Pension & Benefits News Supreme Court will review ACA individual mandate case
Monday, March 9, 2020

Supreme Court will review ACA individual mandate case

By Pension and Benefits Editorial Staff

The Supreme Court has agreed to review the Fifth Circuit’s ruling that found the Affordable Care Act’s (ACA) individual mandate unconstitutional. The court granted certiorari for two petitions, consolidating the cases for one hour of oral argument next fall.

Background. The ACA contains a provision giving individuals a health care choice. They can either purchase health insurance or they can pay to the IRS what is called in the law a "shared responsibility payment." The mandate was written into the law to broaden the health insurance risk pool to include the young and healthy, who would otherwise wait until an injury or illness to buy health insurance. Numerous efforts by Republican congressmen to repeal the law failed.

Separately, ACA opponents filed lawsuits for the same effect, with one reaching the Supreme Court in National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012). In that case, Chief Justice Roberts joined with the four more liberal justices to rule that the ACA was constitutional on the ground that the "shared responsibility payment" was, in effect, a tax, and, therefore, a proper exercise of Congress’s taxing powers. In so ruling, Chief Justice Roberts, joined by none of the more liberal justices, rejected arguments that Congress had authority under the Interstate Commerce Clause or the Necessary and Proper Clause to enact the shared responsibility payment.

Legislation. In 2017, the Republican Congress enacted the Tax Cuts and Jobs Act, which included a provision amending the ACA to zero out the shared responsibility payment. Thus, the payment remained on the books but the amount to be paid to the IRS was always $0. Shortly thereafter, two private citizens and 18 Republican-controlled states filed suit against the U.S. to have the ACA declared unconstitutional on the ground that the shared responsibility payment was no longer a tax because it was set at $0. At this point, the positions became murky because the defendant U.S., now under President Trump, agreed with the position taken by the 18 plaintiff states. As a result, 16 Democrat-controlled states, plus the District of Columbia, intervened in the case to try to save the ACA.

District court ruling. The Texas district court ultimately ruled that (1) all the various parties had standing, (2) the individual mandate was now unconstitutional, and (3) the individual mandate was inseverable from the rest of the ACA, thus rendering the entire ACA invalid. The decision was stayed pending appeal, which the 16 intervenor states did, to the Fifth Circuit. On appeal, the Democrat-led U.S. House of Representatives also intervened to defend the ACA.

Fifth Circuit decision. In December 2019, the Fifth Circuit upheld the district court decision holding the ACA’s individual mandate to be unconstitutional but remanded the case to determine whether the individual mandate is severable from the ACA without the entire law becoming invalid. The Fifth Circuit agreed with the lower court’s determination that the individual mandate was no longer a constitutional exercise of congressional power. Now that the shared responsibility payment is set at $0, the taxing authority, on which the individual mandate formerly stood, is no longer applicable. The court was also tasked with determining whether the ACA could survive without the individual mandate; however, it found that the lower court failed to "explain with precision" how particular portions of the ACA as it existed post-2017 were dependent on the constitutionality of the individual mandate. The Fifth Circuit instructed the lower court to "employ a finer-toothed comb" on remand into which provisions of the ACA Congress intended to be inseverable from the individual mandate.

Issues on appeal. In January 2020, the states defending the mandate and the House of Representatives filed a petition asking the court to review the Fifth Circuit’s decision. In February 2020, the federal government, Texas and the other states challenging the mandate filed a cross-petition. The issues on appeal are:

  1. whether the individual and state plaintiffs in this case have established Article III standing to challenge the minimum-coverage provision in Section 5000A(a) of the ACA,
  2. whether reducing the amount specified in Section 5000A(c) to zero rendered the minimum-coverage provision unconstitutional, and
  3. if so, whether the minimum-coverage provision is severable from the rest of the ACA.

The court also granted review of Texas’ cross-petition, which presents the issue of whether the district court properly declared the ACA invalid in its entirety and unenforceable anywhere.

SOURCE: California v. Texas, No. 19-840, and Texas v. California, No. 19-1019, cert. pet. granted, March 2, 2020.

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