UPDATED: District Court Strikes the Individual Mandate and Declares the Affordable Care Act Invalid: What Happened and What Lies Ahead?
Legal Sidebari
UPDATED: District Court Strikes the
Individual Mandate and Declares the
Affordable Care Act Invalid: What Happened
and What Lies Ahead?
Updated March 7, 2019
UPDATE 3/7/2019: In December 2018, the district court in Texas v. United States issued a partial final
order and stayed its judgment pending appeal. The Department of Justice and the intervening state
plaintiffs subsequently appealed the lawsuit to the U.S Court of Appeals for the Fifth Circuit. The Fifth
Circuit also granted motions filed by the U.S. House of Representatives and four additional state
attorneys general to intervene in the litigation and defend the validity of the Patient Protection and
Affordable Care Act (ACA).
Separately, in February 2019, the U.S. District Court for the District of Maryland rejected the State of
Maryland’s request (discussed below) for a declaration that the ACA is constitutional and enforceable
and dismissed the case.
The original post from December 20, 2018, follows below.
On Friday, December 14, 2018, a federal judge for the U.S. District Court for the Northern District of
Texas ruled in Texas v. United States that the “individual mandate” of the Patient Protection and
Affordable Care Act (ACA), as amended in the 115th Congress, is unconstitutional. Furthermore, the
Texas court concluded that the challenged provision was so “essential” to the remainder of the ACA that
the entire law should fall as well. Despite reaching this conclusion, the court has not yet issued an
injunction against the federal government prohibiting the implementation or enforcement of the ACA.
After summarizing the relevant portions of the ACA and the prior litigation surrounding the individual
mandate, this Sidebar will discuss the Texas court’s analysis of the constitutional questions involved, its
conclusion that the individual mandate is nonseverable from the rest of the ACA, and the next steps in the
litigation that may be expected.
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Background on the ACA and NFIB v. Sebelius
Enacted in 2010, one of the ACA’s major goals was to “increase the number and share of Americans who
are insured.” In addition to providing income-based subsidies to facilitate the purchase of health insurance
and increasing the scope Medicaid coverage, the ACA, as originally enacted, also included financial
penalties on large employers that did not offer coverage to their employees, and on certain individuals
who did not purchase or enroll in such coverage. This latter provision is commonly referred to as the
“individual mandate.” In addition, the ACA included a large number of other provisions that touched an
array of issues, ranging from health care workforce promotion to improving access to innovative medical
therapies.
Congress’s authority to enact the ACA, like all legislation, must derive from one of the specific
“enumerated powers” identified in the Constitution. Whether Congress possessed the authority to impose
the individual mandate was a central issue in the litigation that culminated in the Supreme Court’s
landmark 2012 ruling in National Federation of Independent Business v. Sebelius (NFIB). In that case,
while five Justices concluded that Congress’s authority to regulate interstate commerce did not empower
Congress to enact the individual mandate, the Court held that Congress’s power to levy taxes did.
Notably, the controlling opinion of Chief Justice Roberts reasoned that the penalty “looks like a tax in
many respects,” including by possessing “the essential feature of any tax: It produces at least some
revenue for the Government.” Four dissenting justices expressed the view that neither the interstate
commerce nor taxing power supported the individual mandate, that it should be held unconstitutional, and
that the entire ACA should fall with it.
Texas v. United States
In 2017, Congress amended the ACA to eliminate the financial penalty the ACA imposed on individuals
without coverage. Soon after, a collection of state attorneys general, governors, and individuals filed suit
in Texas, claiming that the individual mandate no longer qualified as a constitutionally permissible “tax”
because it no longer generated revenue for the federal government. According to the plaintiffs, without
the ability to rely on Congress’s taxation authority, and because a majority of Justices previously
concluded that the Commerce Clause did not support the individual mandate, the amended individual
mandate was unconstitutional. While the Department of Justice declined to defend the constitutionality of
the individual mandate, a different group of states intervened in the case as defendants in support of the
individual mandate and the ACA.
In its opinion, the Texas court first addressed the question of standing, a constitutional requirement,
necessitating a plaintiff to demonstrate, among other things, an injury that is “concrete and
particularized,” in order to “ensure that the plaintiff has a personal stake in the outcome of the
controversy.” In Texas, the court held that, even though the financial penalty under the amended
individual mandate was $0, the individual plaintiffs had established standing because the statutory
directive to maintain health insurance injured the individuals by potentially “deter[ring] the exercise of
[their] constitutional rights.” (The court did not address the state plaintiffs’ injury, having determined that
the injury to the individuals was sufficient to satisfy Article III). Turning to the constitutionality of the
individual mandate, the court agreed with the plaintiffs and held that neither the Commerce Clause nor
Congress’s taxing power supported the individual mandate as amended.
Because Congress had already set the penalty for violating the individual mandate at $0, the court’s
determination that the individual mandate is unconstitutional, and therefore unenforceable, may appear to
be of little consequence when viewed in isolation. However, the court in Texas held that the entire ACA
must fall with the individual mandate, potentially rendering the decision to be significantly more
impactful.
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As noted in this previous Sidebar, when courts rule that a specific provision within a large statute is
unconstitutional, a follow-up issue is how much of the remaining statute can stand on its own, without the
unconstitutional provision. The Supreme Court’s severability analysis, undergirded by the principle that a
court “should refrain from invalidating more of the statute than is necessary,” principally focuses on two
issues: whether (1) the remaining provisions still operate as Congress intended and (2) Congress, had it
known that inclusion of the unconstitutional provision “was not a choice that remains open,” would have
enacted the remaining law without the offending provision. If the answer to either of these questions is
negative, then the nonseverable provisions must also fall with the unconstitutional ones.
Parties to the Texas litigation have taken varying positions regarding the severability of the individual
mandate from the rest of the ACA. The plaintiff states have argued that the entire statute should fall with
the individual mandate because the mandate was the ACA’s “core provision.” The Trump Administration,
mirroring the position taken by the government on severability in NFIB, have argued that although the
court should strike certain ACA insurance provisions (specifically, the ACA’s guaranteed issue and
community rating provision) along with the individual mandate, the bulk of the ACA should remain
intact. In contrast, the intervening states have maintained that the 115th Congress’s choice to eliminate
the individual mandate’s penalty in 2017 without amending other ACA provisions evinces clear
congressional intent to leave the rest of the ACA in place.
Ultimately, the Texas court adopted the plaintiffs’ position, relying heavily on congressional findings that
accompany the individual mandate. (These findings indicate, among other things, that the mandate “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.”) In addition, the district court, citing to the
Justices’ competing opinions in NFIB and subsequent cases involving the ACA, maintained that “all nine
Justices” have recognized that the individual mandate and other ACA provisions are inextricably
intertwined. Further, the court rejected that the 2017 amendments demonstrate Congress’s intent for the
ACA to survive without the individual mandate because the 2017 amendments did not remove the
requirement to purchase health insurance itself or the congressional findings accompanying the mandate.
What Comes Next?
The decision in Texas culminated in a declaratory judgment, a remedy that simply “declares the rights and
other legal relations” of parties to the suit, without necessarily ordering any further relief. Although the
plaintiff states in Texas sought an injunction ordering the federal government from further implementing
or enforcing the ACA, the court’s December 14th order denied the request. Nor did the court address the
plaintiffs’ other constitutional or statutory challenges. Following the court’s decision, the Department of
Health and Human Services (HHS) issued a statement expressing its view that the order “does not require
that HHS make any changes to any of the ACA programs it administers or its enforcement of any portion
of the ACA at this time” and that the department “will continue administering and enforcing all aspects of
the ACA as it had before the court issued its decision.” The state intervenors have also filed a motion
seeking clarification that the December 14th order “does not relieve the parties to this litigation—or any
other State, entity, or individual—of their rights and obligations under [the ACA] until appellate review is
complete.” In the event that the court intends its ruling to affect the operation and implementation of the
ACA immediately, the state intervenors also seek a stay of the order pending appeal.
An appeal is expected to the U.S. Court of Appeals for the Fifth Circuit, and many legal commentators
predict that Supreme Court review may follow. However, when such an appeal may be filed by either the
Trump Administration or the state intervenors is not clear. Typically, appeals may only be taken from final
judgments of a district court, or with leave to file an interlocutory appeal (i.e., an interim appeal before
the district court proceedings have concluded). In their motion for clarification, the state intervenors have
also asked the Northern District of Texas to either enter a partial final judgment or certify the order for an
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interlocutory appeal. Questions on appeal may include the substantive constitutional question presented
by the individual mandate, as amended, as well as whether plaintiffs have standing to sue, or the degree to
which the individual mandate is severable from the remainder of the ACA.
In response to the intervening state defendants’ motion, the district court has ordered the plaintiffs and
federal defendants to respond to the state intervenors’ motion by December 21, 2018, and for the state
intervenors’ to submit a reply by December 26, 2018. In addition, the court directed the parties to include
proposals for addressing the lawsuit’s remaining challenges.
As plaintiffs in Texas seek to void the ACA, another legal challenge filed in the U.S. District Court for
Maryland seeks to ensure that the Act remains in force. In Maryland v. United States, filed in September
2018, Maryland’s Attorney General sued the U.S. and members of the Trump Administration, claiming
that the Texas litigation and certain administrative actions taken by the Administration have jeopardized
the stability of the health care market in the state. The federal government has sought to dismiss the
Maryland case, asserting that the state “does not challenge the violation of any law by Defendants, nor
does it seek to prevent any enforcement action” against the state. The Maryland court has not yet issued a
decision in the case. The Texas and Maryland cases raise the possibility of conflicting rulings about the
validity of the individual mandate and the ACA, increasing the likelihood that the Supreme Court would
resolve the conflict.
For Members of Congress concerned about the outcome of the most recent litigation over the ACA, the
Texas and Maryland cases offer a variety of legislative options. Congress could, of course, choose to take
no action and await further judicial developments in the Texas and Maryland cases. Alternatively,
Congress could pass legislation that would target the statutory underpinnings of these cases. For example,
Congress could amend the individual mandate to restore a financial penalty for failing to purchase health
insurance or conversely repeal the requirement to purchase health insurance in its entirety. These types of
proposals would seem to cure the individual mandate’s constitutional infirmities, as identified by the
Texas court, as well as eliminate any questions over the entire ACA’s continued validity. Another
possibility is that Congress could add a severability clause to the ACA. The Supreme Court has ruled that
the inclusion of these clauses “creates a presumption that Congress did not intend the validity of the
statute in question to depend on the validity of the constitutionally offensive provision.” Currently, the
ACA itself does not contain a severability clause. Should Congress deem it appropriate to enact a
severability clause, it could expressly delineate which specific ACA provisions should remain intact in
situations where a court concludes that one of the Act’s provisions is unconstitutional. Finally, Members
of Congress may consider enacting new legislation that contains provisions similar to the ACA, but omits
the provisions that the Texas court deemed constitutionally problematic. If enacted, such legislation could
remain in effect, irrespective of the outcome in Texas or Maryland. One example of such legislation is S.
3388, the Ensuring Coverage for Patients with Pre-Existing Conditions Act, which intends to preserve
certain ACA health insurance requirements, including guaranteed issue requirements.
Author Information
Edward C. Liu
Jennifer A. Staman
Legislative Attorney
Legislative Attorney
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