Texas Court Decision on the Affordable Care Act: The Ruling and What to Expect

Texas Court Decision on the Affordable Care Act: The Ruling and What to Expect

By now, everyone has heard about the decision in Texas v. U.S., where Judge Reed O’Connor of the Northern District of Texas struck down the Affordable Care Act’s (ACA) individual mandate as unconstitutional and found that the rest of the ACA was not severable and struck it down, too. Here’s our overview of the decision and what’s to come:

This suit was brought in 2018 by a group of 20 states, led by Texas, challenging the constitutionality of the individual mandate. There are also a couple of individual defendants. Led by California, a group of 16 states and the District of Columbia intervened in the case, concerned that the Trump Administration would not adequately defend against the suit.

The plaintiffs filed in the Fort Worth division of the Northern District, where Judge O’Connor is the only judge. They chose this forum because of O’Connor’s record and reputation – he was the judge who struck down regulatory protections for transgender students and held that the Indian Child Welfare Act was unconstitutional – and it clearly paid off. On December 14, Judge O’Connor issued partial summary judgement in favor of the plaintiffs holding the ACA is unconstitutional in its entirely. He issued declaratory relief with an effective date of January 1, 2019, but not an injunction. So, at this point, there is no order for the U.S. to take any immediate steps.

As many of us know, the ACA contains an “individual mandate” requiring most individuals to have health insurance or pay a penalty. This “everybody in the pool” requirement was designed to achieve numerous goals, such as getting people into care sooner and ameliorating costs by spreading them over a larger group. In National Federation of Independent Business v. Sebelius, the Court upheld the individual mandate as a valid exercise of Congress’s power to tax. However, in 2017, the Republican Congress removed the financial penalty for people who do not have or get insurance.

In his opinion, Judge O’Connor holds that because the mandate is set at zero, it can’t function as a tax and is unconstitutional. He also holds that the individual plaintiffs have standing because, even though they can ignore the mandate with no penalty, they are still under a compulsion to obey the requirement, which is sufficient injury.

Once the mandate was stricken, the court next considered severability – the question of whether or not Congress would have wanted the rest of the statute to remain in effect without the mandate. While severability is a question of congressional intent and judicial interpretation thereof, the doctrine cautions that judges should preserve whenever possible.  Despite this, Judge O’Connor held that the entire law must fall with the individual mandate.

This raises the question – didn’t Congress already decide this issue when it repealed the individual mandate but kept the rest of the ACA? Judge O’Connor reasons that there was no way to tell what Congress intended when it eliminated only the financial penalty because it did so through the reconciliation process where the only action it could take was to eliminate the financial penalty.

While there is uncertainty, we know a few things:

  • The California Attorney General has already said the case will be appealed. That will go to the Fifth Circuit, which is one of the more conservative Courts of Appeal. It is almost certain that whichever party loses will petition the Supreme Court for review. If the Fifth Circuit reverses what is clearly an erroneous decision, we would hope that the Supreme Court would simply let the decision stand, but it is difficult to predict.
  • In addition to the importance of this issue, there is another case lurking out there could potentially result in a Circuit split. In Maryland v. U.S., the state is challenging the Trump administration’s actions undermining the ACA and asking for a declaration that the law is constitutional. That case was stayed pending the outcome in Texas v. U.S. and there is a hearing on Wednesday, December 19 at which that issue will almost certainly arise.
  • In addition, come January, the new Congress with the newly-Democratic controlled House of Representatives will certainly have something to say about this.

Moreover, the federal government has announced that the ACA is still law and business continues as usual. On Dec. 17, the U.S. Department of Health & Human Services issued the following statement on the district court action:

The recent U.S. District Court decision regarding the Affordable Care Act is not an injunction that halts the enforcement of the law and not a final judgment. Therefore, HHS will continue administering and enforcing all aspects of the ACA as it had before the court issued its decision. This decision 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. As always, the Trump Administration stands ready to work with Congress on policy solutions that will deliver more insurance choices, better healthcare, and lower costs while continuing to protect individuals with pre-existing conditions.

The uncertainty comes from the procedural posture of the case and the history of the Department of Justice failing to defend the law. This is a grant of a declaratory judgment on only one count of a five-count complaint. The judge has issued an order requiring the parties to meet and confer on December 21 and jointly submit a schedule for resolving the remaining claims in early January. Thus, the decision is not immediately appealable, so certification from the District Court or an order from the Court of Appeals is necessary [On Dec. 17, the California Attorney General and a coalition of 17 attorneys general filed a motion with the court asking that it “provide clarity on its opinion and confirm that it does not change the status quo,” and stay its opinion or certify it “so that it may be appealed to the Fifth Circuit Court of Appeals immediately.”] . Moreover, while the Department of Health and Human Services is now giving reassuring signals, it’s clear that President Trump strongly opposes the ACA and may ultimately decide to follow the decision.

We will be watching closely, particularly with regard to implications for the Medicaid expansion.

*This post was first published on the Network for Public Health Law’s blog.

The Network for Public Health Law provides information and technical assistance on issues related to public health. The legal information and assistance provided in this document does not constitute legal advice or legal representation. For legal advice, readers should consult a lawyer in their state.

Support for the Network is provided by the Robert Wood Johnson Foundation (RWJF). The views expressed in this post do not necessarily represent the views of, and should not be attributed to, RWJF.

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