Federal Circuit Court Rules ACA Individual Mandate Unconstitutional, But ACA Remains Fully in Effect For Now

Federal Circuit Court Rules ACA Individual Mandate Unconstitutional, But ACA Remains Fully in Effect For Now

On Wednesday, December 18, 2019, the United States Court of Appeals for the 5th Circuit partially upheld a lower court ruling in the case of Texas v. United States, finding the individual mandate provisions of the Affordable Care Act (ACA) unconstitutional. However, the entire law remains in effect for now. This decision does not affect any current ACA coverage and compliance requirements.  It also does not impact any state-level individual mandate requirements.

The premise of Texas v.  United States is that 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, so the law can no longer be considered constitutional based on Congress’s power of taxation.  The 5th Circuit Court agreed, concluding, “the individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power.”

However, rather than striking down the entire law like U.S. District Court Judge Reed O’Connor did last year, the 5th Circuit remanded part of the original ruling back to the District Court.  The 5th Circuit ruling instructs the lower court to “conduct a more searching inquiry into which provisions of the ACA Congress intended to be inseverable from the individual mandate…The rule of law demands a careful, precise explanation of whether the provisions of the ACA are affected by the unconstitutionality of the individual mandate as it exists today.”

Based on the appeals court’s decision, two next steps in the legal process will occur within short order.  First of all, Judge O’Connor will have to reconsider how much, if any, of the ACA can be legally separated from the requirement for individuals to maintain health insurance coverage or pay a tax penalty.  This process will require new proceedings and could stretch well into next year. While the ACA does not include a distinct severability clause, the law contains ten expansive titles.  It covers everything from private market health insurance reform to the expansion of Medicaid to provisions that have drastically altered the structure of Medicare over the past ten years. But the ACA also includes noncontroversial sections that have little or nothing to do with the individual mandate, like medical student loan provisions and the permanent authorization of the most extensive federal health program providing coverage to Native Americans. The Trump Administration has varied its arguments on how much of the ACA can and should be separated from the individual mandate, which is a key reason why the Appeals Court instructed the District Court to review the matter more carefully.

Second, the defendants in the case plan to ask the United States Supreme Court to consider their appeal of this decision on an immediate basis.  Xavier Becerra, the California Attorneys General who is leading the defense of the ACA in this case, stated: “it’s time to get rid of the uncertainty” when announcing his intent to appeal to the Supreme Court right.  The Supreme Court could decide to take up the case now, or they may elect to wait to see how the District Court proceedings play out.  In any case, the Supreme Court will likely be the authority to ultimately settle Texas v. United States. It is just unclear now if the case will conclude in 2020, or if the appeals process will stretch into 2021.

No matter how long it takes, all provisions of the law remain in force for the time being.  ACA-compliant coverage will carry forward, and all ACA requirements for employers, individuals, and health plans remain unchanged.

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 future judicial or legislative developments that impact health insurance coverage arrangements.