8 minute read
Supreme Court Considers Constitutional Challenge on the Affordable Care Act
Peter W. Thomas, JD, Principal, Powers Pyles Sutter & Verville, PC
On November 11, 2020, the U.S. Supreme Court heard its third major case challenging the constitutionality of the Patient Protection and Affordable Care Act (ACA). California v. Texas (Docket No. 19-840), questions whether the entire ACA should be struck down because Congress, in 2017 tax cut legislation, eliminated the tax penalties for failure to comply with the individual insurance mandate, referenced in the ACA text as integral to the law. Without the tax penalty, the argument states, the constitutionality of the law cannot be based on Congress’ power to tax its citizens and, therefore, the entire law must be struck down.
The case was brought by a group of Attorneys General from 18 Republican-led states1 and argued by the Texas Solicitor General. In an unusual twist, the U.S. Department of Justice (DOJ) joined the case with Texas, though the federal government typically defends the laws of the United States before the court. However, in this case the DOJ argued that the ACA should be invalidated. As a result, a group of Attorneys General from Democrat-led states2 obtained permission from the court to intervene and defend the law, joined in oral arguments by counsel for the U.S. House of Representatives, another unusual development.
History of ACA Challenges Previous challenges to the ACA in 2012 and 2015 resulted in landmark decisions that preserved the sanctity of the law. In National Federation of Independent Business v. Sebelius, the Supreme Court held that the mandate to purchase health insurance under the ACA was constitutional, not under the interstate commerce clause, but under the taxing power afforded to Congress. The case also established that the ACA Medicaid expansion policy was coercive, as written, and that states had to have a meaningful choice in expanding Medicaid without risking the loss of federal matching funds for their existing Medicaid program. The majority opinion was written by Chief Justice John Roberts, considered part of the conservative block of Justices, but who joined with the liberal wing of the Court to produce a 5-4 decision in the case.
In 2015, King v. Burwell reached the Supreme Court and, again, the Court decided by a vote of 6-3 to preserve the financial subsidies provided to low income enrollees in the state and federal exchanges (marketplaces), though the text of the ACA appeared to limit subsidies to state exchanges only. Finally, in 2017, the Senate came within one vote of repealing the ACA, but the late Sen. John McCain (R-AZ) cast the deciding vote to maintain the law, dealing a major blow to then President Trump.
1 The respondents include the states of TX, AL, AR, AZ, FL, GA, IN, KS, LA, MS, MO, NE, ND, SC, SD, TN, UT, and WV, along with two individual plaintiffs living in TX. The petitioners include the states of CA, CO, CT, DE, DC, HI, IL, IA, KY, MA, MI, MN, NV, NC, NJ, NY, OR, RI, VA, VT, and WA.
The Scope and Importance of the ACA The complexity of invalidating the entire ACA cannot be overstated. Fully implemented for 10 years, the ACA forms the basis for how private insurance markets function. Nearly 23 million Americans receive health insurance coverage through either the ACA exchanges or expanded Medicaid programs (split nearly evenly between the two mechanisms). All but about a dozen states have expanded their Medicaid programs to date, and this year voters in two states, Missouri and Oklahoma, approved initiatives to expand their state Medicaid programs under the ACA, bringing the total number of Medicaid expansion states to 39 (including Washington, DC).
The law seeks to cover as many Americans as possible (i.e., universal coverage) coupled with a prohibition against discrimination in the private insurance market. This includes guaranteed issue and renewal, protections against pre-existing condition exclusions, community rating of premiums, essential benefits packages, premium subsidies for those with lower incomes, prohibitions on annual and lifetime insurance limits and many other insurance protections. The law is designed to have private plans compete against each other in structured marketplaces to keep costs as low as possible.
As important as the insurance provisions and Medicaid expansions are to the law, the ACA implemented numerous health reforms that are now engrained in the current health care system. These include value-based care by linking payment with performance, focus on chronic disease and disparities, encouraging use of medical homes, improvements to public health, enhancing the health care workforce, addressing fraud and abuse, reauthorizing the Older Americans Act, and creating and funding the Patient-Centered Outcomes Research Institute. In short, it would be nearly impossible to extricate the ACA from the American health care system.
The Case Pending Before the Court Filed in February 2018, California v. Texas made its way through a District Court in Texas to the Fifth Circuit Court of Appeals. The judges at both levels held that, without a tax penalty, the constitutional premise of the ACA individual mandate was no longer valid. They argued, therefore, the individual mandate must be struck down. And because the ACA legislative history (and even some of the legislative text) asserts that the individual mandate is integral to the functioning of the entire law, including pre-existing condition protections and all the insurance protections, the whole 1,000-page law would have to be struck down as well. The impact of this ruling was “stayed” while the case moved to the US Supreme Court.
The arguments in California v. Texas focuses on three main issues, whether the individual and state plaintiffs have “standing” (i.e., capacity to sue under the law), the merits of the case itself, and whether the individual mandate, if deemed unconstitutional, can be severed from the remainder of the massive law while preserving the ACA.
Standing The standing issue raised concerns with some of the Justices. Standing ensures that the person suing has suffered sufficient harm by the offending law, which a favorable court decision can redress. The Texas Solicitor General set forth seven ways that the ACA harmed Texas by forcing the state to pay a share of Medicaid expenses if it chose to expand its Medicaid population, the other states, and two individual Texas citizens. Additional harm included the mandate imposed on individuals to purchase insurance that covers essential benefits when they wanted only to purchase lesser coverage at lower cost. The arguments did not appear to persuade several Justices on the standing issue, but it was unclear whether a majority would dismiss the case based on standing. Failure to meet the standing requirement would be the easiest way for the Court to rid itself of the case.
Constitutionality of the Individual Mandate On the merits of the case, Justices asked several questions of counsel directed at the taxing power, questioning whether the law would be constitutional in the absence of a tax penalty for failing to comply with the individual mandate. Justice Roberts expressed some degree of impatience that the question of ACA constitutionality was again before the Court. In telling remarks, he noted that those who wished the Court to invalidate the law were essentially asking the Court to do the work of Congress.
Other Justices noted that the absence of a current penalty for failure to comply with the individual mandate does not mean the law is inappropriately based on Congress’ taxing authority, as Congress could decide at a future time to impose a tax penalty for failure to comply with the mandate.
Severability Even if the Court finds the ACA individual mandate is unconstitutional, the issue of severability could determine the fate of the overall law. Three interesting lines of questioning, all by conservative Justices, suggested a willingness to sever the mandate and maintain the larger law. Justice Roberts stated that Congress passed the 2017 tax law eliminating the individual mandate tax but did not even try at that point to repeal the law itself. He noted this was persuasive evidence that Congress intended the law should remain in effect.
Justice Samuel Alito, a solid conservative vote on the Court, stated that since the 2017 law eliminating the tax penalty, the ACA marketplaces have been stable. He suggested that it appears the individual mandate is not integral to the overall design of the law and that the subsidies and generous benefits offered under ACA plans and Medicaid expansion states incentivize Americans to sign up for coverage. This suggests an openness to severing the individual mandate from the rest of the law, if deemed unconstitutional.
In addition, Justice Brett Kavanaugh, another conservative Justice, fairly explicitly stated that he believed this was a strong case under the legal precedents on severability. With three liberal Justices remaining on the Court, only two conservative Justices would have to join the liberal block for the ACA to survive. Although oral arguments during a Supreme Court hearing are traditionally unreliable indicators of how the Court may ultimately decide, the oral arguments and reaction of constitutional scholars indicate the ACA may survive yet another existential challenge.
Impact of the Court’s Decision A decision in the case is not expected until 2021 and could come as late as next June. If the case successfully strikes down the entire ACA, the decision would cause chaos in the health care sector. Congress would need to intervene to restore fundamental elements of the law. Given the partisan environment and passion around health care issues, the prospects of this occurring are unclear. If unsuccessful, the case may represent the final attempt to legally or legislatively invalidate the law. The ACA has gained popularity over the past decade and many millions of Americans now seem to recognize its importance in their lives and the lives of their families.
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