Fifth Circuit Holds the Individual Mandate Unconstitutional: Implications for Congress

Fifth Circuit Holds the Individual Mandate Unconstitutional: Implications for Congress

Legal Sidebari

Fifth Circuit Holds the Individual Mandate
Unconstitutional: Implications for Congress
Updated March 3, 2020
Update 3/2/20: On March 2, 2020, the Supreme Court granted review in the Texas litigation. The
questions at issue before the Court are: (1) whether the individual and state plaintiffs have standing to
challenge the individual mandate; (2) whether the individual mandate, as amended, is constitutional; and
(3) whether the individual mandate is severable from the rest of the ACA. Oral arguments in the litigation
have not yet been scheduled, but will likely take place next fall.
On December 18, 2019, the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) issued its decision
in Texas v. United States on the constitutionality of the Patient Protection and Affordable Care Act’s
(ACA’s) requirement for individuals to maintain health insurance (the so-called “individual mandate”)
and the continued validity of the remainder of the Act. The Fifth Circuit affirmed a district court ruling
that Congress lacked the constitutional authority to enact the individual mandate, as amended by the
subsequent 2017 tax revision, but declined to resolve a broader issue: what happens now to the ACA’s
remaining provisions? The Fifth Circuit reversed the district court’s decision on this severability question
and sent the case back to the district court to “explain with precision how particular portions of the ACA
as it exists post-2017 rise or fall on the constitutionality of the individual mandate.” This Sidebar provides
background on Texas; discusses the Fifth Circuit’s decision; highlights potential effects of the decision
and possible next steps for the case; and identifies legislative options for Congress.
Background
Enacted in 2010, one of the ACA’s central goals was to “increase the number and share of Americans
who are insured.” In addition to sweeping changes to federal private health insurance regulation, income-
based subsidies to facilitate the purchase of health insurance, and substantial increases to the scope of
Medicaid coverage, the ACA, as originally enacted, also compelled certain individuals to maintain health
insurance and imposed financial penalties on those who failed to do so. These latter provisions form what
is commonly referred to as the individual mandate. In addition, the ACA includes other provisions
covering an array of issues ranging from health care workforce promotion to improving access to
innovative medical therapies.
Litigation over the constitutionality of the individual mandate is not new. In 2012, the Supreme Court
addressed this issue in a landmark case, National Federation of Independent Business v. Sebelius (NFIB).
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In NFIB, five Supreme Court Justices concluded that neither Congress’s authority to regulate interstate
commerce nor its derivative authority to enact necessary laws to effectuate its enumerated powers
empowered Congress to enact the individual mandate. These Justices explained that while the Commerce
Clause allows Congress to regulate existing commercial activity, it does not bestow Congress with the
authority to compel individuals to become active in commerce. Nonetheless, a different group of five
Justices concluded that Congress’s power to levy taxes did so. In his controlling opinion, Chief Justice
Roberts stated that it was “fairly possible” to view the penalty as a tax, especially because it possessed
“the essential feature of any tax: It produces at least some revenue for the Government.” Because the
individual mandate could be plausibly construed as a tax, a majority of the Court held that the individual
mandate was constitutional. Conversely, four dissenting justices expressed the view that neither the
interstate commerce nor taxing power supported the individual mandate, and because the individual
mandate was so integral to the ACA’s enactment and operation, the entire Act should fall with it.
In 2017, Congress amended the individual mandate to zero out the financial penalty imposed on
individuals without health coverage, but left intact the language requiring individuals to maintain such
coverage. Soon after, several state attorneys general and governors (the “plaintiff-states”) and other
individuals filed suit against the federal government 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 and argued that
the mandate was unconstitutional, a different group of states intervened in the case as defendants (the
“intervenor-defendant-states”) in support of the individual mandate and the ACA.
As detailed in this CRS Sidebar, in December 2018, a federal judge for the U.S. District Court for the
Northern District of Texas sided with the plaintiffs and the federal government in the Texas case and held
that the individual mandate was unconstitutional. After determining that the individual plaintiffs had
standing to bring the case, the court concluded that neither Congress’s interstate commerce nor its taxing
power supported the individual mandate, as amended by the 2017 Act. As discussed below, when courts
rule that a specific provision within a larger statute is unconstitutional, a follow-up issue is severability,
i.e., the extent to which the remaining statute can stand on its own, without the unconstitutional provision,
consistent with congressional intent.
The district court in Texas held that the individual mandate could not be severed from the entire ACA. In
its decision, the district court relied heavily on congressional findings from 2010 that 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, citing to the Justices’ competing opinions in NFIB and subsequent cases involving the ACA, the
district court maintained that “all nine Justices” have recognized that the individual mandate and other
ACA provisions are inextricably intertwined. The intervenor-defendant-states and the federal government
appealed the district court’s decision to the Fifth Circuit. The U.S. House of Representatives intervened
on appeal as defendants to defend the ACA’s validity.
Overview of the Fifth Circuit’s Decision
After determining that the appeal was properly before it and that at least two plaintiff groups had standing
to sue, a divided panel of the Fifth Circuit held on the merits that the individual mandate, following the
2017 amendment that reduced the financial penalty to zero, is no longer constitutional under NFIB. In the
court’s view, the essential features of a tax, including that it produce some revenue for the government, no
longer exist in the amended individual mandate. Thus, the Fifth Circuit concluded, it is “no longer fairly

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possible to save the mandate’s constitutionality under Congress’ taxing power,” and the amended
individual mandate can only be viewed as a “command to purchase insurance.” Because NFIB held that
such a command was not authorized under the Interstate Commerce Clause or the Necessary and Proper
Clause, the amended individual mandate was held unconstitutional.
Having determined that the amended individual mandate is unconstitutional, the Fifth Circuit next
considered whether, or to what extent, the rest of the ACA is severable from the individual mandate. The
severability doctrine requires a court to first consider whether the statute without the constitutionally
defective provision could operate in a manner consistent with Congress’s intent. If so, the court must then
determine whether Congress would have enacted the remaining provisions without the unconstitutional
portion. This inquiry into “counterfactual Congressional intent,” the Fifth Circuit observed, “places courts
between a rock and a hard place.” Courts must refrain from rewriting a statute in an effort to preserve the
legislation, while also refraining from invalidating more of the statute than necessary. The need to strike
this difficult balance thus, in the Fifth Circuit’s view, requires a “meticulous analysis” that is “at its most
demanding” in the context of a sprawling and amended statutory scheme like the ACA, which
encompasses provisions relating to not only the regulation of private health insurance, but also Medicare,
funding for preventive healthcare programs, drug regulation, nutritional content display at restaurants, and
many other areas.
The Fifth Circuit held that the district court’s severability analysis—which concluded that the individual
mandate is inseverable from the rest of the ACA by focusing on the 2010 Congress’s labeling of the
mandate as “essential” to its goal of “creating effective health insurance markets”—did not sufficiently
satisfy the need “for a careful, granular” approach in this case. Thus, the Fifth Circuit remanded the
severability issue to the district court to conduct “a more searching inquiry” to explain “with precision
how particular portions of the ACA as it exists post-2017 rise or fall on the constitutionality of the
individual mandate.” In so doing, the court emphasized that it was not making any comment on how the
district court should conduct this inquiry, only that the inquiry must be made. In addition to the
severability issue, the Fifth Circuit also remanded for the district court to consider, in the first instance,
the federal government’s arguments on appeal that the declaratory relief in this case should not be
nationwide in scope, but instead, should be tailored to block the ACA’s enforcement in only the plaintiff-
states, and only as to the injurious provisions.
The dissent disagreed with nearly all aspects of the majority opinion. As a threshold matter, the dissent
believed that the court should not have reached the merits because no plaintiff had suffered a cognizable
injury that establishes standing, given that “absolutely nothing” will happen to those who fail to maintain
health insurance under the amended individual mandate. As to the merits, the dissent took the view that
by merely zeroing out the financial penalty, Congress maintained the same “lawful choice” that existed
under the original mandate under NFIB for individuals: either purchase insurance or pay a penalty (which
is now $0). The dissent further explained that in passing a $0 tax, Congress did not alter the “legal rights,
duties and relations of [any] persons.” Thus, in the dissent’s view, the amended mandate was not an
exercise of Congress’s legislative power that must emanate from one of its enumerated powers. Finally,
the dissent would have reversed the district court on severability. Because Congress zeroed out the
penalty without repealing any other part of the ACA, the dissent believed that “little guesswork is needed
to determine that Congress believed the ACA could stand in its entirety” without the penalty.
Immediate Effects of the Decision
Notwithstanding the court’s holding that the individual mandate is unconstitutional, the immediate
consequences of the decision on the individual mandate are somewhat minimal. As noted above, the
individual mandate, as amended by the 2017 tax revision, no longer imposed any consequences on those
who fail to satisfy the individual mandate. Therefore, while the Fifth Circuit concluded that this mandate

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is invalid, noncompliant individuals would not have been subject to a penalty prior to the court’s ruling in
any event.
The immediate effect of the decision on the rest of the ACA is slightly more significant. The district court
had previously declared the remainder of the ACA invalid as inseverable from the individual mandate.
That holding has now been vacated by the Fifth Circuit. Moreover, while the Fifth Circuit gave minimal
guidance on the severability question, it did instruct the district court to reconsider severability in the
context of the ACA as it existed in 2017, suggesting that “[m]ore is needed” than the recapitulation of the
dissenting justices’ view of severability in 2012 in NFIB. However, because the district court had not
issued an injunction against the implementation or enforcement of the ACA, the existence of that
declaratory judgment had not acted as a practical obstacle affecting the ACA’s implementation or
enforcement. In the context of ACA enforcement and implementation, the greatest effect of the Fifth
Circuit’s decision may be to delay any definitive answers to questions about the validity of the remainder
of the ACA, and to what extent any invalid provisions would be enjoined. As discussed in the next
section, the duration of that delay may depend upon the litigants’ next steps.
Next Steps in the Litigation
Because the Fifth Circuit’s decision partially affirmed and partially reversed the district court’s ruling,
each party in the case has standing to petition for review the particular holdings in the Fifth Circuit’s
decision that were not in that party’s favor, either by the entire Fifth Circuit (known as en banc review) or
by the Supreme Court. Specifically, the plaintiff-states or the federal government may argue that the Fifth
Circuit’s reversal of the district court’s severability analysis was erroneous. In contrast, the intervenor-
defendant-states may argue that the plaintiffs lacked standing to challenge the individual mandate or that
the individual mandate remains constitutional notwithstanding the lack of a penalty associated with it.
As described in this CRS product, in cases in which the United States is a party, parties have forty-five
days to file a petition for rehearing or rehearing en banc. Beyond potential en banc review, parties
generally have ninety days from the appellate court’s decision or denial of a rehearing to petition the
Supreme Court for certiorari. Writs of certiorari are granted at the Court’s discretion and typically occur
after briefing from all parties. Grants are more likely where a challenge to an important federal policy is
at issue. Conversely, grants may be less likely where further litigation in the lower courts, such as the
remand directed by the Fifth Circuit in Texas, may clarify the need for Supreme Court review, or lack
thereof. Once a writ of certiorari has been granted, the parties submit additional briefing on the merits,
and a time for oral argument may be scheduled. For writs of certiorari granted after January of a given
year, oral argument is typically scheduled for the Court’s next term, which begins the following October.
Alternatively, if further appellate review is not sought or granted at this time, the case will return to the
district court to conduct the more searching severability analysis directed by the Fifth Circuit. As part of
that process, which could be lengthy, the court may require additional briefing from the parties addressing
the specific questions raised by the Fifth Circuit, such as the 2017 Congress’s intent and the interaction
between the individual mandate and each of ACA’s other provisions.
Considerations for Congress
There remain a variety of legislative options for Congress to address the central legal issues presented in
the Texas litigation. Congress could, of course, choose to take no action and await further judicial
developments. Alternatively, Congress could pass legislation that would target the statutory underpinnings
of the plaintiffs’ arguments. For example, Congress could amend the individual mandate to restore a
financial penalty for failing to maintain health insurance to cure the constitutional infirmities the Fifth
Circuit identified. Conversely, Congress could repeal the requirement to maintain health insurance in its

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entirety to render the litigation moot by removing the provision whose constitutionality is in question.
Either option would seemingly render further litigation over the rest of the ACA’s continued validity
unnecessary.
Another possibility is for Congress to 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 the specific ACA provisions that should remain intact in
situations where a court concludes that one of the Act’s other provisions is unconstitutional. An example
of such a bill from the current Congress is H.R. 383, the Continuing Coverage for Preexisting Conditions
Act of 2019.
Finally, Congress may consider enacting new legislation that contains provisions similar to the ACA, but
are independent of the individual mandate language that the Fifth Circuit held constitutionally
problematic. If enacted, such legislation could remain in effect irrespective of the outcome in Texas. One
example of such legislation is S. 1125, the Protect Act, which intends to preserve certain ACA health
insurance requirements, including guaranteed issue requirements.

Author Information

Jennifer A. Staman
Edward C. Liu
Legislative Attorney
Legislative Attorney

Wen S. Shen

Legislative Attorney

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