States Renew An Old Argument Against Obamacare

A group of twenty states have revived an old argument to mount a new legal challenge to the Affordable Care Act.

Six years ago, the Supreme Court upheld the constitutionality of the Patient Protection And Affordable Care Act (PPACA) against a challenge that sought to undermine the bill by attacking its core requirement, the individual mandate. In that decision, a divided Court led by a surprising vote by Chief Justice John Roberts, the Court ruled that the mandate could not be justified by the Congress’s power under the Interstate Commerce Clause but that it could be upheld via 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 company via the income tax. Last December, though, Congress passed a tax reform bill that, among other things, eliminated the tax penalty for those who failed to purchase insurance, which essentially means that the mandate is now entirely unenforceable and a dead letter.

Based on this, a group of 20 states led by Texas and Wisconsin have filed a new suit against the PPACA seeking a ruling that would, ultimately, put a stake through the heart of what’s left of Obamacare:

A coalition of 20 states has filed a lawsuit alleging ObamaCare is unconstitutional.

They’re claiming that since the GOP eliminated the tax penalty associated with the individual mandate, that ObamaCare itself is no longer constitutional.

The lawsuit against the federal government, led by Texas Attorney General Ken Paxton (R) and Wisconsin Attorney General Brad Schimel (R), was filed Monday in the U.S. District Court in the Northern District of Texas.

In 2012, the Supreme Court ruled 5-4 that ObamaCare’s individual mandate was constitutional because Congress has the power to levy taxes. The lawsuit points to that part of the ruling in its argument that the law is no longer constitutional.

The GOP tax law “eliminated the tax penalty of the ACA, without eliminating the mandate itself. What remains, then, is the individual mandate, without any accompanying exercise of Congress’s taxing power, which the Supreme Court already held that Congress has no authority to enact,” the complaint states.

The GOP tax law “eliminated the tax penalty of the ACA, without eliminating the mandate itself. What remains, then, is the individual mandate, without any accompanying exercise of Congress’s taxing power, which the Supreme Court already held that Congress has no authority to enact,” the complaint states.

“Not only is the individual mandate now unlawful, but this core provision is not severable from the rest of the ACA—as four Justices of the Supreme Court already concluded.”

The GOP tax law zeroed out the individual mandate’s penalty so that, starting in 2019, people wouldn’t have to pay a fine for not having insurance. It didn’t actually eliminate the requirement that people have insurance.

“The U.S. Supreme Court already admitted that an individual mandate without a tax penalty is unconstitutional,” Paxton said in a press release. “With no remaining legitimate basis for the law, it is time that Americans are finally free from the stranglehold of Obamacare, once and for all.”

The goal of the lawsuit, Paxton stated, is to repeal ObamaCare, so that Republicans can replace it.

In some sense, one gets the impression that this lawsuit is the final attempt by Republicans to undo the PPACA after a year in which Congress was utterly unable to do so. The process began when the House of Representatives after some difficulties in March of last year,  passed the American Health Care Act with barely a vote to spare. At that point, the battle shifted to the Senate, which spent three months trying to pass a bill with even just 51 votes (or 50 votes plus the Vice-President’s tie-breaking vote.) From the start it was clear that the House bill had no chance of passing in the Senate, so Senate Republicans put forward their alternative, the Better Care Reconciliation Act. As with the AHCA, the BCRA was drafted behind closed doors without either committee hearings or public debate, and of course no input from Democrats. Almost immediately, the BCRA ran into roadblocks. First, Mitch McConnell’s plan to vote on the bill before the July 4th recess collapsed when the Congressional Budget Office released a devasting score for the bill. After that happened, the BCRA quickly lost support and was pulled from the floor before voting began. After the recess, Senate Republicans put forward a revised plan that also received a bad CBO score and quickly came under fire. When it became obvious that this bill would also fail to get even the fifty votes required to pass the bill, McConnell proposed yet another plan that would repeal the Affordable Care Act without actually replacing it with anything, but that plan ended up falling apart after only eighteen hours. Undaunted, the Senate still refused to give up and decided to go forward even though it was unclear which direction they were heading. Ultimately, the Senate ended up voting on something they called “Skinny repeal,” which repealed only parts of the PPACA such as the individual and employer mandates and some other regulations. Bizarrely, though, even Senators who voted for that bill said they never intended for it to become law. Instead, they said it would be the basis to force a conference committee with the House in an effort to put together a bill that could get through both bodies. That effort, though, came to an end when McCain, who had just been diagnosed with cancer, returned to the Senate to deliver a late-night thumbs down that sealed the bill’s fate. Finally, after first declaring that there would be no more efforts to pass a health care bill, Senate Republicans made one last effort with a bill proposed by Senators Lindsey Graham and Bill Cassidy, but that too failed to pass even under that bodies relaxed reconciliation rules which avoid the need for a sixty-vote majority in order to invoke cloture and pass a bill.  By the end of the year, it was clear that the effort to repeal the PPACA was effectively dead and that it was unlikely that it would be revived during the run-up to this year’ midterm elections.

At that point, the effort to repeal Obamacare essentially came to an end, but the war went on. 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.

In any case, with the penalty now eliminated, the states involved in this new lawsuit are arguing that the entire PPACA now falls into doubt because the mandate is unenforceable. As Ilya Somin explains, this argument seems unlikely to succeed unless the Courts agree with the argument that the now unenforceable mandate can be separated from the PPACA as a whole:

While the state plaintiffs are right to argue that the individual mandate can no longer be considered a tax, they are wrong to claim that the fall of the mandate should take the rest of Obamacare down with it. The states do not assert that any other part of the ACA is unconstitutional; they argue, rather, that the rest must be struck down because the individual mandate cannot be “severed” from it. If one part of a law is declared unconstitutional, and that part cannot be severed from the rest, then the whole thing must fall.

The Supreme Court’s severability jurisprudence is far from a model of clarity. But the Court has held that if the unconstitutional part of a law is so important to the rest that the statute as a whole cannot work as intended, then the latter falls along with the former. Otherwise, the residual law is no longer what Congress had intended to set up. In NFIB, four conservative justices who concluded that the individual mandate is unconstitutional also contended that it could not be severed from the rest of the ACA, because of the ways in which the mandate was essential to the overall regulatory scheme.

But there is a big difference between a court choosing to sever a part of a law, and Congress doing so itself. And in this case, Congress has already effectively neutered the individual mandate, while leaving the rest of the ACA in place. It was Congress that removed the monetary penalty imposed on violators of the individual mandate, thus rendering it ineffective. And it was also Congress which chose to leave the rest of the law in place, nonetheless (largely because President Trump and the GOP leadership repeatedly failed to round up enough votes in the Senate to repeal any more of Obamacare). Unlike in NFIB, a court could not conclude that Congress’ design for the ACA would be fatally undermined without an effective individual mandate. The four dissenting justices in that case argued that, without the mandate, the other parts of the law could not “operate as Congress designed them.” In this case, Congress itself has concluded that a mandate-less ACA is acceptable (or at least a lesser evil than the available alternatives).

The state plaintiffs also claim that a mandate-less law is so badly flawed that it flunks even minimal “rational basis” review to which virtually legislation is subject. But given that almost anything can pass rational basis review, so long as it has some remotely plausible rationale (Justice Antonin Scalia famously called the rational basis test “a test of whether the legislature has a stupid staff”), that argument is unlikely to succeed. A recent Congressional Budget Office analysis predicts that a mandate-less ACA would be worse than the status quo in some ways, but also that it would not collapse completely. The ACA is a badly flawed law with or without the mandate. But it’s good enough for rational basis government work.

In sum, the states deserve to win on the issue of the constitutionality of the individual mandate. But they should lose on severability.

Given the ruling of the Supreme Court in King v. Burwell, 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 follow 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 an 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.

Even before we get to the question of severability, though, the courts will need to deal with the question of whether these states, all of which are controlled by Republicans, have standing to raise this issue in court at all. Previous lawsuits against the PPACA were filed on behalf of individual Plaintiffs or businesses that would allegedly have been negatively impacted by the mandate who argued that they had standing because they had standing to sue based on their potential liability under the law if they failed to purchase insurance. In this case, it’s hard to see what standing the individual states have to challenge either the now toothless mandate or the law as a whole. While it’s true that courts in recent years have shown a tendency to be more open to giving states the right to challenge Federal Government policy, it’s unclear whether that willingness will extend to a case such as this one where the states are effectively arguing that an entire law should be struck down based on the fact that the now toothless mandate is unconstitutional.

It’s no mistake that this case is being filed in the Northern District of Texas, which is part of the Fifth Circuit. Thanks in no small part to the fact that it is made up predominantly red states, the Fifth Circuit is one of the few Circuits in the nation that can still fairly be said to be dominated by conservative judges at both the District Court and Circuit Court of Appeals level, mostly including Judges appointed by President George W. Bush but also including some appointed by this father and by President Reagan who have not retired from judicial service. This is why the Fifth Circuit has been the source of opinions that have struck down various Obama Era provisions such as the expanded version of DACA. Much like the challenges to Trump Administration policies such as the Muslim Travel Ban and the effort to exclude transgender troops from military service that have come from the Ninth, Fourth, and District of Columbia Circuits, the Fifth Circuit is the one part of the Federal Judiciary most likely to be sympathetic to the arguments the state are making here.Whether that helps or not remains to be seen. In any case, this lawsuit is likely to spend at least the next year in the lower Federal Courts before making it to the Supreme Court. At that pace, the Justices would not have the case before them until the October 2019 Term at the earliest and by then the Supreme Court could look quite different from the way it does today.

Here’s the Complaint:

Texas Et Al v. United States Et Al PPACA Complaint by Doug Mataconis on Scribd

FILED UNDER: Health Care, Law and the Courts, 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. Tyrell says:

    I have always thought that the mandate caused many problems. Young people generally ignored it. People who could not afford health insurance were punished. And any halfway decent tax preparer knows 8 different ways to get around it.




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  2. Kylopod says:

    @Tyrell:

    People who could not afford health insurance were punished.

    Actually, people were permitted to claim exemption from the mandate based on financial hardship.




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