The Legal Future of the Affordable Care Act

by Maria D. Garcia | February 2020
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This year, the healthcare industry may expect additional guidance from courts and the federal government regarding the future of the Affordable Care Act (“ACA”). The decisions to be made by a variety of parties – including Congress, the U.S. Supreme Court, Trump administration, and federal district and appellate court – will likely have a resounding effect on the healthcare industry. Specifically, they may have an impact on the future of federal Exchange health plans and also provide direction to the individual States on how to implement the ACA in their respective jurisdictions. Here is a brief review of one of the most recent federal court case being watched by the healthcare industry as well as patients around the country.

In 2019, the Court of Appeals for the Fifth Circuit found that the ACA’s individual mandate was unconstitutional because the mandate could no longer be read as a tax. Texas v. United States, 945 F.3d 355, 372-73 (5th Cir. 2019). In Texas, eighteen states and two individual plaintiffs challenged the constitutionality of the ACA. Under the ACA, the individual mandate requires individuals to maintain health insurance coverage, and if the individuals fail to maintain such coverage, then the individuals must make a payment to the IRS, known as the “shared responsibility payment.” Id. at 370.

This case ensued as a result of recent policy changes made by Congress. As part of the Tax Cuts and Jobs Act, Congress reduced the shared responsibility payment to $0. Based on that change, the plaintiffs in Texas argued that the individual mandate was no longer constitutional because its constitutionality rested on reading the provision as a tax, and the Tax Cuts and Job Act undermined the ability to characterize the individual mandate as a tax because it no longer generates revenue. Id. at 373.

The Fifth Circuit in Texas agreed with the plaintiffs. Id. at 390. Specifically, the individual mandate cannot be construed as a tax because it no longer produces “at least some revenue for the Government.” Id. This also means that the mandate is no longer paid into the treasury, nor is it determined by factors such as taxable income, nor does the IRS collect the payment in the same manner as taxes. Id. Importantly, the Fifth Circuit also found that the case presented a live case or controversy. Id. at 369.

The District Court in Texas held that the individual mandate was unconstitutional and that it could not be severed from any other part of the ACA. Id. at 393. On appeal, the Fifth Circuit in Texas remanded the case for the District Court to explain with more precision what provisions of the post-2017 ACA are inseverable from the individual mandate and to consider the government’s argument that any order prohibiting enforcement of the ACA should extend only to provisions that injure the plaintiffs and that only apply in the plaintiffs’ states. Id.

After this Court ruling, California and the House of Representatives filed petitions for a writ of certiorari for the U.S. Supreme Court to review the Fifth Circuit’s decision; and the case is on-going. In addition, they asked the Court to proceed on an expedited basis to have the case argued and decided by June of 2020; while the plaintiffs in Texas asked that the U.S. Supreme Court allows the lower court to decide on severability first.

If the U.S. Supreme Court decides to hear this matter, we may expect a decisive opinion regarding the constitutionality of the ACA and whether you can sever the rest of the legislation from the individual mandate, in light of the Tax Cuts and Jobs Act. We will then see how the legislative and executive branches and the individual States may react to any decisions rendered by the U.S. Supreme Court.