Fifth Circuit Sends Affordable Care Act Case Back to the District Court, Prolonging Uncertainty
On December 18, 2019, while many Americans were transfixed by the congressional vote on impeachment or preoccupied with holiday parties, the United States Court of Appeals for the Fifth Circuit issued its long-awaited decision in Texas v. United States. It affirmed the district court’s judgment finding the Affordable Care Act’s (ACA) individual mandate unconstitutional, but sent the case back to the lower court to reconsider how much, if any, of the remainder of the ACA should be invalidated. The Fifth Circuit’s decision leaves the fate of the ACA uncertain, quite likely through the 2020 elections.
The lawsuit was filed in 2018 by Texas and 19 other Republican state attorneys general, who were joined soon thereafter by two individuals (Neill Hurley and John Nantz). The lawsuit is based on three propositions: 1) a majority of the Supreme Court in 2012 asserted that Congress lacked constitutional authority to impose the ACA’s individual mandate as a legal requirement but constitutionally imposed it as a tax; 2) the 2017 Tax Cut and Jobs Act reduced the tax to $0, making the provision no longer constitutional as it is no longer a tax; and 3) without the individual mandate the rest of the ACA is invalid, because the “findings” accompanying the mandate assert that the mandate is “essential to creating effective health insurance markets.” Judge Reed O’Connor of the United States District Court for the Northern District of Texas agreed with this argument and in December of 2018 invalidated the entire ACA.
The United States Department of Justice (DOJ) initially agreed with the plaintiffs that the mandate was unconstitutional but argued that only the provisions of the ACA protecting individuals with preexisting conditions should be invalidated. On appeal, however, the DOJ changed its position, arguing that the entire ACA should be invalidated. It then changed its mind again, arguing that only those provisions that directly affect the plaintiffs should be stricken.
Standing and the Constitutionality of the Mandate
The lengthy Fifth Circuit majority opinion was written by Judge Jennifer Walker Elrod, joined by Judge Kurt D. Engelhardt, both Republican appointees. A vigorous dissent was filed by Judge Carolyn Dineen King, a Democratic appointee.
The majority opinion addresses the four issues raised by the case. First, the court held that the California group could appeal the lower court’s decision. The United States government had appealed and the California group had demonstrated that they would be adversely affected if the court affirmed the lower-court decision.
Second, the majority affirmed Judge O’Connor’s ruling that the individual plaintiffs had “standing” to sue. It held that they were forced to purchase insurance to comply with the mandate and thus had suffered a judicially cognizable injury. The majority went on to hold that the Texas group also could sue, a finding that Judge O’Connor had not reached. Judge King in dissent pointed out that any injury to the individual plaintiffs was self-inflicted, as there were no legal consequences of failing to buy insurance once the penalty was zeroed out. She also opined that the state plaintiffs were not injured in any way by the toothless mandate.
Third, the majority held that the individual mandate was unconstitutional. Chief Justice Roberts’ 2012 NFIB opinion had determined that the mandate was unconstitutional as a legal requirement, but he upheld it as a tax. With the tax zeroed out, the Fifth Circuit majority found, the mandate was simply unconstitutional. In dissent, Judge King pointed out that with the tax zeroed out, the mandate was not unconstitutional, it was inconsequential. If the plaintiffs continued to buy insurance, it was simply their own choice.
How Much of the ACA Is Invalid?
Having disposed of those three issues, the majority reached the central issue of the case — if the mandate goes, what else goes with it? Judge O’Connor had held in a superficial analysis that all 900 pages of the statute must be invalidated. Pointing to legislative findings in the 2010 ACA that the mandate was “essential” to other insurance reforms, O’Connor concluded that the entire remaining ACA could not be “severed” from the mandate.
The majority opinion concluded that O’Connor’s analysis was too facile. It urged him to go back over the entire statute with a “finer-toothed comb.” O’Connor had not adequately considered either Supreme Court and Fifth Circuit precedent counseling caution in invalidating too much of a statute when a single section is invalid. He had also given too little thought to what Congress had done in 2017 when it left the remainder of the ACA in place as it zeroed out the individual responsibility tax. The majority also urged O’Connor to consider the new position of the DOJ, which had argued that only provisions should be invalidated that directly affected the plaintiffs. The court vacated Judge O’Connor’s judgment invalidating the remainder of the ACA and sent the case back to reconsider his severability ruling.
Judge King was sharply critical of this decision. She argued that the appellate court should itself decide how much of a statute can be severed from an invalid provision; the trial court has no special competence here. Moreover, the “findings” in the ACA in 2010 had nothing to do with severability, but rather with whether the mandate provision was justified by Congress’s power to regulate commerce. Congress clearly did not mean to repeal the entire ACA when it zeroed out the penalty in 2017.
Judge King concluded: “Limits on judicial power demand special respect in a case like this. . . . [T]he legitimacy of the judicial branch as a countermajoritarian institution in an otherwise democratic system depends on its ability to operate with restraint . . . . The district court’s opinion is textbook judicial overreach. The majority perpetuates that overreach and, in remanding, ensures that no end for this litigation is in sight.”
What Happens Next?
California has stated that it is prepared to request the Supreme Court to review the Fifth Circuit decision. It only takes four Justices to decide to review a case, so it is possible the Court will take it. But normally it takes months for a case to make its way through the Court. The last day for oral arguments this term is April 29, 2020. The case may not be decided this term, although the Court can move quickly in reviewing a case it deems urgent. In the meantime, the case will go back to Judge O’Connor who, given past rulings, will likely invalidate as much of the ACA as he can. Then it would bounce back to the Fifth Circuit, and likely to the Supreme Court, in 2021 or 2022.
The future of the ACA remains in limbo. The district court decision was vacated, so the ACA remains the law of the land. Anyone who has signed up for coverage for 2020 (or who signs up in state marketplaces that remain open) will be covered. In a statement harshly critical of the ACA, President Trump said the decision would not “alter the current health care system.” But the continued uncertainty around the survival of the ACA will no doubt affect consumers, insurers, providers, states, and even biosimilar manufacturers, who may lose Food and Drug Administration approval authority if the ACA is invalidated.
In the interim there, we will have elections in 2020 for the president, congress, and state governors and attorneys general. Although for now the future of the ACA remains in the courts, the attorneys general who brought it there and the president who refused to defend it will have to answer to the voters.