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Court Decision to Invalidate the Affordable Care Act Would Affect Every American

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On December 14 — the eve of the final day of the 2019 open-enrollment period — Texas federal court Judge Reed O’Connor delivered a judgment purporting to accomplish what Republicans in Congress had failed to do and what the Supreme Court had twice refused to do: invalidate the Affordable Care Act.

The case, Texas v. Azar, was brought by attorneys general or governors from Texas and 19 other Republican states, as well as two individuals, in February 2018. Texas argued that when Congress reduced the individual mandate penalty amount to zero in the 2017 Tax Cut and Jobs Act, it rendered the individual mandate unconstitutional and the remainder of the ACA invalid. In April, the plaintiffs asked Judge O’Connor to enter an injunction, or court order, blocking the operation of the ACA. The U.S. Department of Justice responded — to the surprise of everyone including apparently its own attorneys — by agreeing that the preexisting condition protections of the ACA were invalid. The administration, however, defended the rest of the law. California’s attorney general and 16 other Democratic attorney generals then intervened to defend the law in its entirety.

Judge O’Connor’s Reasoning

Judge O’Connor refused to grant an injunction, instead entering a “partial summary judgment” declaring the ACA invalid. That is to say, he ruled on one of the plaintiffs’ claims, stating his opinion as to the validity of the ACA. He did this despite California’s objection to his entering a summary judgment without giving the Democratic attorneys general an opportunity to address further issues summary judgment would raise.

The logic of Judge O’Connor’s decision is simple and straightforward, but clearly wrong. He first observed, correctly, that the Supreme Court in 2012 had held that the ACA’s requirement that individuals be insured was unconstitutional as a legal requirement but permissible as a tax. Judge O’Connor next ruled that because the 2017 tax cut act had reduced this tax to zero, the individual responsibility requirement is no longer valid as a tax and is entirely unconstitutional.

Chief Justice Roberts had indeed held in 2012 that Congress could not require individuals to buy health insurance. Roberts further held, however, that Congress had in fact offered individuals a choice to be insured or to pay a tax. With a zero tax, individuals are wholly free of any requirement to be insured so there is no constitutional problem. Judge O’Connor’s initial ruling on constitutionality is, therefore, based on a misreading of the Supreme Court’s decision.

O’Connor’s next step, however, was his boldest, and most questionable. Interpreting language in the individual responsibility section of the ACA, he held that the requirement was “essential” to the entire remainder of the ACA. Without the requirement, he concluded the remaining 900 pages and hundreds of sections of the ACA are invalid. He largely ignored the limited scope of what Congress itself had done in zeroing out the individual responsibility tax in 2017. Statements by Republican Senators both before the tax legislation and after the Trump administration failed to defend the law in Texas v. Azar establish that Congress had no intention of repealing any other sections of the ACA when it zeroed the tax. O’Connor also ignored settled law on “severability” of unconstitutional provisions of a law, which normally counsels a court to do as little damage as possible to the underlying law.

The Decision’s Sweeping Potential Effects

Judge O’Connor’s decision shows only a limited understanding of the sweeping damage his judgment will do if it is not reversed. Of course, it would invalidate the protections of the current law against discrimination by insurers based on preexisting conditions — something the Trump administration, Republican candidates for the 2018 midterm elections, and members of Congress who voted for the tax bill said they did not want to do. But it would also invalidate many other protections that apply to Americans, including the majority who have employer coverage, such as required coverage of preventive services without cost sharing, prohibitions on annual or lifetime dollar limits, coverage of children up to age 26, and limits on out-of-pocket cost sharing.

It would invalidate the Medicaid expansions, throwing millions of Americans off Medicaid, but would also invalidate Medicaid coverage for children aging out of foster care, expansion of Medicaid community care options for long-term services, and simplification of Medicaid eligibility. The ruling would also eliminate what O’Connor characterized as “minor provisions” of the ACA: expansion of Medicare preventive services requirements and possibly expansion of Medicare drug coverage in the “donut hole.” Invalidation of the ACA would cause numerous changes in payment for Medicare providers, possibly pitching the Medicare program into chaos. The ruling would also invalidate taxes that finance the Medicare program.

Judge O’Connor’s decision, if upheld, would end Food and Drug Administration authority to approve generic biologics. It would impede fraud and abuse enforcement, including the enforcement authority of the Department of Labor against association health plans, which have a history of fraud and insolvency. It would end privacy protections for nursing mothers and disclosure requirements for fast food. The ruling would also invalidate extensive changes the ACA made to the Indian Health Service.

In sum, O’Connor’s judgment would adversely affect virtually all Americans, regardless of the type of health care coverage they have.

Next Steps

Judge O’Connor’s decision will certainly be appealed, at least by California, and will likely be blocked from going into effect. It will very likely be reversed by the Fifth Circuit Court of Appeal, and almost certainly by the Supreme Court if it gets that far. But it is still likely to cause untold confusion. The final day of open enrollment usually sees thousands of Americans apply for marketplace coverage. How many may have foregone applying, believing that the ACA is no longer in effect — even though the Center for Medicare and Medicaid Services sent out an email saying that the decision would not affect 2019 coverage? This is a deeply irresponsible decision and will do untold damage to the American health care system, even though it is likely to be ultimately reversed.

Publication Details

Publication Date: December 17, 2018
Contact: Timothy S. Jost, Emeritus Professor, Washington and Lee University School of Law
Citation:

Timothy S. Jost, “Court Decision to Invalidate the Affordable Care Act Would Affect Every American,” To the Point (blog), Commonwealth Fund, Dec. 17, 2018. https://doi.org/10.26099/82W5-3427

Experts

Emeritus Professor, Washington and Lee University School of Law