Supreme Court will review Affordable Care Act ruling that was a sick joke

Leah Litman

Update (March 2, 2020, 10:15 a.m. ET): This piece has been updated throughout to reflect that the U.S. Supreme Court has chosen to take up a legal challenge to the Affordable Care Act.

The U.S. Supreme Court decided Monday to review a December appellate court decision on the Affordable Care Act that was a total joke — but didn't leave those depending on the ACA for health insurance laughing.

The appellate court's decision in Texas v. United States, which struck down the ACA’s provision regarding individual insurance coverage, often referred to as the individual mandate, featured a bad legal argument and a worse one. The bad argument was that the ACA minimum-coverage provision, which the appellate court interpreted as requiring each person to have a minimal amount of coverage, is unconstitutional; the worse argument was that courts should consider invalidating the entirety of the ACA because that one provision is unconstitutional.

Two Republican-appointed judges on the U.S. Court of Appeals for the Fifth Circuit in Texas held that the so-called mandate is unconstitutional, and that the rest of the ACA might have to be invalidated as a result. (The third judge on the panel, appointed by a Democrat, dissented.)

In making that determination, the court of appeals wrote off the fact that the Supreme Court already upheld the provision regarding individual insurance coverage in its 2012 landmark ruling National Federation of Independent Businesses v. Sebelius, written by Chief Justice John Roberts.

The reason that the appellate court could entertain the idea that it could revisit the ACA after the Supreme Court had already weighed in is that the GOP-controlled Congress changed the ACA in 2017: That year, Congress reduced the penalty on individuals who don’t get insurance for health care to zero dollars. This legal adjustment allowed the plaintiffs to argue this presented a new case. They claimed that the Republicans actually strengthened Obamacare and that this stronger law violated the Constitution even if the weaker version the Supreme Court upheld had not.

The court of appeals concluded that the Republican Congress, in eliminating the financial penalty for failing to obtain health insurance, actually imposed a freestanding legal obligation to purchase insurance rather than merely impose a tax as it had done previously. Therefore, the court reasoned, the obligation is unconstitutional even though Congress has the authority to impose a tax, because this requirement is instead a mandate.

This argument is (to put it mildly) strange. In NFIB, the Supreme Court held that the Affordable Care Act’s minimum-coverage provision does not impose a freestanding legal obligation to purchase health insurance. And the Republican Congress in 2017 maintained that it was repealing the minimum-coverage provision, not strengthening it. The argument also boils down to the rather silly claim that Congress lacks the constitutional authority to say “do this thing, and if you do not, there will be no consequences whatsoever.”

But the court of appeals agreed with this bad argument and held that Congress lacked the constitutional authority to pass the now-toothless minimum-coverage provision. More troublingly, the court suggested that the even worse legal argument might have legs, too.

The even worse argument concerned the potential consequences for the rest of the ACA. The Trump administration, together with a coalition of Republican states, argued that if a court finds the minimum-coverage provision unconstitutional, then the rest of the ACA should be invalidated as well under a doctrine known as severability.

Severability tells courts what to do if they invalidate one provision in a statute, and it determines whether the constitutional parts of a statute remain in effect or whether the whole law must be scrapped. The legal test for severability focuses on congressional intent — what would Congress have wanted the courts to do if one provision did not exist, with the best evidence of Congress’ intent being the words that are in a statute.

In the case of the Affordable Care Act, there is a very easy answer to this question. In passing the 2017 Tax Cuts and Jobs Act, Congress eliminated (for all practical purposes) the minimum coverage provision and chose to keep the rest of the ACA. There is, accordingly, no need to speculate about what Congress would have wanted to have happen without an enforceable individual mandate; Congress enacted it into law — while choosing to keep the rest of the ACA.

It’s alarming that, in its ruling in December, the appeals court merely directed the district court to perform a severability analysis again, rather than definitively rejecting outright the nonsense argument the individual mandate can’t be severed without dooming the whole law. (The district court had previously concluded that the rest of the ACA cannot be severed from the minimum-coverage provision.)

In doing so, the court of appeals prolonged the legal uncertainty around the ACA and the accompanying uncertainty in the health insurance market. The decision also gave unnecessary and unjustifiable credence to the idea that there might be merit to the severability argument.

Though the court of appeals ruling does not change Americans’ access to insurance under the ACA — Medicaid expansion and health care exchanges are still available, and the ACA still prohibits insurance companies from pricing individuals with preexisting conditions out of the insurance market — insurance companies may decide to back out of the ACA’s programs and adjust their policies if they wonder whether the ACA is long for this world.

Avoiding that uncertainty and instability was a major reason for pursuing a Supreme Court review of the Fifth Circuit’s decision. But the most important factor weighing in favor of Supreme Court review was just how obviously wrong the district court’s severability conclusion was. There is no reason for the Supreme Court to postpone a decision correcting that error now.