Outside the Beltway

Trump Administration Won’t Defend Obamacare, Says Mandate Is Unconstitutional

The Trump Administration is declining to defend the Affordable Care Act in Court, arguing that the individual mandate is now unconstitutional because the tax penalty has been eliminated.

Doug Mataconis · Monday, June 11, 2018 · 14 comments

The Trump Administration has joined with several states that are challenging key parts of the Affordable Care Act, arguing that it is unconstitutional:

WASHINGTON — The Trump administration told a federal court on Thursday that it would no longer defend crucial provisions of the Affordable Care Act that protect consumers with pre-existing medical conditions.

Under those provisions of the law, insurance companies cannot deny coverage or charge higher rates to people with pre-existing conditions.

The Justice Department said the provisions were part of an unconstitutional scheme that required most Americans to carry health insurance.

In a court case filed by Texas and 19 other states, the Justice Department said in a brief on Thursday that the requirement for people to have insurance — the individual mandate — was unconstitutional.

If that argument is accepted by the federal court, it could eviscerate major parts of the Affordable Care Act that remain in place despite numerous attacks by President Trump and his administration. Insurers could again deny people coverage because of their medical condition or history.

A definitive court ruling could be months away and appeals of any decision could take many more months, during which the law is likely to stay in effect.

The Supreme Court upheld the individual mandate in 2012 as an exercise of the government’s power to tax. But since Congress repealed the tax last year, the mandate and the law’s consumer protections can no longer be justified, the Justice Department said.

The mandate cannot be interpreted as a tax “because it will raise no revenue as Congress has eliminated the monetary penalty,” the department said in a brief filed in the Federal District Court in Fort Worth.

Brad Woodhouse, the director of the Protect Our Care Campaign, an advocacy group that supports the health law, said the Justice Department’s position threatened to “steal coverage from millions of Americans.” It is, he said, Mr. Trump’s “most dangerous sabotage effort yet.”

Even though the Justice Department is not defending crucial provisions of the law, California and 15 other states have intervened in the court proceeding, and they filed a brief on Thursday defending the law, including its consumer protections.

The Justice Department said that the protections for people with pre-existing conditions were inseparable from the individual mandate and must also be struck down.

But it did not go as far as Texas and the other states, which argued that all of the Affordable Care Act and the regulations issued under it were now invalid.

The 2010 health care law includes many other provisions, such as the creation of health insurance marketplaces, premium subsidies for low- and moderate-income people and expansion of the Medicaid program, as well as changes in Medicare and public health services.

The Justice Department did not challenge those provisions of the law. Indeed, it said, they can continue to operate without the individual mandate.

By contrast, the department said, the Supreme Court held that the individual mandate was “closely intertwined” with the requirement for insurers to offer coverage to all consumers at the same basic prices, regardless of their health status.

Attorney General Jeff Sessions sent a letter to congressional leaders on Thursday notifying them that he would not defend the constitutionality of the individual mandate or the requirement for insurers to sell insurance to all applicants at standard rates — the “guaranteed issue” and “community rating” provisions.

The Justice Department has a long tradition of defending statutes enacted by Congress, regardless of whether it supports the policies reflected in those laws.

But, Mr. Sessions said, this is “a rare case” in which the Justice Department has decided not to defend certain provisions of a law, because he could not find any “reasonable arguments” to support the constitutionality of the provisions.

Lyle Denniston has more:

In a filing in a federal trial court in Fort Worth, Texas, government lawyers urged the judge not to act immediately to bar enforcement of the mandate, saying it won’t actually be unconstitutional until the tax penalty is set to expire on January 1 of next year.  In the meantime, it suggested, the judge should simply issue a declaration that the mandate cannot survive constitutionally if it no longer involves a tax that raises federal revenue.   The judge may be able to decide the constitutional challenge before the new year opens, the document suggested.

Besides urging nullification of the insurance-buying mandate itself, the new government position argued that two of the most popular features of the ACA must fall along with it: the requirement that insurance companies cannot deny health insurance to individuals because of existing or pre-existing medical conditions, and the requirement that they cannot charge higher insurance premiums based on existing or pre-existing conditions.   Those two were so closely tied to the insurance-buying mandate that they would not work in the health insurance market without the guaranteed pool of insured people that the mandate was designed to create, Administration lawyers contended.

The filing was made in reaction to a lawsuit filed by Texas, 18 other states and the governor of Maine, but the Administration stopped short of supporting all that those challengers are asking.  Their lawsuit has contended that the entire ACA program cannot function as an economic matter without the assurances of adequate numbers of people buying insurance.  So, they have called on the trial court to strike down every part of the ACA, a massive law of more than 900 pages that Congress passed in 2010.

Aside from the individual insurance mandate and the two insurance guarantees tied to it, the government filing argued, all of the rest of the ACA can continue to function.  That would include such popular items as the guarantee that young people can stay on their family’s health insurance plans until age 26, subsidies to help poorer people to afford health insurance, the existing state-level health insurance marketplaces (“exchanges”), the expansion of the Medicaid health insurance program for poor people, and a mandate that larger employers provided minimum levels of health insurance coverage for their workers.

The federal courts have no power to strike down those other provisions, since they can be severed from the parts of the ACA that will fall when the tax penalty ends at the opening of next year, the government argued.

Off the top the most notable thing going on here is the fact that the Justice Department is making the unusual, but not unprecedented, decision to decline to defend a Federal law in Court. While this may seem to be counterintuitive or even improper to a lay observer, it has happened before and is clearly a proper exercise of discretion on the part of the Cabinet Department primarily responsible for the administration of justice at the Federal level. The most notable recent example of this happening, of course, occurred roughly seven years ago when the Obama Justice Department under former Attorney General Eric Holder announced that it could not defend the constitutionality of the Defense of Marriage Act in court, a move that went a long way toward that law ultimately being declared unconstitutional. While many on the right denounced the decision at the time, it seemed clear to me at the time that this decision was entirely proper, especially given the fact that there was a more than ample precedent for the action that the Justice Department was taking in the DOMA cases. Of course, now that the show is on the other foot, which is somewhat ironic given my speculation about how liberals who were cheering the Obama Administration’s decision regarding to DOMA would react “if a Republican Administration declined to defend the Affordable Care Act, and instead argued the other side of the issue.” That, of course, is exactly what is happening here, and just as there was no real legal argument against the Obama Administration’s action with regard to DOMA there is no legal argument against the Trump Administration’s decision in this case.

Leaving that argument to the side, the position that the Federal Government is taking here dates back to the early days of the Obamacare debate, and the legal arguments that resulted from passage of the law.

Six years ago, of course, 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.

It was in response to that the development that Texas and nineteen other states filed the current lawsuit which essentially makes two central claims. First, the lawsuit argues that, with the penalty for not getting health insurance removed, the argument that Chief Justice Roberts based his ruling on is no longer valid. This would mean that the Court’s other holding, which found that the mandate could not be justified as an exercise of Congressional power under the Interstate Commerce Clause, must control and the mandate must be declared unconstitutional. From there, the lawsuit goes on to argue that declaring the mandate unconstitutional means that the entire PPACA must be declared unconstitutional due to the fact that the mandate is so intertwined with the rest of the law that the PPACA cannot stand if the mandate does not stand. As I stated at the time the lawsuit was filed, and as other legal scholars such as Ilya Somin have also argued, this argument does not seem to be particularly strong, especially given the fact that Congress itself apparently believes that the mandate is severable from the rest of the PPACA given the fact that it essentially repealed it but left the rest of the law standing.

As noted, the Justice Department does not join Texas and its sister states in arguing that the PPACA must be struck down in its entirety. Instead, it argues that a good part of the structure of the law can be severed from the mandate and allowed to stand since the argument that the entire law will collapse is entirely speculative. This, of course, is in addition to the fact that, as I noted above, Congress obviously believed that the mandate was severable from the law as a whole given the fact that it effectively repealed the mandate by removing the penalty while leaving the rest of the law in place. For those reasons, I continue to believe that the state’s argument that the entire PPACA must be declared unconstitutional simply doesn’t hold water. Much of the law, indeed most of it, is clearly unrelated to the mandate, and as I’ve noted before Courts are generally reluctant to strike down a law in its entirety when a credible argument can be made that the basic structure of the law can be preserved even if a portion of it, such as the mandate, is invalid either under some other Federal law or under the Constitution.

While the Federal government does not take the position that the entire law is unconstitutional, it does take the position that some parts of the PPACA are so intertwined with the mandate that they cannot be severed from the mandate itself and therefore must be struck down along with the mandate. Specifically, the Justice Department argues in its brief that, without the mandate, those portions of the law that bar insurance companies from denying coverage to people with pre-existing conditions or charging them higher rates based on those conditions — which are called the “guaranteed issue” and “community rating” provisions of the law — are so intertwined with the mandate that they cannot stand if the mandate is declared unconstitutional:

The United States contended in NFIB that “Congress’s findings establish that the guaranteed-issue and community-rating provisions are inseverable from the minimum coverage provision.” Br. for Resp. (Severability) at 45, NFIB, No. 11-393. And the Supreme Court has since essentially agreed, noting that these “three reforms are closely intertwined” and that “Congress found that the guaranteed issue and community rating requirements would not work without the coverage requirement.” King v. Burwell, 135 S. Ct. 2480, 2487 (2015).

That finding, set forth at 42 U.S.C. § 18091(2)(I), specifically and expressly explains why Congress believed that the individual mandate requirement is “essential” to the operation of the guaranteed-issue and community-rating provisions. Namely, “if there were no requirement, many individuals would wait to purchase health insurance until they needed care.” Id. But “[b]y significantly increasing health insurance coverage,” the mandate, “together with the other provisions of this Act, will minimize this adverse selection and broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums.” Id. Accordingly, the individual mandate “is essential to creating effective health insurance markets in which improved health insurance products that are guaranteed issue and do not exclude coverage of pre-existing conditions can be sold.” Id. In short, Congress found that enforcing guaranteed issue and community-rating requirements without an individual mandate would allow individuals to game the system by waiting until they were sick to purchase health insurance, thereby increasing the price of insurance for everyone else—the polar opposite of what Congress sought in enacting the ACA.

Indeed, Congress’s conclusions regarding the linkage between the individual mandate, guaranteed-issue, and community-rating requirements were agreed upon by all of the Justices in NFIB. See 567 U.S. at 548 (opinion of Roberts, C.J.) (“The guaranteed-issue and communityrating reforms … exacerbate” the “problem” of “healthy individuals who choose not to purchase insurance to cover potential health care needs,” and “threaten to impose massive new costs on insurers[.] … The individual mandate was Congress’s solution to these problems.”); id. at 597-98 (Ginsburg, J., concurring in part and dissenting in part) (“[T]hese two provisions, Congress comprehended, could not work effectively unless individuals were given a powerful incentive to obtain insurance. … [G]uaranteed-issue and community-rating laws alone will not work.”); id. at 695-96 (joint dissent) (“Insurance companies bear new costs imposed by a collection of insurance regulations and taxes, including ‘guaranteed issue’ and ‘community rating’ requirements . . . but the insurers benefit from the new, healthy purchasers who are forced by the Individual Mandate to buy the insurers’ product.”).

In expressly finding this link between these three provisions, Congress looked to experiences from prior state experiments in restructuring their laws governing health insurance. In some States, insurers were forced to cover everyone and charge the same rates regardless of health status, and chose to raise premiums for healthy individuals. See Br. of America’s Health Insurance Plans and the Blue Cross Blue Shield Association as Amici Curiae in Support of Reversal of the Court of Appeals’ Severability Judgment at 8‒11, NFIB, No. 11-393. For example, after imposing guaranteed-issue and community-rating requirements without an individual mandate, New Hampshire experienced an increase in premiums and, ultimately, all but two insurers withdrew from the State. See Br. for Resp’t (Severability) at 49, NFIB, No. 11-393; see also id. at 48‒51 (collecting examples). Thus, Congress acted on the assumption that severing the individual mandate from the guaranteed-issue and community-rating provisions “necessarily would impose significant risks and real uncertainties on insurance companies, their customers, all other major actors in the system, and the government treasury.” NFIB, 567 U.S. at 699 (joint dissent). Although the empirical assumptions underlying this connection may be subject to dispute (see, e.g., Br. for Court-Appointed Amicus Curiae Supporting Complete Severability at 35‒41, NFIB, No. 11-393), what is indisputable is that Congress believed that these three provisions were interdependent in enacting the ACA.

That conclusion is not affected by the fact that the TCJA eliminated the mandate’s penalty. It still remains the case that, in the complete absence of the mandate, retention of the guaranteedissue and community-rating requirements would expose health insurers (and their customers) to unfettered adverse selection by individuals who can game the system by waiting until they are sick to purchase insurance, contrary to Congress’s express intent. 42 U.S.C. § 18091(2)(I). Nor is this conclusion undermined by the fact that the TCJA did not itself eliminate the guaranteed-issue and community-rating requirements at the same time it eliminated the mandate’s penalty and thereby rendered the mandate unconstitutional. The best evidence of Congress’s intent is found in the legislative findings, which continue to remain part of the ACA after the TCJA. These express findings continue to describe the mandate as “essential” to the operation of the guaranteed-issue and community-rating provisions. See EEOC v. Hernando Bank, Inc., 724 F.2d 1188, 1190-91 (5th Cir. 1984) (noting that in determining “whether Congress would have enacted the remainder of the statute in the absence of the invalid provision[,] … [c]ongressional intent and purpose are best determined by an analysis of the language of the statute in question”). Those findings cannot be deemed to have been impliedly repealed by Congress’s mere elimination of the financial penalty. See Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 662 (2007) (explaining that “‘repeals by implication are not favored’ and will not be presumed unless the ’intention of the legislature to repeal is clear and manifest'” (citation omitted)).

The counter-argument to the one that the Justice Department raises here is that there is plenty of evidence to believe that, in repealing the penalty for failure to purchase insurance as part of the tax law, Congress did not believe that it was simultaneously repealing the protections for people with pre-existing conditions. Daniel Hemel at Slate raises this argument in an article pushing back against the notion that the Trump Administration’s decision to decline the defense of these portions of the PPACA is similar to what the Trump Administration is doing here. On some level at least, there is some logic to this position. As Hemel notes, President Trump himself has said that he wanted to keep the protections for people with pre-existing conditions in place several times during the campaign and after he became President. Additionally, the bills that were considered by both the House and the Senate last year that would have constituted the ‘replace’ part of ‘repeal and replace’ would have kept those protections in place. Keeping that in mind, the argument goes, if Congress knew that repealing the penalty for failure to comply with the individual mandate would have resulted in the repeal of the protection for pre-existing conditions, it arguably would have acted differently. Add into this the fact that it is estimated that, if it is accepted by the courts, the Administration’s new legal position could lead to 52 million Americans losing access to coverage either through the denial of coverage or premiums so high as to make insurance unaffordable. Of course, it is probably inevitably true that the effective death of the insurance mandate could end up causing serious problems for the economic viability of the PPACA going forward, but that is a policy argument for the Legislative Branch not a legal argument for a Judge to consider. Given all of this, the fact that the mandate is now effectively a dead letter arguably does not mean that the pre-existing conditions protections must be stricken as well. This is especially true given that, as a general rule, courts try to construe a statute as narrowly as possible and to avoid striking the entire law down if there is a valid reason to save the rest of the law. With that in mind, the argument that the Court is compelled to strike down either the entire PPACA as the states argue or the Community Rating and Guaranteed Issue portions of the law as the Trump Administration argues seems quite weaker than it might appear at first glance.

At this point, the next step would be for the Judge to issue a ruling on the case, although it may take several more months of briefing and argument before the case is ready for that stage. After that, of course, the case could be appealed to the Fifth Circuit Court of Appeals and from there to the Supreme Court. At least initially, it appears that the states and the Trump Administration have the advantage here given the fact that the Fifth Circuit is stacked with Republican-appointed Judges by Presidents Reagan, Bush 41, Bush 43, and Trump at both the District Court and Court of Appeals level. This, after all, is the reason why the lawsuit was filed in Texas,. Whether that means that the conclusion is foreordained is unclear, but don’t be surprised if we end up with an adverse ruling against the PPACA that adopts either the arguments of the states or the arguments of the Trump Administration. From there, it would be up to the Supreme Court to rule once again on the matter. Whether the outcome will be different from what we saw in 2011 will largely depend on the makeup of the Court at that time.

Here’s the Justice Department Brief:

Texas Et Al v United States Et Al DOJ Brief by Doug Mataconis on Scribd