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EB Flash: The ACA Survives Another Round

Employee Benefits Alert

In the closely-watched case challenging the constitutionality of the entire Affordable Care Act (ACA), Texas v. United States, the U.S. Court of Appeals for the Fifth Circuit held yesterday, in a 2-1 decision, that the lower court correctly found that the individual mandate – the requirement that individuals purchase health coverage or pay a penalty which Congress reduced to zero – is unconstitutional. Writing for the majority, Circuit Judge Jennifer Walker Elrod preserved, for the time being, the remainder of the ACA, sending the case back to the district court for a more detailed analysis of whether other portions of the law can survive without the individual mandate.  

As background, on December 14, 2018, Judge Reed O'Connor of the United States District Court for the Northern District of Texas held that the entire ACA was unconstitutional in a two-part ruling:  First, he ruled that the ACA's individual mandate, which had been upheld by the Supreme Court as a valid exercise of Congress's taxing authority, cannot survive after the Tax Cuts and Jobs Act of 2017 eliminated the monetary exaction associated with non-compliance with the individual mandate. Judge O'Connor further held that the individual mandate was inseverable from the remainder of the ACA, thus rendering the entire ACA unconstitutional. (See our prior alert on this ruling.)

The Fifth Circuit decided the following with respect to the individual mandate: 

  • Concluded that 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"; 
  • Held that the case presents a live case or controversy; and
  • Concluded that both the state and individual plaintiffs have standing to challenge the ACA because the individual mandate requires the individual plaintiffs to purchase insurance that they do not want, and the state plaintiffs are required to incur costs to comply with ACA reporting requirements. 

On the severability question, the Fifth Circuit majority remanded the case back to the district court for a "finer-toothed" and "more searching inquiry into which provisions of the ACA Congress intended to be inseverable from the individual mandate."

In her dissent, Circuit Judge Carolyn Dineen King, stated that the "majority errs in concluding the individual plaintiffs have standing." On the merits, she wrote that she "agree[s] with much of what the majority has to say about the district court's severability ruling . . . [but fails] to understand the logic behind remanding this case for a do-over." In her view, "little guesswork is needed to determine that Congress believed the ACA could stand in its entirety without the unenforceable coverage requirement." 

The 101-page decision by the Court of Appeals is posted here.

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