Justice Department Will Argue Against ACA on Appeal

The United States Justice Department has changed its position and is now supporting the position that the Affordable Care Act (ACA) was rendered unconstitutional when Congress set the individual shared responsibility payment to zero in the 2017 Tax Cuts and Jobs Act.

On December 14, 2018, United States District Court Judge Reed O’Connor ruled that when Congress set the individual shared responsibility payment to zero, beginning in 2019, it invalidated the Affordable Care Act in its entirety. Texas v. United States, No. 4:18-cv-00167-O (N.D. Tex. Dec. 14, 2018). Although the federal government filed a notice of appeal with the Fifth Circuit Court of Appeals on January 4, 2019, to challenge the Texas court's decision, it reversed course on March 25, 2019. Assistant Attorney General Joseph Hunt filed a letter with the United States Court of Appeals for the Fifth Circuit stating that the Department of Justice had "determined that the district court's judgment should be affirmed." The letter states that the United States intends to file a brief on the appellees' schedule, in support of the district court's ruling.

This leaves intervenor appellants to challenge the district court's ruling. These appellants include the States of California, Connecticut, Delaware, Hawaii, Illinois, Kentucky, Massachusetts, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington, Minnesota, and the District of Columbia. The appellants filed their opening brief on March 25.

The United States will now join the plaintiffs who brought the action in arguing that the district court's order declaring the ACA unconstitutional should be upheld. Plaintiffs include the States of Texas, Wisconsin, Alabama, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Utah, West Virginia, and Arkansas.

The Texas court based its ruling on Nat’l Fed’n of Indep. Businesses v. Sebelius (NFIB), 567 U.S. 519 (2012), in which the U.S. Supreme Court upheld the constitutionality of the individual mandate. Chief Justice Roberts, writing for the majority of the Court in NFIB, found that while the individual mandate would not be a constitutional exercise of Congressional power under the Interstate Commerce Clause or the Necessary and Proper Clause, it was constitutional under Congress’s Tax Power. This required a finding that the associated individual shared responsibility payment was a tax, not a penalty as the law called it.

In its December decision, the Texas court reasoned that if the individual shared responsibility payment is zero, there is no tax. As if there is no tax, there is no constitutional source of power for the individual mandate, which continues to direct individuals to purchase health insurance, even in the absence of a monetary penalty. The Texas court then went on to declare that this unconstitutional individual mandate is inseverable from the ACA as a whole because Congress clearly stated that the mandate was “essential” to the law. Because rewriting the ACA without the essential mandate is beyond the power of a court, the court ruled that the remaining provisions of the ACA were thus invalid.

On December 30, 2018, the Texas court issued an order staying its judgment pending resolution of appeals. The court agreed that immediately implementing the judgment declaring the ACA void could cause chaos for patients, providers, insurance carriers,and federal and state governments. The ACA continues in full force unless and until a final appellate decision upholds the Texas court’s judgment.

We will keep you posted as the appeal proceeds. It just got more interesting.