Outside the Beltway

Fifth Circuit Appears Skeptical Of Constitutionality Of PPACA

The Fifth Circuit Court of Appeals heard argument yesterday in a case that could radically impact health care coverage for millions of Americans.

Doug Mataconis · Wednesday, July 10, 2019 · 27 comments

As I made note of previously, the Fifth Circuit Court of Appeals heard argument yesterday in a case involving the constitutionality of the Affordable Care Act in light of the effective nullification of the individual mandate. Based on the reports regarding that argument, it appears that the three-judge panel hearing the case is skeptical of the ability of the PPACA being able to survive Constitutional review with the mandate now a dead letter:

NEW ORLEANS — A panel of federal appeals court judges on Tuesday sounded likely to uphold a lower-court ruling that a central provision of the Affordable Care Act — the requirement that most people have health insurance — is unconstitutional. But it was harder to discern how the court might come down on a much bigger question: whether the rest of the sprawling health law must fall if the insurance mandate does.

In 90 minutes of oral arguments on whether a federal district judge in Texas was correct in striking down the Affordable Care Act in December, two appellate judges appointed by Republican presidents peppered lawyers with blunt questions while the third judge, appointed by President Jimmy Carter, remained silent.

The two Republican appointees, Jennifer Walker Elrod, appointed by President George W. Bush in 2007, and Kurt Engelhardt, appointed by President Trump in 2018, seemed particularly skeptical of the Democratic defendants’ argument that Congress had fully intended to keep the rest of the law when it eliminated the penalty for going without insurance as part of its 2017 tax overhaul.

The arguments in the United States Court of Appeals for the Fifth Circuit were a stark reminder of the enormous stakes of the case, not only for millions of people who gained health insurance through the law but for the political futures of Mr. 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, initially saying only its provisions protecting people with pre-existing conditions should be struck down. Then, this spring, it said it agreed with the ruling that the law’s requirement for people to buy insurance was unconstitutional now that Congress eliminated the penalty for going without it, 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 that was much discussed during Tuesday’s arguments 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. When the Supreme Court upheld the mandate in its landmark 2012 ruling that saved the law, its decision 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.

On Tuesday, Douglas N. Letter, a lawyer for the House of Representatives, was particularly insistent that Judge O’Connor had been wrong, telling the appeals panel that “the burden is on the other side to show Congress wanted this entire statute to be struck down.”

The arguments did reveal some tensions between the Republican states that brought the case, led by Texas, and Mr. Trump’s Justice Department. For example, a lawyer for Texas took issue with a puzzling new Justice Department position — revealed in a May brief — that the ruling should apply only in the 18 plaintiff states, not nationwide. The Republican states would need to evaluate if they had “been the victim of a bait and switch,” said the Texas lawyer, Kyle D. Hawkins.

In another wrinkle, August E. Flentje, a lawyer for the Justice Department, appeared reluctant to answer questions from Judge Elrod about how applying the ruling only to the plaintiff states would work. He was also vague about another new and surprising position the administration mentioned almost in passing in its May brief: that some pieces of the health law, though not its insurance provisions, should be preserved.

“A lot needs to get sorted out and it’s complicated,” Mr. Flentje replied.
Judge Elrod also asked how the federal government would respond if a stay issued by the lower court after Judge O’Connor’s decision was lifted and its order striking down the law took effect.

“We think it’s great the stay is in place,” Mr. Flentje said. “Those things don’t need to get sorted out until there’s a final ruling.”

Over all, though, the panel spent the most time on the question of whether the rest of the law should fall if Judge O’Connor was correct in scrapping the insurance mandate — and Judge Elrod and Judge Engelhardt, based on their questioning, seemed to firmly believe he was. Judge Engelhardt asked Mr. Letter, the House lawyer, why Congress could not remedy the situation by writing a new health law or set of laws.

“They could do this tomorrow,” Judge Engelhardt said, leading Mr. Letter to dryly point out that Mr. Trump would need to sign off on new laws, too.

“And obviously the president would sign this, right?” he asked sardonically. “No, obviously not.”

“You can fix this, and the Supreme Court has told you how to do it,” Mr. Letter told the panel, referring to legal precedent that directs courts to limit damage to major statutes when considering which provisions to throw out. “Maintain everything you can that can stand on its own.”

But Judge Engelhardt and Judge Elrod kept referring to past statements, including from Supreme Court justices in an earlier case questioning the constitutionality of the health law, King v. Burwell, suggesting that the law’s other insurance provisions cannot work without the mandate.

Those provisions include one that requires insurance companies to sell health coverage to anyone who wants to buy it, including people with pre-existing medical conditions, and another that requires the companies to charge the same price to everyone who is the same age.

More from The Washington Post:

Federal appeals court judges expressed skepticism Tuesday that the nearly decade-old law that refashioned the nation’s health-care system should remain intact after Congress eliminated a tax penalty for Americans who fail to carry health insurance.

During oral arguments in a case with momentous stakes for consumers and politicians ahead of the 2020 elections, two members of a three-judge panel of the U.S. Court of Appeals for the 5th Circuit grilled lawyers representing Democratic-led states and the U.S. House to explain why the Affordable Care Act remains valid.

“If you no longer have the tax, why isn’t it unconstitutional?” asked Judge Jennifer Walker Elrod, who was appointed by President George W. Bush. She and the other GOP appointee, Judge Kurt Engelhardt, named by President Trump last year, repeatedly noted that the law was written without an explicit feature guaranteeing that if one part were ever removed by Congress or the courts, the rest would remain in place.

At stake in the panel’s decision is insurance coverage for millions of Americans who gained it under the law through expansions of Medicaid in three dozen states and a new insurance marketplace, as well as consumer protections for most people with private health plans. Whatever the circuit court decides, its ruling could well be appealed to the Supreme Court, catapulting those issues to the forefront of the 2020 presidential and congressional elections.

The Democratic lawyers fighting to preserve the law argued that the Republican Congress had tried and failed to repeal the ACA two years ago and that by eliminating the penalty in late 2017 as part of broad tax changes, it had not touched any other parts of the sprawling statute. They also said that Congress did not eliminate the penalty but simply lowered the amount to zero — an assertion challenged by the panel’s Republican appointees.

Kyle Hawkins, solicitor general for the Texas attorney general who initiated the lawsuit in February 2018, countered: “I am not in position to psychoanalyze Congress . . . what Congress intended.”

Despite such pointed questioning, the hearing did not clearly foreshadow how the panel will rule in the appeal of a December opinion by a federal district judge in Texas who said the entire ACA is unconstitutional. Nor did the panel members say when they expect to issue an opinion, though the court says in general that its judges will try to do so within a few months.

Engelhardt, the Trump appointee, primarily grilled attorneys representing California Attorney General Xavier Becerra, a score of other Democratic-led states and the Democratic House. Elrod peppered both sides with questions. The third and only Democratic appointee on the panel, Judge Carolyn Dineen King, a former chief judge of the court who was appointed by President Jimmy Carter, was silent during the 90-minute-plus hearing.

As I’ve noted before, it’s generally inadvisable to draw conclusions from the questions that are asked at oral argument. While they can often be a signal as to which way a particular Judge is leaning in a particular case, that isn’t always the case. In some cases, the questions that Judges ask can be based on a desire for counsel for one side or the other to clarify some point set forth in the briefs that have been filed in the case, or to more fully address an issue that has been raised in the briefs of the parties or the amicus briefs filed by outside parties who may have an interest in the case. On other occasions, it can be looked at as a means for one of the Judges to try to address concerns expressed by one of their fellow Judges on the bench. On still other occasions, a question asked may simply be based on intellectual curiosity on the part of one of the Judges.

Putting those caveats to the side, though, it does appear from the questioning that all of the Judges agree that the individual mandate can no longer survive Constitutional scrutiny. The basis for this ruling, of course, would reside in the Supreme Court’s ruling 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 to rule, though, 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. This case was, generally, the end of the legal challenges that posed an existential threat to the PPACA.

In 2017, though, Congress passed the Tax Cuts and Jobs Act, part of which eliminated the Federal tax penalty for not having insurance. For those Americans who did not have insurance, this meant an end to the tax penalty, but it also spurred a new legal argument against the PPACA. Basically, that argument is that the individual mandate can no longer be considered Constitutional because the Supreme Court based the constitutionality of the mandate on the fact that it included a tax penalty for non-compliance. In the end, this seems axiomatic.

The question the Court faces is what happens after you declare the mandate unconstitutional. Texas and its sister states argue that without the mandate the entire structure of the PPACA must fall. 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 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.

I’ve addressed the issue of severability before, most recently in the preview post I wrote yesterday, and I won’t repeat them here. From the descriptions of the oral argument, though, it appears that at least two of the Judges appear skeptical of the argument that the mandate is severable from the underlying law. If that is the route they take in their opinion, then it would mean an end to some of the most popular parts of the PPACA, including provisions barring discrimination against persons with pre-existing conditions and requirements that plans cover the children of insured persons up to the time they turn 26. This would result in significant disruptions for millions of Americans and would completely up-end the health insurance marketplace absent action by Congress.

The Court of Appeals will likely hand down a ruling in this case sometime early in the fall. This means there would be more than sufficient time for the losing party to appeal to the Supreme Court and for the Court, presuming it accepts the appeal, to hear oral argument during the term that begins in October. That should make the 2020 Presidential campaign very interesting to say the least.

You can listen to the Court’s oral argument at this link. Take note that the link is to an MP3 file that will begin playing when the window opens. There is also an option to download the MP3 file.