The Affordable Care Act Will Go Before the United States Supreme Court for the Seventh Time

Tomorrow, the United States Supreme Court will hear oral arguments for their seventh review of the legality of the Affordable Care Act (the “ACA”). Their review in the current case, California v. Texas, will be their second review of the constitutionality of the ACA’s individual mandate, which requires that, with few exceptions, all Americans buy health insurance.

The Supreme Court last considered the constitutionality of the individual mandate in 2012 in National Federation of Independent Business v. Sebelius. In NFIB, the Court voted 5-4 to reject the challenge. The Court held that the mandate, in essence, imposed a tax on individuals who do not buy health insurance, and Congress has the power to tax.

After the Supreme Court’s 2012 review of the individual mandate, Congress passed the Tax Cuts and Jobs Act (the “TCJA”) which, as of January 1, 2019, eliminated the penalty for failing to buy health insurance. Following this elimination, 18 states, led by Texas, and later joined by two individuals, filed a lawsuit in federal district court in Texas on the basis that because Congress eliminated the penalty, the mandate could no longer be considered a tax. Rather it is now just an unconstitutional command. Both the federal district court and the U.S. Court of Appeals for the 5th Circuit agreed that the individual mandate is now unconstitutional because it no longer constitutes a tax – i.e., without a penalty, it is only a command to buy insurance, which is not within the power of Congress

Of greatest consequence, Texas and the other challengers also claimed that the individual mandate is inseparable from the rest of the ACA and, therefore, the courts must strike down all of the ACA. The district court agreed with the challengers, but the 5th Circuit remanded the case back to the district court to reconsider the question. California, other democratic-controlled states, and the U.S. House of Representatives, which had joined the case to defend the ACA, asked the United States Supreme Court for an immediate review in January 2020, but, although the Supreme Court granted a writ of certiorari, it declined to fast track its review.

The Supreme Court will be considering three legal issues in this review of the ACA. First, at least one of the challengers will have to prevail on the question of standing to sue. Second, if the Supreme Court finds that at least one of the challengers has standing, it will then consider the constitutionality of the individual mandate in light of elimination of the penalty for failure to buy insurance enacted the TCJA.  Third, if the Supreme Court agrees with the lower courts that the individual mandate is now unconstitutional, it will then consider the question of most consequence: whether the individual mandate is severable from the rest of the ACA or whether its invalidity must cause some or all of the rest of the ACA to be invalidated as well.

Recent Supreme Court reviews of the issue of severability have demonstrated that the Supreme Court typically takes a narrow view of severability and will not invalidate a statute if a problematic section can be neatly excised. Many legal experts believe that the challengers’ severability argument will be a difficult one for them to win, but it will be many months before the outcome is known. A decision is not expected until sometime in 2021.