Federal Judge Rules ACA Unconstitutional, But Law Remains In Effect Pending Appeal

Federal Judge Rules ACA Unconstitutional, But Law Remains In Effect Pending Appeal

On Friday, December 14, 2018, U.S. District Court Judge Reed O’Connor struck down the entire Affordable Care Act (ACA).  Siding with the twenty states that brought the case, O’Connor noted that the passage of the Tax Cut and Jobs Act in 2017 effectively rendered the entire ACA unconstitutional.  However, this action does not impact current ACA compliance or coverage.  Following the ruling’s release, the White House issued a statement noting, “We expect this ruling will be appealed to the Supreme Court.  Pending the appeal process, the law remains in place.”

The premise of Texas v. The United States concerns the ACA’s individual mandate.  The plaintiffs argued that since Congress reduced the tax penalty for failure to comply with the ACA’s individual coverage mandate provisions to $0 beginning with the 2019 tax year, “the country is left with an individual mandate to buy health insurance that lacks any constitutional basis.  Once the heart of the ACA — the individual mandate — is declared unconstitutional, the remainder of the ACA must also fall,” and Judge O’Connor agreed with their assessment.

The next step in the legal process will be an immediate appeal to the U.S. Court of Appeals for the 5th Circuit by the 16 Democratic state attorneys general who intervened in the case to defend the health law.  In addition, current House Minority Leader Nancy Pelosi, who is set to become Speaker of the House when the 116th Congress convenes in January, issued the following statement, “When House Democrats take the gavel, the House of Representatives will move swiftly to formally intervene in the appeals process to uphold the life-saving protections for people with pre-existing conditions and reject Republicans’ effort to destroy the Affordable Care Act.”  Ultimately, the Supreme Court may settle the case.

Between now and then, all provisions of the law will stay in force. ACA-compliant coverage will carry forward, and all ACA requirements for employers, individuals, and health plans remain unchanged. 

While history isn’t always a predictor of future events, it is essential to keep in mind that during the initial round of federal cases challenging the constitutionality of the ACA in 2011, a Florida federal district court judge ruled that the individual mandate was outside the power of Congress.  Since he believed the mandate could not be severed from the rest of law, he also struck down the entire act, but then as now, the law remained in force while the cases made their way through the federal appeals court process. When the Supreme Court ultimately considered the issue in 2012, they voted 5-4 to uphold the law, and all five justices that supported the ACA are still active members of the Supreme Court.

It may take up to two years for Texas v. United States to work its way through the federal judicial system, and it is also possible that action by the incoming 116th Congress could impact both the ACA as it stands now and the trajectory of the case.

Kistler Tiffany Benefits will be watching this case closely to support and inform our clients.  We remain committed to providing you with exceptional service and timely information about any judicial or legislative developments.