On December 14, 2018, a federal district judge sitting in Texas ruled that, without the so-called “individual mandate” which requires individual taxpayers to maintain minimum essential coverage, the rest of the Patient Protection and Affordable Care Act as amended (widely known as the “ACA”) is “INVALID”.

What was the case about?

Texas v United States was brought in Judge Reed O’Connor’s court by numerous states and two individual plaintiffs seeking the court’s declaration that the individual mandate is unconstitutional and that the remainder of the ACA is inseverable from the individual mandate.

For context, remember that this case followed –

  1. the Supreme Court’s 2012 decision in National Federation of Independent Businesses v. Sebelius that the individual mandate is unconstitutional under the Commerce Clause but could fairly be read as exercising Congress’s power to tax because failure to comply with it would trigger a tax under the individual shared responsibility penalty provision of the ACA; and
  2. Congress’ passage of the Tax Cuts and Jobs Act of 2017 (“TCJA”) which reduced to zero (for tax years after 2018) the individual shared responsibility penalty otherwise triggered by failing to comply with the individual mandate.

What did the judge decide?

Judge O’Connor filled the plaintiffs’ stockings:  He held that the individual mandate could “no longer be fairly read as an exercise of Congress’s Tax Power” because Congress nullified its revenue raising potential by reducing the individual shared responsibility penalty amount to zero.  Thus, the only basis on which the Supreme Court upheld the individual mandate’s constitutionality in the 2012 case went up the chimney with the TCJA in 2017.

With visions of sugar plums dancing in plaintiffs’ heads, Judge O’Connor held that the individual mandate is “essential to and inseverable from the remainder of the ACA.”  This, he based on Congress’ own words about the individual mandate:  “The requirement is an essential part of this larger regulation of economic activity, and the absence of the requirement would undercut Federal regulation of the health insurance market.”  He pointed out also that Congress itself had explained in multiple contexts how the individual mandate was the keystone of the ACA.  He also reminded us that each of the nine Supreme Court justices in the 2012 case had agreed that the individual mandate was inseverable from at least some other ACA provisions (for example, the prohibition against pre-existing condition limitations).

In other words – the judge’s own words – with the individual mandate unconstitutional, the remaining provisions of the ACA “are INSEVERABLE and therefore INVALID.”

What happens now?

Most likely, the (for some) nightmare before Christmas case will not have immediate effect and will be appealed to the Supreme Court, making it the third case challenging the constitutionality of the ACA to reach the Supreme Court.  Although it’s unlikely that the government defendants will be the ones appealing.  Instead, it will be the states that intervened in the case when it became apparent that the United States Justice Department under President Trump would not defend the constitutionality of the individual mandate or its severability from other provisions like the prohibition against pre-existing condition limitations.

In response to the ruling on December 14, 2018, President Trump tweeted “As I predicted all along, Obamacare has been struck down as an UNCONSTITUTIONAL disaster! Now Congress must pass a STRONG law that provides GREAT healthcare and protects pre-existing conditions.”

We will continue to follow the court and legislative developments closely and post updated information on our blog.