NewsFlash: Texas v. United States
The Patient Protection and Affordable Care Act (the “ACA”) has survived two trips to the U.S. Supreme Court. It now appears as though a third is likely.
At the end of last week, on December 14, 2018, the U.S. District Court for the Northern District of Texas granted partial summary judgment for the plaintiffs in Texas v. United States1 and held that following the passage of the Tax Cuts and Jobs Act of 2017 (the “TCJA”), the ACA has been rendered unconstitutional. The basis of the court’s decision was that (i) the ACA’s individual mandate is not valid as an exercise of congressional power under the Constitution’s commerce clause and was valid only as an exercise of Congress’s taxing power as manifested by the ACA’s shared-responsibility payment, (ii) the TCJA, by eliminating the shared-responsibility payment, eliminated the constitutional basis for the individual mandate, and (iii) the remainder of the ACA is inseverable from the individual mandate, thereby rendering the entirety of the ACA unconstitutional.
By way of brief background, the ACA became law on March 23, 2010. The ACA on its face contains a requirement (referred to as the “individual mandate”) that individuals maintain health insurance that provides minimum essential coverage. The ACA required those who are subject to the individual mandate to pay a “shared-responsibility payment” if they do not maintain the applicable insurance. In National Federation of Independent Business v. Sebelius (“NFIB”),2 the Supreme Court held that the ACA’s individual mandate was beyond Congress’s power under the Constitution’s commerce clause, but that the combination of the individual mandate and the shared-responsibility payment operated as a valid exercise of Congress’s taxing power under the Constitution.
On December 22, 2017, the TCJA was signed into law. In the TCJA, Congress reduced the ACA’s shared-responsibility payment to zero, effective January 1, 2019.
In Texas v. United States, 19 states and several individuals commenced an action seeking a determination that the individual mandate, in light of TCJA’s elimination of the shared-responsibility payment, as amended by the TCJA, has been rendered unconstitutional, and that the remainder of the ACA is inseverable from the individual mandate and is therefore unconstitutional as well. The plaintiffs reasoned that because the TCJA eliminated the shared-responsibility payment, the tax-based reasoning of NFIB no longer applies as a constitutional justification for the individual mandate, leaving it without a valid constitutional basis.
On June 7, 2018, then-U.S. Attorney General Sessions sent a letter to Paul Ryan, Speaker of the U.S. House of Representatives, agreeing with the Texas plaintiffs and informing Mr. Ryan that the U.S. Department of Justice would not defend the constitutionality of the individual mandate and would argue that certain provisions of the ACA were inseverable from the individual mandate.3
The District Court determined in Texas v. United States that, because “the Individual Mandate no longer ‘triggers a tax’ beginning in 2019, . . . the saving construction articulated in NFIB is inapplicable and the Individual Mandate cannot be upheld under Congress’s Tax Power.”4 The District Court then went on to hold, relying on, among other things, certain statements of Congressional intent expressly set forth in the ACA itself, that the individual mandate is inseverable from the entire ACA, because the “‘Legislature would not have enacted’ the ACA ‘independently of’ the Individual Mandate.”5 Thus, the entire ACA was held to be unconstitutional.
The District Court granted the plaintiffs partial summary judgment, but it denied their request for an injunction to stop the enforcement of the ACA. Thus, although the ACA continues to be in effect for now, its ultimate fate is presently unclear.
While some are viewing the District Court’s opinion dismissively, the case should arguably not be taken lightly and it may well be too early to assume that the ACA is safe from this challenge.6 The decision is thoughtful and detailed, and there appear to be good and reasonable arguments both for and against the District Court’s holding that the ACA is unconstitutional. The case should be watched carefully by the many affected individuals, providers, institutions and advisors that have an interest in the critical issues surrounding health care in America.
If you would like to discuss the Texas v. United States decision, please contact any of the Dechert attorneys listed below or any Dechert attorney with whom you regularly work.
Footnotes
1) No. 4:18-cv-00167 (N.D. Tex. Dec. 14, 2018).
2) 567 U.S. 519 (2012).
3) It is noted, however, that Mr. Sessions stated that the U.S. Department of Justice would continue to argue that the individual mandate is severable from those provisions of the ACA other than the guaranteed issue and community rating provisions.
4) Texas, slip. op. 27.
5) Texas, slip. op. 51 (quoting Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 684 (1987)).
6) Only earlier this year, a key Obama-era initiative was struck down by the courts. In Chamber of Commerce v. Department of Labor, 885 F.3d 360 (5th Cir. 2018), the U.S. Court of Appeals for the Fifth Circuit vacated the Department of Labor’s amended fiduciary rule. While the procedural posture was quite different in that case, the case may be a recent object lesson for those who would too-lightly regard a decision like the one in the Texas case.
