Health Affairs Forefront
Following The ACADOJ, Republican AGs Ask Supreme Court To Strike Down ACA
On June 25, 2020, a Texas-led coalition of 18 Republican states, two individuals, and the Trump administration filed opening briefs in California v. Texas. All parties maintained their position that the entire Affordable Care Act (ACA) should be declared invalid by the Supreme Court. The Trump administration continues to take a confusing position on standing and remedy but, in any event, argues that the entire ACA should be declared invalid. This post briefly summarizes the history of the lawsuit; the opening briefs from the respondents; and what comes next.
The respondents take this position despite COVID-19, which is not mentioned by name. The briefs from the states and individuals do refer to the pandemic but only as an “extratextual consideration” that the Court should ignore. The briefs also do not grapple with the fact that the lawsuit, if successful, could lead to coverage losses for about 23.3 million Americans. Whether the ACA is good policy or not, they argue, “miss[es] the point.”
Anticipating these briefs, Democrats used this week to strike a clear contrast. Democrats in the U.S. House of Representatives introduced new legislation to expand upon the ACA and strengthen the Medicaid program. The House Energy and Commerce Committee released a report on its investigation of insurers and brokers that offer short-term plans (an ACA alternative promoted by the Trump administration). And former Vice President Joe Biden referred to the Trump administration’s position in Texas as a “heartless crusade to take health care protections away from American families.”
How We Got Here
Texas was originally filed by 20 Republican state attorneys general and governors and two individuals after Congress zeroed out the individual mandate penalty in the Tax Cuts and Jobs Act of 2017 (TCJA). They argued that the penalty-less mandate is no longer constitutional and asked that the entire law be struck down. A federal district court in Texas agreed and declared the entire ACA invalid (although the law remained in place). Many of district court’s legal conclusions, from standing to severability, were criticized by conservative legal scholars, the Wall Street Journal editorial board, and the National Review editorial board, among others.
In a 2-1 decision, the Fifth Circuit Court of Appeals partially affirmed the district court, agreeing that the mandate is now unconstitutional but remanding the case for additional analysis on the question of severability. One judge disagreed with these conclusions and filed a lengthy dissent arguing that the plaintiffs lacked standing and that, in any event, the mandate remains constitutional and severable from the rest of the ACA. She opined that there was no need to remand, especially on severability.
A coalition of Democratic attorneys general and governors, led by California, and the House had intervened to defend the ACA and appealed the Fifth Circuit’s decision to the Supreme Court. The Court agreed to hear California’s appeal and separately granted a conditional cross-petition filed by the plaintiffs. This means the full scope of legal issues in Texas will be considered by the Supreme Court: whether the plaintiffs have standing, whether the penalty-less individual mandate is unconstitutional, whether the rest of the ACA can be severed from the mandate, and the scope of relief.
California (on behalf of 21 states) and the House each filed opening briefs on May 6. Those briefs were consistent with arguments made before the lower courts and argued that 1) the two individual plaintiffs and the Texas-led states do not have standing to sue; 2) the individual mandate, with a $0 penalty, remains constitutional; and 3) the mandate, even if unconstitutional, is severable from the rest of the ACA.
California and the House were supported by a wide range of amici who explained to the Court that invalidating the ACA would severely disrupt the health care system. The law has been in place for a full decade and touches on every part of the health care system. If the plaintiffs and the Trump administration are successful before the Court, millions of people will lose their coverage and millions more will lose protections for preexisting conditions, among many other changes and upheavals.
The Opening Briefs
Texas (on behalf of 18 states), two individuals from Texas, and the Department of Justice (DOJ) each filed an opening brief on June 25. Not all briefs argue all of these points but the respondents collectively argue that 1) at least one of the parties (whether the two individual plaintiffs, the Texas-led states, or both) have standing to sue; 2) the individual mandate, with a $0 penalty, is unconstitutional; 3) the mandate is inseverable from the rest of the ACA; and 4) the district court was correct to declare the entire ACA invalid on a nationwide basis. These arguments have been presented in great detail in many prior posts on Texas, but the briefs are summarized here.
A Preliminary Note On DOJ’s Positions
It should be emphasized that the DOJ has taken a highly unusual position in Texas by not defending the ACA’s constitutionality. Historically, the DOJ has defended federal statutes where a reasonable argument can be made in their defense. As shown by California and the House, there are many reasonable arguments that can be made. But the DOJ declined to defend the ACA first under then-Attorney General Jeff Sessions.
In letters to Congress, Attorney General Sessions refused to defend the mandate and asked that the ACA’s major provisions for protecting people with preexisting conditions also be struck down. At that point, the DOJ had drawn the line at the rest of the ACA’s provisions, arguing that the rest of the ACA was severable and should remain in effect.
Then, on appeal, the DOJ under Attorney General William Barr took the new position that the entire ACA should be declared invalid. From there, the DOJ moderated its position twice more, suggesting first that the district court’s decision applied only to the 18 plaintiff states and two individuals, and second that the court’s remedy should be limited only to the provisions that injure the individual plaintiffs.
The DOJ reiterates the latter in the current brief before the Supreme Court. In a nutshell, the Trump administration is asking for the entire ACA to be declared invalid but wants the ultimate ruling to be limited only to the provisions of the ACA that actually injure the plaintiffs.
While the Trump administration pays lip service to the idea that plaintiffs can only seek relief to redress their own injuries, it flips this bedrock legal concept on its head by first asking the Court to declare the entire ACA to be invalid and then promising to go back and figure out which provisions of the law actually injure the plaintiffs. The DOJ wants the benefit of arguing that the entire ACA is invalid while asking for the right to cherry pick the provisions it wants to keep later on in future proceedings.
This is not a new position for the Trump administration, which has been arguing this point since proceedings before the Fifth Circuit. Even then, judges voiced skepticism, calling the DOJ’s argument “vague” and pressing for clarity (to no avail). The DOJ noted only that the scope of relief is merely one of the more “technical issues” in the case. The confusing position taken by the DOJ was one of the reasons cited by the Fifth Circuit in remanding Texas back to the district court on severability.
The Individuals’ Standing
Texas and the individuals argue that the two individuals in Texas have standing to challenge the individual mandate. The individuals’ brief focuses on this point the most and embraces the district court’s reasoning that the mandate commands them to buy health insurance that they do not want. This brief also rebuts the arguments made by California and the House that the individuals’ injuries are self-inflicted.
The DOJ does not directly assert that the individual plaintiffs have standing to challenge the individual mandate. But that does not matter because the individuals have shown that the ACA’s “insurance-reform provisions”—market reforms such as guaranteed issue, community rating, pre-existing conditions protections, and the coverage of essential health benefits—injure them, even if it is possible that what remains of the individual mandate itself does not. According to the DOJ, the market reforms limit the individuals’ coverage options and raise their costs, which gives the individuals standing to challenge the enforcement of those reforms.
As noted above, this is a convenient argument for the DOJ to make given its position that the Court can only set aside the provisions of the ACA that actually injure the plaintiffs. Even if it gets to that point—where the ACA is declared invalid and the case is remanded to determine which provisions injure the plaintiffs—the DOJ makes clear (for the first time) that it will take a broad view of the plaintiffs’ injuries. The individuals are injured “at a minimum” by the ACA’s market reforms. So, in addition to asking the Court to rule that the entire law is invalid, the DOJ makes clear that the protections for people with preexisting conditions, the coverage of essential health benefits, and other major market reforms should absolutely be set aside by a future court.
The States’ Standing
The district court devoted no attention to whether the Texas-led states had standing to sue, focusing entirely on the standing of the two individuals. The Fifth Circuit found that the states did, in fact, have standing. The majority held that the plaintiff states demonstrated an injury by showing that the penalty-less mandate would cause third parties to buy insurance and that this would inflict a financial injury on the states through higher administrative costs to report, manage, and track the insurance status of state employees and Medicaid/CHIP recipients.
California and the House acknowledged that Texas could have standing but that the Texas-led states failed to meet their burden of showing that the mandate imposed a fiscal injury. Texas responds that it presented “reams of evidence” about costs faced by states because of the mandate.
Texas repeats its standing arguments from the lower courts. It points to higher costs from increased enrollment in Medicaid programs and state employee health plans; reporting requirements related to the mandate; and costs to “fix” problems that resulted from the ACA. Texas’s other issues are with the ACA more generally, which it cites “alongside” the individual mandate. These grievances include the law’s Medicaid provisions, the fact that it cannot adopt state-specific health care policies (like high risk pools), benefit changes to the state employee plan (by covering dependents up to age 26 and preventive services), and ACA compliance and enforcement costs (even though Texas and one other state on the brief chose not to enforce the ACA’s market reforms).
The Texas brief cites outdated and incorrect data about the status of ACA insurance markets, arguing that the markets are unstable. In the meantime, the Trump administration has touted stability, lower premiums, and increased insurer competition. (The DOJ even cited the market’s stability as a defense in a separate lawsuit known as the “take care” case.) Texas also inexplicably cites the ACA’s Cadillac tax as a burden on states even though the tax has not and now will not ever go into effect because it was repealed in December 2019.
Constitutionality
The respondents continue to argue that the penalty-less mandate is unconstitutional because it can no longer be construed as a tax under the Court’s decision in National Federation of Independent Businesses v. Sebelius (NFIB) and cannot be saved under the Commerce Clause. Without the penalty, the mandate lacks tax-like features outlined in NFIB, including the “essential feature” that a tax raises revenue. The penalty-less mandate, the respondents argue, fails to satisfy the functional approach that Chief Justice John Roberts outlined in NFIB. The zeroing out of the penalty, then, converts the mandate into an unconstitutional command to purchase health insurance.
The briefs devote a fair amount of space to addressing the arguments advanced by California and the House. Those parties had argued that the mandate is precatory, still offers a choice between obtaining insurance or not under NFIB, and may be viewed as a predicate to a tax of $0. The respondents argue that these positions cannot be squared with the text of the ACA. The individuals cite the Court’s recent decision in Maine Community Health Options to note that “shall” in the text of the mandate imposes an obligation and thus gives this provision teeth. The respondents’ briefs also take issue with the reliance of California and the House on legislative history surrounding ACA repeal efforts throughout 2017.
Severability
All respondents believe that the individual mandate is inseverable from the rest of the ACA, meaning the entire law should be declared invalid. The respondents argue that the 2010 Congress never would have passed the law without the individual mandate. They cite King v. Burwell to argue that Congress would not have adopted the ACA’s guaranteed issue and community rating provisions without the mandate. From there, they simply assert that it is “evident” that Congress would not have adopted the rest of the ACA either.
The primary argument for this point—that the mandate is “essential”—is based on inoperable legislative findings included in the ACA when it was passed. The respondents point to these findings to argue that the text of the ACA confirms that the mandate is inseverable from the rest of the law. On this point, Texas and the individuals heavily cite the Court’s recent decision in Bostock v. Clayton County, Georgia to argue that courts must look only to a statute’s text, not Congress’s intent when the law was passed. The text is determinative, they argue, even if no member of Congress could have expected the outcome. They also rely heavily on the dissent in NFIB, as they did before the lower courts.
California and the House, the respondents argue, ask the Court to either ignore those legislative findings or agree that they have been repealed by implication, which is disfavored. The DOJ notes that the Court cannot look exclusively to either the 2010 Congress or the 2017 Congress because it is the interaction between the ACA and TCJA that results in the mandate being unconstitutional. And, once again, the legislative findings are characterized as an “inseverability clause.”
Because the mandate is “essential” to the entire rest of the ACA, its invalidation means that all other parts of the ACA—whether “major” and “minor” provisions—must also fall. Texas divides the ACA into four categories: the individual mandate; guaranteed issue and community rating; “other chief provisions” (i.e., the ACA’s other insurance market reforms and Medicaid expansion); and then “minor provisions” (i.e., everything else in the ACA). The other briefs also refer to the ACA’s “minor” provisions, a label applied by the district court.
The characterization of the rest of the ACA as “minor” is ludicrous. The law touches every facet of the health care system, and the respondents would affix this label to the (now repealed) medical device tax, restaurant menu labeling, Medicare changes (like closing the drug doughnut hole), creation of the Center for Medicare and Medicaid Innovation, the biosimilar approval pathway, the Prevention and Public Health Fund, the Indian Health Care Improvement Act, the Patient-Centered Outcomes Research Institute, amendments to the Black Lung Benefits Act, and much more. (Many of these programs were highlighted by amici to argue that the mandate is not, in fact, essential to the rest of the ACA.)
Scope Of Relief
According to Texas and the individuals, the district court properly ruled that the ACA was invalid on a nationwide basis. This issue arose on appeal after the DOJ argued that the district court’s ruling was limited to the plaintiff states. Texas and the individuals note what we all recognized at the time—that the DOJ had argued in favor of nationwide relief during oral argument.
Setting aside that point, Texas and the individuals believe that nationwide relief from the ACA is necessary. If the ACA continues to operate in only the non-plaintiff states, taxpayer dollars from the plaintiff states would be used to subsidize the ACA’s operation in the rest of the country, which would not relieve the states of the economic injuries they claim.
The individuals argue that the district court was correct in full, nationwide invalidation of the law but that, at a minimum, the guaranteed issue, community rating, and ACA subsidy provisions must all fall alongside the mandate. They take this one step further, though, to note that Title I of the ACA cannot function without those provisions and thus Title I should also fall. And the Court would be creating a new law to retain Titles II through IX, so those too should fall. The individuals also take the remarkable position that the only way for two self-employed individuals in Texas to obtain relief is for the entire ACA to be declared unconstitutional and unenforceable nationwide—in the interest of “equity.”
What Comes Next
Amicus briefs in support of Texas, the individuals, and the Trump administration are due on July 2. California and the House will file a second round of briefs on July 29, and Texas will file a limited reply brief on August 18.
It remains possible for oral argument to be scheduled before election day, but this seems increasingly unlikely since the Court pushed some cases for its current term to the next term because of COVID-19. Presumably, the Court will reschedule those arguments first, which could delay consideration of Texas. In any event, the Court will issue a decision in Texas in 2021.
