed through a change in which that ACA penalty will be eliminated, starting in January. The lawsuit argues that, with the enforcement of the insurance requirement gone, there is no longer a tax so the law no longer is constitutional.
“Once the heart of the ACA — the individual mandate — is declared unconstitutional, the remainder of the ACA must also fall,” the lawsuit said.
In his 55-page opinion, O’Connor agrees. He writes that the individual mandate is unconstitutional, saying that it “can no longer be fairly read as an exercise of Congress’ tax power.”
The judge also concludes that this insurance requirement “is essential to and inseverable from the remainder of the ACA.”
The opinion goes beyond the administration’s legal position in the case. In a June court brief and an accompanying letter to congressional leaders, Justice Department officials contended that, once the insurance mandate’s penalty is gone next month, that move will invalidate the ACA’s consumer protections, such as its ban on charging more or refusing to cover people with preexisting medical conditions. But the administration argued that many other parts of the law could be considered legally distinct and thus can continue.
More from the NYT (“Texas Judge Strikes Down Obama’s Affordable Care Act as Unconstitutional“):
In his ruling, Judge Reed O’Connor of the Federal District Court in Fort Worth said that the individual mandate requiring people to have health insurance “can no longer be sustained as an exercise of Congress’s tax power.”
Accordingly, Judge O’Connor, a George W. Bush appointee, said that “the individual mandate is unconstitutional” and the remaining provisions of the Affordable Care Act are invalid.
At issue was whether the health law’s insurance mandate still compelled people to buy coverage after Congress reduced the penalty to zero dollars as part of the tax overhaul that President Trump signed last December.
When the Supreme Court upheld the mandate as constitutional in 2012, it was based on Congress’s taxing power. Congress, the court said, could legally impose a tax penalty on people who do not have health insurance.
But in the new case, the 20 plaintiff states, led by Texas, argued that with the penalty zeroed out, the individual mandate had become unconstitutional — and that the rest of the law could not be severed from it.
The Justice Department’s response to the case was highly unusual: though it disagreed with the plaintiffs that the entire law should be struck down, it declined this year to defend not just the individual mandate, but the law’s provisions that protect people with pre-existing conditions. That prompted a coalition of 16 states and the District of Columbia, led by California, to intervene and defend the law.
Bloomberg (“Obamacare Thrown Out by Judge, Raising Insurance Uncertainty“) adds:
Texas and an alliance of 19 states argued to the judge that they’ve been harmed by an increase in the number of people on state-supported insurance rolls. They claimed that when Congress last year repealed the tax penalty for the so-called individual mandate, it eliminated the U.S. Supreme Court’s rationale for finding the ACA constitutional in 2012.
The Texas judge agreed. He likened the debate over which provisions of the law should stand or fail to “watching a slow game of Jenga, each party poking at a different provision to see if the ACA falls.” He also wrote that it’s clear the individual mandate is the linchpin of the law “without marching through every nook and cranny of the ACA’s 900-plus pages.”
“The court must find the individual mandate inseverable from the ACA,” he said. “To find otherwise would be to introduce an entirely new regulatory scheme never intended by Congress or signed by the president.”
President Donald Trump and Texas Attorney General Ken Paxton praised the ruling, while the American Medical Association called the decision “an unfortunate step backward for our health system.”
Some health-care law experts were quick to critique the judge’s reasoning and predicted the ruling will be overturned.
“We know what Congress’ intent was in 2017 — that was to pull the individual mandate while keeping the rest of ACA intact,” University of Michigan law professor Nicholas Bagley said. “Now we have a judge saying we have an unenforceable mandate. This whole thing is bonkers.”
I tend to agree with Bagley.
Back in 2012, I disagreed vehemently with the Roberts ruling (“SCOTUS Upholds ObamaCare Mandate As Tax Even Though It’s Not a Tax“).
First, I fully agree with the majority that Congress lacks power under the Commerce Clause to compel citizens to engage in interstate commerce.
Second, I fully agree with the majority that Congress has the authority under their power to tax to incentivize people to purchase health insurance or, well, just about anything.
My problem with the ruling, though is the not so trivial detail that Congress not only did not enact the individual mandate as a tax but vehemently denied that it was a tax. Likewise, until it came to the oral arguments-at which time the tax idea was a Hail Mary fallback position-so did the Obama administration. It strikes me that this matters. The power to tax, after all, resides with the Congress, not the Supreme Court. And declaring something that isn’t a tax to be a tax is likewise outside the mandate of the judicial branch.
Indeed, I gather that Roberts argues that it’s the Supreme Court’s job to bend over backwards to find a way to construe Congress’ actions as Constitutional. My counter is that it’s Congress’ job to write laws that are Constitutional and the Supreme Court’s role is, to coin a phrase, call balls and strikes. The majority here essentially ruled that Congress struck out but nonetheless awarded them a base.
UPDATE: To be clear, while I think Congress could have accomplished this with a tax, I don’t think they passed a tax; rather, they passed a mandate to buy something with a penalty for not doing so. Even if you want to call it a “tax” rather than a “penalty,” I think Roberts and company get it wrong: Congress doesn’t have the power to tax people for , to reuse the tired analogy that was always used in the Commerce Clause debate, failing to eat their broccoli.
What I do think Congress has the power to do is do exactly the same thing in reverse. That is, they could issue either an increase to the Medicare withholding or some other dedicated PPACA tax and then allow an offsetting deduction on the federal tax return for those who can document that they are insured.
I fully grant that, as a practical matter, it’s the exact same thing. But process matters. And neither Congress nor the Supreme Court fIollowed that process.
UPDATE 2: To put it more succinctly, Roberts gets the fundamentals right: Congress clearly wanted to mandate that people have insurance and have a way of collecting money from those who don’t to cover the costs of free riding. Congress clearly has the power to do that via a tax-although typically through tax credits and deductions rather than outright taxes. My objection is that the law imposes a penalty for failure to buy insurance rather than issuing a tax credit for buying it.
My OTB colleague Doug Mataconis wrote an interesting rebuttal (“The Roberts ObamaCare Decision: The Epitome Of Judicial Restraint“) the next day. Our disagreement is really over the issue in my two updates: I contend that the Court ought interpret the law as written and sold and he argues that the Court should indeed bend over backwards to find a way to find duly-passed laws Constitutional.
Regardless, the legality of the mandate and the entirety of the ACA is settled law. Republicans tried and failed an inordinate number of times to repeal the law. And I fully agree with Bagley that repealing the mandate—far and away the most unpopular and controversial part of the law—does not undermine Roberts’ reasoning. His tortured reasoning as to why the mandate was Constitutional is indeed OBE given that there is no mandate. But it’s absurd to argue that the law itself is somehow unconstitutional because there’s no mandate.
Indeed, in the very case in question, NATIONAL FEDERATION OF INDEPENDENT BUSINESS v. SEBELIUS, the Supreme Court ruled part of the ACA, the Medicare expansion, unconstitutional. But it simultaneously ruled that this defect was “surely no basis to tear down the ACA in its entirety. When a court confronts an unconstitutional statute, its endeavor must be to conserve, not destroy, the legislation.”
I fully expect O’Connor’s ruling to be overturned on appeal.
Update (Doug Mataconis): I’ve posted an analysis of Judge O’Connor’s ruling, as well as some early takes from those legal bloggers who were still awake when the opinion was released late yesterday. There’s also a copy of the opinion for those of you interested in reading it. Generally speaking, I agree with James that the ruling that striking down the mandate, which seems to be the only fair interpretation of the law at this point, is probably correct but the broader ruling striking down the law as a whole is incorrect.