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ACA’s individual mandate under fire in Texas v. U.S. appeal
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Category: ACA, 2017 Tax Cuts and Jobs Act, individual mandate

ACA’s individual mandate under fire in Texas v. U.S. appeal

07.09.19

Since its inception, the Affordable Care Act (ACA) has faced persistent challenges and litigation seeking to render it invalid. The most recent of those challenges will take place this week as Texas v. U.S. is heard before the 5th Circuit Court of Appeals.

Under fire, in particular, is the individual mandate, a feature of the ACA which the 2017 Tax Cuts and Jobs Act (TCJA) mitigated by removing the financial penalty for individuals choosing not to maintain a minimum level of health insurance coverage.

As determined by the Texas trial court, the removal of the financial penalty undermines the language of the ACA, which originally upheld that the penalty was constitutional as an act of taxation by Congress. Under the ACA, if an individual chose to opt out of coverage, the financial penalty for that decision would be paid to the IRS.

Now that the financial penalty has been removed, or more specifically the shared responsibility payment has been set at $0, the trial court found that the individual mandate is no longer an act of taxation since the penalty does not and will not produce the federal government “at least some revenue.” Because the individual mandate was described as “essential” to the ACA when enacted in 2010, the Texas court went on to find the entire law invalid.

Though the trial court ruled the ACA should be invalidated, the Trump administration has made clear it will be enforcing the law while the appeal is pending. 

A group of 18 states led by Texas, referred to as “state plaintiffs” in court briefings, is behind this challenge, as well as two individual plaintiffs. Another group of 17 states, referred to as “state-intervener-defendants,” has been defending the ACA, led by California. To see which states are involved, as well as the status of the rest of the states, view this map from Kaiser Family Foundation.  

In order for the case to proceed, the parties must establish standing. Standing proves there is an actual case or controversy for the court to address and is essential in proving the court has jurisdiction. In light of the requirement for standing, the individual and state plaintiffs submitted a reply to the Fifth Circuit following the Supreme Court’s recent decision in Department of Commerce v. New York concerning the 2020 census. The plaintiffs find that the decision supports their standing in Texas, while the House disagrees and submitted its own response disputing the plaintiffs’ arguments.

If both the plaintiffs and defendants are deemed by the court to have standing, which is itself a major debate, then the court will need to determine if the individual mandate, without its financial penalty, is still constitutional. If the court finds the mandate unconstitutional, the next question will be whether or not the individual mandate is severable from the rest of the ACA. If it is not severable, this would mean ruling the entire ACA unconstitutional.

If the individual mandate is found unconstitutional but severable, the impact will be minimal. Things will remain largely how they are now – no penalty for choosing not to have health insurance. However, if the ACA were ruled unconstitutional, it would mean major changes to the country’s healthcare landscape, impacting nearly every American.

Among many other things, the ACA expanded Medicaid eligibility for low-income adults; required protections in the individual market for people with pre-existing conditions; expanded the list of preventive services covered without cost-sharing by Medicare, Medicaid and private insurance; approved tax increases to allow for these changes; and created initiatives to improve public health across the country. The Trump administration has said it will address these issues independent of the outcome of this case.

The oral arguments are scheduled for July 9 in New Orleans. The plaintiffs and defendants will each have 45 minutes to present their side to a panel of three judges. No deadline has been placed on the court’s decision.

For more information, access the individual plaintiffs’ opening brief and the state defendants’ opening brief. A summary of the judgment from Texas v. U.S. is available here.

Heather Botting contributed to this report.





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