HR Management & Compliance

District Court Finds Entire ACA Unconstitutional

A federal district court ruled that the entire Affordable Care Act (ACA) is unconstitutional because Congress’ recent repeal of the individual mandate penalty undermined the U.S. Supreme Court’s rationale for upholding the law in 2012.

Source: Michail_Petrov-96

However, the U.S. District Court for the Northern District of Texas declined to grant an injunction invalidating the ACA, meaning that the law will likely remain in effect during a potentially lengthy appeals process.

After passage of the Tax Cuts and Jobs Act of 2017 (TCJA), which zeroed out the ACA’s “individual shared responsibility” penalty beginning in 2019, 20 states and 2 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 that opinion, Chief Justice John Roberts wrote that the individual mandate could be upheld only as an exercise of Congress’s power to tax.

The district court agreed with the plaintiffs that the TCJA change negated this tax justification by eliminating the “shared responsibility” payment without repealing the mandate itself.

“At least five Justices agreed the Individual Mandate reads more naturally as a command to buy health insurance than as a tax, and those five Justices agreed the mandate could not pass muster under the Interstate Commerce Clause,” District Judge Reed O’Connor wrote in Texas v. United States, No. 4:18-cv-00167-O (N.D. Texas, Dec. 14, 2018). “Given that the Individual Mandate no longer ‘triggers a tax,’ the Court finds the Individual Mandate now serves as a standalone command that continues to be unconstitutional under the Interstate Commerce Clause.”

The district court also ruled that the rest of the ACA was not “severable” from the individual mandate, citing congressional and judicial references to the mandate’s importance in the law’s overall scheme.

No Immediate Effect

In a statement, HHS said it “will continue administering and enforcing all aspects of the ACA as it had before the court issued its decision. This decision does not require that HHS make any changes to any of the ACA programs it administers or its enforcement of any portion of the ACA at this time.”

Texas Attorney General Ken Paxton (R), one of the lead plaintiffs, said in a statement that the ruling “halts an unconstitutional exertion of federal power over the American healthcare system.” However, his California counterpart Xavier Becerra (D) called it “an assault on 133 million Americans with preexisting conditions, on the 20 million Americans who rely on the ACA for healthcare, and on America’s faithful progress toward affordable healthcare for all Americans.” One of 16 state attorneys general who intervened in the law’s defense, Becerra vowed to appeal.

The Trump administration had argued that the individual mandate was unconstitutional but that only certain ACA provisions, not the whole law, should be invalidated along with it.

David Slaughter 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.