By Laura K. Clayman
A very important decision rests in the hands of the United States Fifth Circuit Court of Appeal. On July 9, a 3-judge panel heard 90 minutes of oral argument in Texas v. U.S., the Affordable Care Act (ACA) case that could declare the entire ACA unconstitutional!
To better understand Texas v. U.S., it’s helpful to take a look back at some of the related match-ups.
Round 1 – National Federation of Independent Business v. Sebelius
Texas v. U.S. isn’t the ACA’s first step into the constitutionality ring! In 2012, the United States Supreme Court upheld the constitutionality of the individual mandate, the ACA provision requiring Americans to purchase health insurance or pay a tax penalty. States that challenged the ACA argued that the individual mandate was an overreach of Congress’s power to regulate certain economic activity between the states, known as the Commerce Clause. The Court agreed that the individual mandate was not within Congress’s commerce power, but found the individual mandate to be constitutional because the penalty attached to it was a tax, and not a criminal punishment for an illegal action. Thus, the ACA was found to be constitutional under Congress’s power to tax.
Round 1 goes to the ACA!
Round 2 – The Tax Cuts and Jobs Act (TCJA)
In December 2017, following numerous unsuccessful attempts to repeal the ACA, the Trump Administration passed the Tax Cuts and Jobs Act (TCJA) and dealt a serious blow to the ACA. The TCJA reduced the tax penalty of the individual mandate to zero dollars beginning January 1, 2019, effectively eliminating the individual mandate provision.
Round 2 goes to the ACA’s opponents!
Round 3 – Texas v. U.S. – District Court ruling
On December 14, 2018, a Texas federal district court ruled that the entire ACA is invalid due to the elimination of the individual mandate. The court agreed with the plaintiffs’ arguments that without a tax penalty, the individual mandate is now unconstitutional. Further, the district court found that the individual mandate is too integrally intertwined with the rest of the ACA to be severed, relying on the fact that Congress called the individual mandate “essential” to the ACA and necessary to cover the cost of U.S. health care. And if the individual mandate is unconstitutional, the entire ACA is unconstitutional!
Soon after, the district court issued a stay on the ruling and allowing all provisions of the ACA to remain in place pending the appellate court’s decision.
Round 3 goes to the ACA’s opponents!
Round 4 – The Fifth Circuit Arguments – the Main Event!
Seventeen states have joined Texas, along with two individual Texans and the Department of Justice (DOJ), in the argument to invalidate the entire ACA. There are 21 states led by California and joined by the U. S House of Representatives defending the ACA.
It’s worth mentioning that the DOJ is dancing all over the ring in this fight! Prior to Texas vs. U.S., the DOJ’s position was that the ACA is the law of the land and should be upheld. Later, while it supported the Texas plaintiffs at the district court level, it did not advocate striking down the entire ACA as unconstitutional. Instead, the DOJ only requested that the court invalidate the individual mandate and the ACA’s provisions on guaranteed issue, community rating, ban on preexisting condition exclusions, and discrimination based on health status. Prior to appeal, the DOJ feinted again and filed a two-sentence letter stating unequivocally that it now seeks to have the Fifth Circuit affirm the district court’s decision and invalidate the entire ACA. But at the appellate level, the DOJ argued that certain provisions of the law should survive, or even more puzzling, that possibly all provisions should be struck down in only the states that joined the original challenge, but the ACA should intact remain in the states that are defending the law.
The appellate court asked the parties to address three main questions: (1) whether the parties have standing to argue these issues before the court; (2) whether the individual mandate is constitutional without the tax penalty; and (3) if the answer to (2) is ‘no’, whether that makes the entire ACA unconstitutional.
Will this be a knock out?
The Fifth Circuit did not give a clear indication of which way it was leaning during the argument. Instead, the judges asked a great many questions – some relating to the question of standing (did the ACA defenders suffer a concrete injury that a ruling in their favor would redress), whether Congress intended for the ACA to exist without the individual mandate, and whether Congress could remedy this situation by writing a new health law.
The Fifth Circuit indicated that a ruling would likely come in early fall. If the court upholds the district court decision, the case will likely go to the Supreme Court. It’s not as clear if the Supreme Court will take up the case if the court overturns the ruling and declares the ACA constitutional.
If the ruling is allowed to stand, the consequences are more significant than some realize. The individual mandate and accompanying employer mandates would be eliminated, but the following provisions would also cease to exist:
- Requirement for children to be allowed on their parents’ plan up to age 26;
- Subsidies in the Health Insurance Marketplaces – and even the Marketplaces themselves;
- Federal subsidized Medicaid expansion;
- Protections for pre-existing conditions;
- Limitations on waiting periods;
- Prohibition on annual or lifetime limits of available coverage; and
- Required coverage of preventive services with no cost sharing.
And of course, eliminating the ACA means that millions of Americans could lose health care coverage. While we waiting for the final bell to ring on Texas v. U.S., the ACA remains in place and the only certainty is that the healthcare fight still rages on.
McGriff Insurance Services
ERISA & Employee Benefits Compliance Officer