A federal judge struck down the ACA. (But hospitals shouldn't panic yet.)

A federal judge on Friday ruled that the Affordable Care's (ACA) individual mandate, and therefore the entire law, is unconstitutional.

Just updated: Your cheat sheets for understanding health care's legal landscape

Lawsuit details

The ruling came in response to a lawsuit brought by a group of 20 Republican-led states that argued the 2017 tax reform law, which eliminates the individual mandate's tax penalty starting in 2019, has rendered the individual mandate, and by extension the entire health reform law, unconstitutional.

The Department of Justice (DOJ), which has declined to defend the ACA in the suit, in a brief largely agreed with the 20 states challenging the ACA's constitutionality, saying the individual mandate will no longer be constitutional once the tax penalty is eliminated in 2019. But unlike the GOP states, DOJ said such a ruling should not invalidate the entire law.

Instead, DOJ argued a ruling invalidating the ACA's individual mandate should only affect some of the ACA's consumer insurance protections, such as the ACA's ban on insurers denying people health coverage or charging them higher premium rates based on pre-existing medical conditions, as well as limits on how much insurers can charge people based on gender and age, would no longer be constitutional.

Judge rules ACA is unconstitutional

U.S. District Judge Reed O'Connor on Friday in a declaratory judgement ruled that eliminating the individual mandate's tax penalty made the mandate unconstitutional. He also ruled that the ACA cannot be severed from the mandate, meaning the entire ACA must be struck down because the individual mandate is unconstitutional. O'Connor wrote in his ruling, "[T]he individual mandate 'is so interwoven with [the ACA's] regulations that they cannot be separated. None of them can stand.'"

Why there's no need for hospitals to panic, yet

Industry observers were quick to note that the ruling once again creates a large amount of uncertainty around the ACA and its future. If the decision ultimately is finalized and upheld, the effects would be wide-ranging, invalidating not only the individual mandate, but the ACA's exchanges, federal subsidies, and many of the provider payment reforms created under the Center for Medicare and Medicaid Innovation.

Politico's "Pulse" reports that uncertainty in the health care industry can cause hospital CEOs to delay investments and health insurers to make contingency plans, and can leave consumers unsure if they are supposed to sign up for coverage.

While President Trump in a tweet called O'Connor's ruling "Great news for America," legal experts and public health officials were quick to note that there is no need for ACA supporters to panic, as O'Connor's ruling, which came after business hours on Friday, does not prohibit the federal government from enforcing the law.

Nicholas Bagley, a professor at University of Michigan Law School and an expert in health law, in a tweet explained that O'Connor issued a declaratory judgement, not an injunction, and his declaration "resolved only the first of five counts that the plaintiffs brought." Without a clear injunction, the federal government must continue to carry out the law, he said.

CMS Administrator Seema Verma in a tweet posted Friday wrote, "The recent federal court decision is still moving through the courts, and the exchanges are still open for business and we will continue with open enrollment. There is no impact to current coverage or coverage in a 2019 plan."

ACA proponents to appeal ruling—and experts say it's unlikely to survive a court challenge

Democratic AGs and lawmakers already have signaled their intent to appeal the ruling and pursue legislation to validate the ACA, and legal experts who have argued for and against the ACA say the ruling is unlikely to survive a legal challenge.

California Attorney General Xavier Becerra (D), who is leading the coalition of Democratic-led states defending the ACA in the lawsuit, in a statement issued Friday said the states will appeal the ruling immediately.

Democrats on the House Ways and Means Committee in a statement issued Friday also said they "will take immediate action in the new Congress to intervene in this case and appeal this decision." They added, "House Democrats will do whatever it takes to make sure the protections enshrined in the [ACA] endure."

Sen. Minority Leader Chuck Schumer (D-N.Y.) during an appearance on NBC's "Meet the Press" on Sunday said Senate Democrats also would "put a vote on the floor urging an intervention in the case" as soon as possible.

But O'Connor's declaration could pose obstacles to an immediate repeal. Bagley explained that O'Connor might need to issue a final ruling on the case before an appeal can be filed. According to Modern Healthcare, O'Connor has requested that the AGs involved in the case set a briefing schedule for the claims still pending in the the lawsuit, which could delay any appeals actions in the case.

Some legal experts say the ruling is unlikely to be upheld once it advances to an appellate court.

Two law professors who have taken opposing stances on past ACA lawsuits in a New York Times opinion piece called O'Connor's ruling "an exercise of raw judicial power, unmoored from the relevant doctrines concerning when judges may strike down a whole law because of a single alleged legal infirmity buried within." In the opinion piece, Jonathan Adler, a professor at the Case Western Reserve University School of Law, and Abbe Gluck, a professor and faculty director at the Solomon Center for Health Law and Policy at Yale Law School, argued that the ruling ignored the legal principle that courts should be cautious of striking down an entire law because of issues with just one section of the statute.

The American Medical Association in a statement similarly called the ruling "a stunning display of judicial activism."

Chip Kahn, who leads the Federation of American Hospitals, said, "The judge got it wrong," adding, "This ruling would have a devastating impact on the patients we serve and the nation's health care system as a whole."

But Stephen Miller, a senior adviser at the White House, during an appearance on CBS' "Face the Nation" on Sunday said he believes "the likeliest outcome" is that the case eventually will make it to the Supreme Court, and the high court will strike down the ACA. "Obamacare has always been unconstitutional," he said, adding, "The more important question is whether Democrats are going to work with Republicans once Obamacare is ultimately struck down, which we believe it will be, to come up with a replacement plan" (Demko/Cancryn, Politico, 12/14; Herman, "Vitals," Axios, 12/17; Council for Affordable Health Coverage statement, 12/16; Rovner, Kaiser Health News, 12/14; Peterson/Armour, Wall Street Journal, 12/15; Diamond, Politico, 12/15; Weinstock, Modern Healthcare, 12/16; Burke [1], The Hill, 12/16; Burke [2], The Hill, 12/16).

Cheat sheet: What you need to know about the ACA

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The Patient Protection and Affordable Care Act, otherwise known as the ACA, is the comprehensive health care reform bill passed by Congress in March, 2010. The law reshapes the way health care is delivered and financed by transitioning providers from a volume-based fee-for-service system toward value-based care.

Download the ACA cheat sheet to get a quick overview of this significant U.S. health care legislation.

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