The Trump administration has decided not to defend the Affordable Care Act’s (ACA) individual mandate, or certain provisions it considers to be inseparable from the mandate, from an ongoing constitutional challenge. The U.S. Department of Justice (DOJ) has asked the court hearing the case to declare these provisions invalid as of January 1, 2019.
Source: Michail_Petrov-96
While the individual mandate itself already was effectively nullified by last year’s Tax Cuts and Jobs Act (TCJA), the invalidation of ACA guaranteed issue and community rating provisions could have a substantial impact on the individual insurance market, and possibly the group market as well.
Background
After passage of the TCJA, which zeroed out the “individual shared responsibility” penalty beginning in 2019, 20 states and two individuals filed suit alleging that this change undercut the basis for the U.S. Supreme Court majority’s decision in National Federation of Independent Business (NFIB) v. Sebelius, 567 U.S. 519 (2012).
In the NFIB case, five justices decided Congress could not mandate the purchase of health coverage, but one of them, Chief Justice John Roberts, determined that the individual mandate could still pass muster if it were construed as a tax. Statutes should be construed to survive constitutional challenge if possible, and the mandate “can reasonably be read as a tax” because the shared responsibility payment is to be assessed and collected in a manner resembling a tax, he wrote for the five-justice majority (Roberts himself and the four who thought the ACA individual mandate was constitutional anyway).
The TCJA, enacted in December 2017, repealed the individual shared responsibility payment (26 U.S.C. §5000A(c)) beginning January 1, 2019, but not the mandate itself (26 U.S.C. §5000A(a)). However, according to the plaintiffs in Texas v. United States, No. 4:18-cv-00167-O (N.D. Texas), the mandate can no longer be construed as a tax because it will raise no revenue, so the narrow Supreme Court majority’s rationale for upholding it no longer applies. These states and individuals further argue that the whole of the ACA should be thrown out because it is “inseverable” from the individual mandate.
DOJ’s Position
DOJ agreed with the plaintiffs that the TCJA rendered the individual mandate unconstitutional. “Because Section 5000A(a) can no longer fairly be described as a tax after the TCJA amendment takes effect in 2019, the saving construction adopted by NFIB will no longer be available,” according to the brief filed June 7 by the department. “Instead, Section 5000A(a) must be interpreted per its plain text as a freestanding legal mandate to maintain insurance, which NFIB squarely held exceeds the powers of Congress.”
Unlike the plaintiffs, DOJ did not call for the court to throw out the whole ACA, but it is contending that the provisions on “guaranteed issue” and “community rating” should be held unconstitutional because they are inextricably linked to the individual mandate.
In the findings Congress included with the original ACA, “Congress found that enforcing guaranteed-issue and community-rating requirements without an individual mandate would allow individuals to game the system by waiting until they were sick to purchase health insurance, thereby increasing the price of insurance for everyone else,” DOJ argued. This link was acknowledged by all nine Supreme Court justices in the NFIB decision and, according to DOJ, was not affected by the TCJA because Congress’ original findings “cannot be deemed to have been impliedly repealed by Congress’s mere elimination of the financial penalty.”
DOJ disagreed with the plaintiffs’ call for a preliminary injunction, arguing that no harm is imminent because the statutory change at issue is not scheduled to take effect until January 1, 2019. Instead, the U.S. District Court for the Northern District of Texas “should consider construing Plaintiffs’ motion as a request for summary judgment and then entering a declaratory judgment that the ACA’s provisions establishing the individual mandate as well as the guaranteed-issue and community-rating requirements will all be invalid as of January 1, 2019,” according to DOJ’s brief.
In a June 7 letter to congressional leaders, Attorney General Jeff Sessions explained his unusual decision not to defend the ACA. “As you know, the Executive Branch has a longstanding tradition of defending the constitutionality of duly enacted statutes if reasonable arguments can be made in their defense. But not every professionally responsible argument is necessarily reasonable in this context,” he wrote. “The Department in the past has declined to defend a statute in cases in which the President has concluded that the statute is unconstitutional and made manifest that it should not be defended, as is the case here.”
AHIP Disagrees
The health insurer group America’s Health Insurance Plans (AHIP) took issue with the administration’s stance. “Zeroing out the individual mandate penalty should not result in striking important consumer protections, such as guaranteed issue and community rating rules that help those with pre-existing conditions,” according to an AHIP statement.
“Removing those provisions will result in renewed uncertainty in the individual market, create a patchwork of requirements in the states, cause rates to go even higher for older Americans and sicker patients, and make it challenging to introduce products and rates for 2019,” AHIP added. “Instead, we should focus on advancing proven solutions that ensure affordability for all consumers.”
Provisions Affected
The provisions targeted by DOJ (42 U.S.C. §300gg(a)(1), §300gg1, §300gg3, §300gg4(a)-(b)) cover insurers’ rating of individual and small-group coverage, guaranteed issue to individuals and employers, and prohibitions on pre-existing condition exclusions and health status discrimination by both health insurers and group health plans.
In arguing for the invalidation of these provisions, DOJ focuses on the workings of the individual market, so it is unclear how its reasoning, or ultimately that of a court, would apply to the employer market. The TCJA did not alter the employer mandate or its underlying penalty and, under DOJ’s argument, this mandate is legally severable from the individual mandate and should remain in place.
Intervening States
Meanwhile, 16 states and the District of Columbia have intervened in the litigation to defend the constitutionality of the ACA, including what remains of the individual mandate. In their own June 7 brief, they argue that the individual mandate remains a lawful exercise of Congress’ taxing power. “Continuous production of revenue is not a constitutional requirement for a tax, and the minimum coverage requirement will continue to produce revenue for years to come,” according to the brief filed by California Attorney General Xavier Becerra (D) on the coalition’s behalf.
Even if zeroing out the penalty is found to render the mandate unconstitutional, “under longstanding and controlling Supreme Court precedent, the proper remedy is to strike the unconstitutional amendment and revert back to the prior statutory provision which was upheld in NFIB,” these states added. And the rest of the ACA should be left intact because “the Congress that passed the TCJA expressly and intentionally left the rest of the ACA untouched.”
 David A. Slaughter, JD, is a Senior Legal Editor for BLR’s Thompson HR products, focusing on benefits compliance. Before coming to BLR, he served as editor of Thompson Information Services’ (TIS) HIPAA guides, along with other writing and editing duties related to TIS’ HR/benefits offerings. Mr. Slaughter received his law degree from the University of Virginia and his B.A. from Dartmouth College. He is an associate member of the Virginia State Bar.
Questions? Comments? Contact David at dslaughter@blr.com for more information on this topic. |