5th Circuit Says ACA Individual Mandate Is Unconstitutional

The appellate panel asked the district court to judge parts of the law inseparable from the mandate

Stephen Miller, CEBS By Stephen Miller, CEBS December 19, 2019

​A panel of the U.S. Court of Appeals for the 5th Circuit ruled Dec. 18, in Texas v. United States, that the Affordable Care Act's (ACA's) individual coverage mandate is unconstitutional now that Congress has removed the tax penalty for not having health coverage. The appellate panel then sent the case back to the district court to adjudicate which parts of the law can't be separated from the individual mandate.

On Dec. 14, 2018, district court judge Reed O'Connor ruled that because Congress eliminated the penalty on individuals without ACA-compliant health coverage effective in 2019, the ACA's individual mandate requiring people to have health insurance "can no longer be sustained as an exercise of Congress's tax power." O'Connor, who sits in the Northern District of Texas, then struck down the ACA in full, concluding that the individual mandate is so connected to the law that Congress would not have passed the ACA without it. His ruling, however, left the ACA in place pending an appeal to the 5th  Circuit.

On appeal, the split panel of the 5th Circuit instructed the district court to rehear the matter and "to employ a finer-toothed comb on remand and conduct a more searching inquiry into which provisions of the ACA Congress intended to be inseverable from the individual mandate."

This suggests, legal analysts said, that the 5th Circuit may be unlikely to overturn the ACA in full but could strike down parts of the law directly related to the individual mandate, such as the 5:1 ratio age band, under which insurers can't charge seniors premiums more than five times what younger patients pay, and community rating, which prevents insurers from varying premiums within a geographic area based on age, gender, health status or other factors. The increase in revenue to insurers from the individual mandate was meant to offset the decrease from these restrictions.

[Update: On Jan. 21, 2020, the U.S. Supreme Court declined to hear an expedited appeal, which seemed as if it would allow lower courts to continue adjudicating the case. However, on March 2, the Supreme Court justices announced they would hear the case in its term beginning in the fall of 2020, with a decision expected by June 2021, so the lower courts will not further adjudicate this case.]

5th Circuit Punts on Scrapping Entire Law

The 5th Circuit found that opposing Democratic- and Republican-controlled states had standing to litigate the ACA's constitutionality.

"The individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power," the opinion by Judge Jennifer Walker Elrod reads, pointing back to Supreme Court Chief Justice John Roberts' 2012 opinion upholding the ACA.

Judge Carolyn Dineen King dissented to remanding the case back to the district court. "Regardless of whether the ACA is good or bad policy, it is undoubtedly significant policy," King wrote. "It is unlikely that Congress would want a statute on which millions of people rely for their health care and livelihoods to disappear overnight with the wave of a judicial wand."
(National Law Journal)

Ruling Delays Prospects for Supreme Court Review

King, the panel's lone Democratic appointee, wrote that the Republican states challenging the law did not have standing to do so. If they did, she wrote, she would find the mandate constitutional.

The two-to-one ruling leaves the rest of the sprawling statute in limbo heading into the 2020 presidential and congressional elections in which health-care costs and insurance have emerged as pivotal issues.

The 5th Circuit decision may or may not be the final word on the ACA, depending on whether its opinion is appealed to the Supreme Court and, if so, whether the high court takes the case. But by sending a thorny legal question back to the Texas jurist who already has held the law unconstitutional, the judges effectively slowed the case, so that the high court could not take it during its current term and decide it before the November elections.
(Washington Post)

Entire Law Less Likely To Be Overturned

The uncertainty generated by the original lawsuit is resolved slightly, in that plan sponsors know that the entire Affordable Care Act will not be overturned. However, challenges to the ACA mean that the health care system continues to be unsettled, particularly with respect to the stability of the individual insurance market. It is unlikely that the provisions most important to plan sponsors—such as elimination of preexisting condition exclusions, coverage of adult children to age 26 and coverage of preventive services—would be sufficiently related to the individual mandate to be threatened. Nevertheless, the continuing attacks on the ACA mean that plan sponsors have to be vigilant in assessing the health care environment and its impact on their health plan costs.

[SHRM members-only toolkit: Complying with and Leveraging the Affordable Care Act]

Justice Department Says ACA Should Be Struck Down

In March 2019, the Justice Department announced it supported the district court's ruling that the ACA was now unconstitutional, in the expectation that the case could eventually be heard by the U.S. Supreme Court.

Later, the administration's position appeared to shift. In a July 2019 filing with the appellate court, Justice Department attorneys argued that perhaps the health law should be invalidated only in the GOP states that are suing, rather than all states.
(SHRM Online and NPR)

All ACA Obligations on Employers Remain in Place

Despite the district court's December 2018 ruling, all ACA coverage and reporting obligations for employers remained in place. The ruling "is a declaratory judgment and not an injunction to freeze the ACA. This means at this point the ruling doesn't impact anyone," explained Chatrane Birbal, director of policy engagement at the Society for Human Resource Management. "Compliance with the ACA's employer mandate and employer-reporting requirements are still in effect and employers should continue to comply with these requirements until the Supreme Court upholds or overturns the recent decision."

Removing any doubts about ACA compliance, the Department of Health and Human Services stated last December that it would "continue administering and enforcing all aspects of the ACA as it had before the court issued its decision."
(SHRM Online)



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