The Future of the Affordable Care Act: California v. Texas

MADISON HAUSER—The Patient Protection and Affordable Care Act (“ACA”) yet again appears before the United States Supreme Court. In California v. Texas, Texas and several other states (“the plaintiff states”), and individual plaintiffs, allege that the ACA violates the Constitution. This case frightens many. Should the Court hold the ACA unconstitutional, the decision would upend the health insurance market and end protection for people with pre-existing conditions in the midst of a pandemic. However, upon closer look, one may find this ultimate holding a far reach. Currently, three questions appear before the Court: (1) Whether the plaintiffs have standing to challenge the individual mandate provision of the ACA; (2) Whether reducing the tax specified in §5000A(c) to zero rendered the individual mandate provision unconstitutional; and (3) if the reduction did render the provision unconstitutional, whether that provision can be severed from the statute, leaving the remainder of the ACA intact.

In order to understand California v. Texas, one must understand National Federation of Independent Business v. Sebelius (“NFIB”), a previous case in which the ACA appeared in the Supreme Court. In NFIB, Florida and several other states alleged that the individual mandate provision of the ACA violated the constitution. This provision of the ACA requires American citizens to either purchase healthcare that meets certain minimum requirements or pay the fee outlined in §5000A(c). In NFIB, the majority of the Supreme Court upheld this mandate as a valid exercise of Congress’s power to tax. In other words, under Article 1 of the Constitution, “[p]ut simply, Congress may tax and spend,” and therefore, Congress has the power to tax citizens if they choose not to purchase the required healthcare. A plurality of the Court explained however that Congress’s ability to regulate interstate commerce could not serve as a justification of upholding this mandate. According to the plurality, mandating citizens to engage in commerce stretches Congress’s ability to regulate interstate commerce too far, as Congress would not be regulating commerce, but instead forcing citizens to engage in it. Therefore, a plurality of the Court concluded the interstate commerce clause could not justify the individual mandate, but because the majority of the Court found justification for the mandate under Congress’s enumerated power to tax, the Court deemed the mandate constitutional.

Today, the individual mandate again sits before the Supreme Court. In 2017, when Congress reduced the fee outlined in §5000A(c) to zero, Congress effectually eliminated the tax, thereby eliminating any consequence for people that do not obtain private health insurance. The plaintiff states now argue that the individual mandate violates the Constitution because Congress’s ability to tax can no longer serve as the justification behind the individual mandate. At oral argument, Texas argued that the essential function behind Congress’s power to tax is the ability to raise revenue, and because the individual mandate no longer raises revenue, the Court can no longer justify the individual mandate as an exercise of Congress’s ability to tax. As it follows, the individual mandate is unconstitutional, because, as it stands today, it remains just a blind mandate, no longer a choice. California and the defending states respond threefold: First they argue the Plaintiffs lack standing. Second, on the merits, California argues that zeroing out a tax does not change the provision from a tax to a blind mandate, but instead simply creates a constitutional inoperative provision of the statute with no consequence, which Congress does routinely. Indeed, in the future, Congress can choose to raise the tax again. And finally, California argues that even if the individual mandate now violates the constitution, the Court should sever it from the statute, leaving the rest in place.

Of the three questions that the Court faces, the third possesses the potential to cause the greatest disruption. Should the Court find that the individual mandate cannot be severed from the statute, the entire ACA would fall, and the healthcare system in this country would drastically change. However, this result remains totally dependent on the Court’s answers to the first two questions.

First, the Court must find that the plaintiffs have Article III standing to even challenge the individual mandate of the ACA. California argues that the individual plaintiffs do not have standing because they have not suffered any legally cognizable harm, a requirement for a plaintiff to have standing. Similarly, the defending parties argue that the plaintiff states lack standing as they have “not produce[d] concrete evidence supporting either their primary theory of injury—that the existence of an unenforceable minimum coverage provision would “forc[e] individuals into the States’ Medicaid and CHIP programs,”—or the panel majority’s separate theory that the provision would increase state costs for “printing and processing [certain] forms[.]” Should the Court agree with California that the plaintiffs lack standing, the case disappears and the ACA remains in place. And considering the extent to which the Justices questioned the plaintiff’s theories for standing, this outcome seems like a viable possibility.

However, the Justices did spend time questioning the parties on the merits, making a realistic prediction difficult. If the Court does find the parties have standing, and therefore the moves to address the merits of the case, only time will tell whether the Court agrees with Texas that the provision is a blind mandate, or with California, that it is a constitutional inoperative provision with the possibility of becoming a tax again in the future. If the Court finds that the 2017 amendment rendered the individual mandate unconstitutional, the Court may still save the ACA by severing the unconstitutional mandate from the statute, leaving the rest intact. And the Court did seem particularly interested in this third question of severability, a slight indication that it agrees with Texas on the second, constitutionality issue.

As for severability, Texas argued that a legislative finding written into the original ACA precludes severability because the finding states that the individual mandate is essential to effectively regulate health insurance markets. Texas argued that this finding serves as an inseverability clause and a textual interpretive clue that Congress would not want the ACA to survive without the individual mandate. With newly appointed textualist, Amy Coney Barrett, now sitting on the Supreme Court, this argument may have landed with at least one Justice. However, many justices questioned the validity of this argument. Some justices seemingly agreed with California that this finding does not appear like many of the other inseverabiltiy clauses Congress has written. And some found persuasive California’s argument that because the 2017 Congress left the rest of the ACA untouched, Congress believed the mandate to be severable.

Therefore, while impossible to predict the the Court’s final outcome, the Court would need to agree with Texas on all three questions in order for the ACA to completely fall. And given the Justices’ targeted questions during oral arguments, Texas may have difficulty succeeding on the standing and/or severability issues. Accordingly, the ACA will likely remain either unchanged or without the individual mandate. Though the true outcome cannot be accurately predicted, oral arguments may have provided hope that those with pre-existing conditions, and others positively impacted by the ACA, will remain protected amidst the pandemic.