Fifth Circuit Declares ACA's Individual Mandate Unconstitutional

December 22, 2019 | Kristine A. Tidgren

On December 18, 2019, a divided panel of the United States Court of Appeals for the Fifth Circuit affirmed a Texas district court’s December 2018, ruling that the individual mandate in the Affordable Care Act is unconstitutional in light of changes made by the Tax Cuts and Jobs Act of 2017 (TCJA). Texas v. U.S., No. 19-10011 (5th Cir. Dec. 18, 2019). Although the district court had ruled that this infirmity rendered the entire ACA unconstitutional, the Fifth Circuit (in a 2-1 decision) remanded the case to the district court for a more precise determination of whether the unconstitutional individual mandate is severable from the ACA as a whole.

In reaching its decision, the Fifth Circuit relied on Nat’l Fed’n of Indep. Businesses v. Sebelius (NFIB), 567 U.S. 519 (2012), in which the U.S. Supreme Court decided that the ACA’s individual mandate  could  be  read  as  a  tax  on  an  individual’s  decision  not  to  purchase  insurance,  which  was  a  constitutional  exercise  of  Congress’  taxing  powers  under Article I of the U.S. Constitution. The Fifth Circuit reasoned that such a conclusion could only be drawn when the shared responsibility payment produced revenue. Because the TCJA set the individual shared responsibility payment to zero, the shared responsibility payment no longer produces revenue, and the individual mandate has lost its constitutional footing.

The district court had ruled that the unconstitutional individual mandate was inseverable from the legislation as a whole, thereby tainting the entirety of the ACA. The Fifth Circuit vacated this portion of the decision, however, and remanded for further consideration. The Fifth Circuit instructed the district court to consider “with a finer-toothed comb” what provisions of the ACA are indeed inseverable and to consider whether Congress would have preferred no ACA at all to an ACA without the individual mandate. The court also instructed the district court to consider on remand the proper relief to be granted in light of its findings.

What does this case mean? For the time being, it is status quo. A number of states, however, including Iowa, have filed a petition asking the U.S. Supreme Court to immediately review the case. They urge that the Fifth Circuit’s decision has created uncertainty about the status of the Affordable Care Act that must be resolved. While possible, it appears unlikely that the U.S. Supreme Court will step in to consider this issue before the case has worked its way back through the system. And because 2020 (and another election) may be behind us before that happens, stay tuned for future wrangling.