Federal Judge Strikes Down Affordable Care Act As Unconstitutional

Eight years after it was signed into law, a Federal Judge has ruled the Affordable Care Act to be unconstitutional.

As James Joyner noted this morning, almost eight years after it was signed into law by former President Obama, and six and a half years after the Supreme Court upheld its constitutionality in a ruling that many conservatives still consider controversial, a Federal Judge in Texas has declared the Affordable Care Act unconstitutional:

WASHINGTON — A federal judge in Texas struck down the entire Affordable Care Act on Friday on the grounds that its mandate requiring people to buy health insurance is unconstitutional and the rest of the law cannot stand without it.

The ruling was over a lawsuit filed this year by a group of Republican governors and state attorneys general. A group of intervening states led by Democrats promised to appeal the decision, which will most likely not have any immediate effect. But it will almost certainly make its way to the Supreme Court, threatening the survival of the landmark health law and, with it, health coverage for millions of Americans, protections for people with pre-existing conditions and much more.

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.

On Friday night, a spokeswoman for Xavier Becerra, the California attorney general, said California and the other defendant states would challenge the ruling with an appeal in the United States Court of Appeals for the Fifth Circuit in New Orleans.

“Today’s ruling is an assault on 133 million Americans with pre-existing conditions, on the 20 million Americans who rely on the A.C.A.’s consumer protections for health care, on America’s faithful progress toward affordable health care for all Americans,” Mr. Becerra said in a statement. “The A.C.A. has already survived more than 70 unsuccessful repeal attempts and withstood scrutiny in the Supreme Court.”

Attorney General Ken Paxton of Texas, who initiated the lawsuit, applauded the decision, saying in a statement, “Today’s ruling enjoining Obamacare halts an unconstitutional exertion of federal power over the American health care system.”

He added, “Our lawsuit seeks to effectively repeal Obamacare, which will give President Trump and Congress the opportunity to replace the failed social experiment with a plan that ensures Texans and all Americans will again have greater choice about what health coverage they need and who will be their doctor.”

Mr. Trump, who has consistently sought the law’s repeal and has weakened it through regulatory changes, posted a response to the ruling on Twitter late Friday night: “As I predicted all along, Obamacare has been struck down as an UNCONSTITUTIONAL disaster! Now Congress must pass a STRONG law that provides GREAT healthcare and protects pre-existing conditions.”

The White House, in a separate statement late Friday, said: “We expect this ruling will be appealed to the Supreme Court. Pending the appeal process, the law remains in place.”

If Judge O’Connor’s decision ultimately stands, about 17 million Americans will lose their health insurance, according to the Urban Institute, a left-leaning think tank. That includes millions who gained coverage through the law’s expansion of Medicaid, and millions more who receive subsidized private insurance through the law’s online marketplaces.

Insurers will also no longer have to cover young adults up to age 26 under their parents’ plans; annual and lifetime limits on coverage will again be permitted; and there will be no cap on out-of-pocket costs.

Also gone will be the law’s popular protections for people with pre-existing conditions, which became a major talking point in the November midterm elections, as Democratic candidates constantly reminded voters that congressional Republicans had tried to repeal the law last year.

Many Democrats successfully centered their midterm campaigns on protecting the Affordable Care Act’s insurance mandates for pre-existing conditions.

President Trump’s reaction on Twitter is unsurprising:

As a preliminary matter, it’s important to note that the immediate impact of this ruling is rather limited. As a matter of procedure, Judge O’Connor granted the Plaintiff states Summary Judgment on the mandate and severability issues. However, he stopped short of granting the injunction that the states had asked for in their Complaint. This means that, at least for now, the law remains in effect and will continue to be so absent a further ruling on his part or the action of another court. It’s also unclear whether this can be considered a Final Order subject to appeal until the court has ruled on the request for an injunction. Leaving that technicality aside, though, the message that Judge O’Connor sends with his ruling is clear, even though the reasoning falls short in many respects.

The key to Judge O’Connor’s ruling lies in the basis upon which the law was upheld by the Supreme Court back in June 2012 in a 5effect, it became the subject of court challenges across the country which were mostly focused on the question of whether or not the mandate, which was seen as the key to the law, could be justified as an exercise of Federal authority under the Interstate Commerce Clause. While most courts across the country upheld the law against the Commerce Clause challenge, several ruled in favor of the Plaintiffs and those cases inevitably made their way to the Supreme Court.

In its June 2012 ruling, the Supreme Court ruled that the mandate could not be justified by the Congress’s power under the Interstate Commerce Clause, a ruling that initially led many media outlets to report that the law had been struck down. 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 Burwell 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 ruling, Judge O’Connor essentially accepted the argument of Texas and the other Plaintiff states that the mandate was unconstitutional due to the fact that it was now unenforceable. As I explain above, this part of the decision seems axiomatic. From there, though, he took the more controversial and legally questionable position that the unconstitutionality of the mandate means that the entire law is unconstitutional. This goes to the question of whether or not the mandate is considered legally severable from the rest of the law, and that is where even several conservative and libertarian legal scholars are skeptical about the ruling.

Jonathan Adler at The Volokh Conspiracy, for example, sums up the problem with Judge O’Connor’s ruling that the mandate is not severable quite well:

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 agrees:

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.

As I made clear in my post when the lawsuit was originally filed by Texas and its sister states, 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. Indeed, the Court partially addressed the severability issue in another part of its June 2012 when it found that Congress could not compel states to set up their own insurance marketplaces and could not compel them to expand Medicaid coverage as established by the PPACA but let the rest of the law as it applied to the state stand. On the whole, though, the Court didn’t fully address the severability issue because, of course, it had upheld the law. The issue of severability came back, though. thanks to subsequent action by Congress.

When Congress passed the tax reform law in 2017 that made the mandate unenforceable without specifically repealing it, it did not even make an effort to repeal the other parts of the law, nor is there anything in the law that comes close to doing so. Indeed, nearly all of the same members of Congress who voted in favor of repealing the penalty for not having insurance have also repeatedly said that they are still in favor of several provisions of the PPACA, including the protections for people with pre-existing conditions, the mandate that insurers cover dependents up to the age of 26, and a ban on lifetime caps on coverage. As noted, the fact that the mandate is no longer enforceable likely means that many people are not purchasing insurance, which will have an impact on the insurance system as a whole, but this is entirely different from saying that the entire law must fail as a matter of law because the mandate is now unconstitutional.

Where we go from here is both a legal and a political question.

While the Trump Administration has declined to defend the law, saying that it agrees with Texas and the Plaintiff states at least on the argument that the mandate cannot be constitutional now that it is unenforceable, the Court allowed California and a group of Democratic-controlled states to intervene in the case to defend its constitutionality. Those states have already stated in the wake of last night’s ruling that they will be appealing the case to the Fifth Circuit Court of Appeals. While the Fifth Circuit is generally considered among the most conservative courts in the country, it’s unclear if Judge O’Connor’s ruling on severability will withstand scrutiny there. From there, of course, the case would go to the Supreme Court. Notwithstanding the fact that the Court is most assuredly more conservative than it was in June 2012, I tend to agree with Adler and Somin that Judge O’Connor’s ruling on the severability issue is unlikely to withstand appeal. For that to happen, and assuming there are no changes in personnel on the liberal side of the Supreme Court between now and then, Chief Justice Roberts would essentially have to switch sides and repudiate in its entirety his own ruling, and that seems to me to be highly unlikely.

Politically speaking, this ruling seems likely to be of benefit to Democrats, who are already set to enter power in the House of Representatives with the wind at their backs. After a long period during which public support for the PPACA was negative, it’s been apparent for some time now that public opinion on the PPACA as a whole has been positive and that support for repeal of the law has essentially disappeared. More specifically, even when the PPACA as a whole was unpopular and polling was showing that most Americans favored repealing the law, the provisions regarding protections for people with pre-existing conditions and other provisions were almost universally popular, even among Republicans and conservatives who were opposed to the law and said they were in favor of repeal.  Democrats took advantage of this position to great effect during the just-concluded midterms, with many Republican candidates being put on the spot regarding the fact that they claimed to continue to support thing such as protection for people with pre-existing conditions even as their party is involved in a lawsuit that would, if it succeeded, result in those protections being repealed. Going forward, we can expect the Democrats to continue along this theme as we go forward.

Here’s the opinion:

Texas. et al v. U.S. et al … by on Scribd

FILED UNDER: Health Care, Law and the Courts, U.S. Constitution, US Politics, , , ,
Doug Mataconis
About Doug Mataconis
Doug holds a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010. Before joining OTB, he wrote at Below The BeltwayThe Liberty Papers, and United Liberty Follow Doug on Twitter | Facebook

Comments

  1. Kathy says:

    From an admittedly hasty reading on the subject, I’d bet on “tempest in a teapot.”

    I’d also bet that from now until November 2020, El Cheeto will keep reminding everyone Obamacare was ruled unconstitutional.

  2. getalife2324 says:

    Unfortunately, for the proponents of Obamacare, the Dems built this entirely around the individual mandate. Even in theory it cannot work without the mandate because the mandate is the only thing that offsets, at least to some extent. the additional costs. In practice even that theory was not sound as the skyrocketing costs were far outweighing the added revenues seen by new enrollments required by the mandate. The Supreme Court ruled that the law was constitutional because the mandate could be considered as a tax. Without that taxing provision, the judge in Texas is correct in striking down the law as unconstitutional.

    Health care is a right we all have. Health insurance is not. And make no mistake, Obamacare had nothing to do with healthcare and everything to do with health insurance. Pre-existing conditions should certainly be covered. If you are in the market for health insurance you should be able to obtain it regardless of your circumstance. But that doesn’t mean it will be inexpensive for you. Just as with any other insurance market your premiums are determined by a number of things, the most important of which is the cost of providing the services. Those people who take little advantage of insurances generally see lower premiums than people who use their insurance often. Have a fire at your house several times per year and see what happens to your homeowner’s insurance costs. Moving violations and accidents cause auto insurance to rise, and smoking or daredevil risky behavior that means a higher likelihood of a life insurance payout in the short term, which equates to higher life insurance premiums. Why should this axiom be different in the health insurance market place. As with everything else in life, wanting something and actually being able to afford it are two entirely different things.

    Congress needs to work on a plan that incentives health practitioners to move away from needing to accept insurance for any routine care. Routine care could be affordable out of pocket without the involvement of a third party payer, leaving only the need for catastrophic coverage. Injecting more bureaucracy into the system only causes costs to go higher. If common sense weren’t’ enough to tell you that a single payer system is not sustainable one only need to look at those countries where the SPS is in place to see the enormous downside. Even our own prelude to a single payer system as we had with Obamacare was about as dismal a failure as you’d expect it would be. The curtain has been pulled back and the snake oil salesman who promised the undeliverable to us has finally been exposed. From Day 1 nothing about the Affordable Care Act panned out as promised and seeing it thrown on the trash heap of terrible legislation moves us in a positive direction.

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  3. Just nutha ignint cracker says:

    And those “enormous downsides” are…
    (Full Disclosure: I lived in a country that had SPHC in place with [as is fairly common] supplemental insurance for procedures for which the SP system doesn’t pay much [which insurers would not sell to me because I was not a permanent resident–also not uncommon as I understand]. I never saw any downsides other than that my doctor never said “I want you to get 10 or 15 MRIs; they probably won’t show me anything, but you have insurance, so it won’t cost you very much” because MRI were one of the things people needed supplemental insurance for.)

  4. Dave Schuler says:

    Is the problem the severability of the individual mandate or that Chief Justice Roberts’s opinion defended the Affordable Care Act’s constitutionality on the basis of Congress’s power to tax? Said another way Roberts’s decision may end up having been a Pyrrhic victory.

  5. Scott says:

    The problem with the right wing is that they will not support any healthcare system. Already they are saying things like: “Now let’s work together on a solution”. “Now we can have better healthcare for all and no one between you and your doctor”. Trouble is, is that they are frauds. Here in Texas, I’ve been hearing for 25 years about a “Texas approach to healthcare”. Except such an approach never materializes. I’m sure it is in the same think tank as the Republican replacement plan or the ever promised Trump plan that will get everybody better healthcare at a cheaper price.

    When your Congressman opines on these talking points, just keep pressing for the plan and not the marketing brochure. When my tea party Koch supported newly elected Congressman Chip Roy cheered the decision, I asked him to demonstrate the brave new world he is cheering by “not shackling himself to the freedom denying tyranny of the taxpayer subsidized Federal Employees Health Benefits Program”. He, of course, will never respond.

  6. charon says:

    @getalife2324:

    Yeah, yeah, yeah.

    Back in the day, when I was a youngun, you could get health care without insurance. Now, not so much. These days health insurance more or less equates to access to healthcare. Try getting (or affording) health care without insurance if you have some preexisting condition, say Type 1 diabetes, or just anything of that sort – cancer survivor or some such.

  7. Gustopher says:

    @getalife2324: Are the downsides higher life expectancy and a lower cost of care? Because, by and large, that’s what we see with countries with Single Payer Health Care.

    And those are the most important metrics.

    Some wait times increase above a level we might like in some countries, but that can be adjusted. Increase funding for knee replacement if we don’t want people waiting months like Canada.

    But right now, we have a lot of people who cannot get a knee replacement ever, and a few months wait would be a massive improvement for them.

    We would be going from rationing healthcare by ability to pay, to rationing health care by need. There will be winners and losers. Data from around the world suggests we will have more winners. As a likely loser, I would want a robust private option to maintain my privilege, but not so robust that it undercuts the rest of the system.

    There are random horror stories with different systems, because there are random horror stories for all systems. But anecdotes aren’t data. Define what a horror story is, measure the frequency. You can’t fix what you can’t measure.

  8. Raoul says:

    The severabilty argument is something else. Congress severed a provision last year rendering the act illegal because it cannot be severed despite the fact that Congress just did. That my friends is circular reasoning. But what it really shows is that one can muster “legal” arguments and as long as there is policy preference by a judge, he or she can then rule in a certain way pretending it is done by the color of law. It really speaks on the quality of judging by the GOP. This decision essentially eviscerates the rule of law.

  9. Paul L. says:

    Amusing that criticizing the Judges decision on DACA and the Trump travel ban was a attack of Judiciary that threatened the very Rule of Law.

    But not in this case.

  10. Paul L. says:

    Remember when criticizing the courts decisions on DACA and the travel ban was a unprecedented attack on the Judiciary and the Rule of Law.

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  11. Bob@Youngstown says:

    So let me see if I understand this correctly:
    The ACA is uconstitutional because the tax penalty is zero cents.
    But the ACA would be constitutional with a tax penalty of 1 cent.
    I suppose that makes perfect sense in Washington (or Texas).

  12. JohnMcC says:

    I admit that the issues of severability and Commerce Clause and etc run round and round in my head until the turn into butter at the base of my palm tree. The really important thing to me is that the voting public (in a MIDTERM, let us recall!) emphatically declared that very few legislators who deprived them of their health insurance would survive to see another day.

    I expect that Ms Pelosi knows how to keep this on the nation’s front pages.

  13. Liberal Capitalist says:

    Texas, right?

    Go figure, eh? No surprise.

  14. Tyrell says:

    @Just nutha ignint cracker: When these doctors prescribe tests, does anyone ever ask how much the tests will cost? Do the doctors even know?
    The last thing we need is a single payer one size fits all plan. Peoples’ needs are different. There should be options, and incentives to get young people in.
    My prescription medicine is cheaper when I don’t go through insurance: $4 cash compared to $10 insurance co-pay. There is a lesson there.

  15. Matt says:

    @Tyrell:

    When these doctors prescribe tests, does anyone ever ask how much the tests will cost? Do the doctors even know?

    The doctor’s don’t know because the actual cost will depend on if you have insurance or not and if you have insurance the price will depend on who you are insured by. I’m not talking about deductibles either I’m talking about the price that will be billed to the payer (insurance or person). Test A costs $500 for uninsured But for insurance company Omega the cost is $320 while insurance company beta pays $390…