July 10, 2019

A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit on Tuesday heard oral arguments in a lawsuit challenging the Affordable Care Act's (ACA's) constitutionality, and appeared likely to strike down the law's individual mandate.

Cheat sheet: What you need to know about the ACA

Lawsuit details

Attorneys general (AGs) from 20 Republican-led states filed the lawsuit, which argues that a 2017 tax reform law rendered the ACA's individual mandate unconstitutional by zeroing out the mandate's tax penalty for remaining uninsured, because the Supreme Court in 2012 ruled that the mandate would be unconstitutional without a tax penalty.

The GOP AGs also argue that the ACA cannot be separated from the individual mandate because the law does not does not include a severability clause stating that some parts of the law may stand if other parts are struck down. Therefore, the entire law must be invalidated if the individual mandate is struck down as unconstitutional, the Republican AGs claim.

U.S. District Judge Reed O'Connor in December 2018 agreed with the plaintiffs, but Democratic AGs from 18 states and the District of Columbia, who are defending the ACA in the case, appealed O'Connor's ruling to the U.S. Circuit Court of Appeals for the Fifth Circuit. House lawmakers also have joined in the lawsuit to defend the ACA.

The Department of Justice (DOJ) has declined to defend the ACA in the suit, and in a brief filed in June 2018 largely agreed with the GOP AGs, saying the individual mandate was no longer constitutional once the tax penalty was eliminated. But unlike the GOP states, DOJ said such a ruling should not invalidate the entire law.

However, DOJ in March changed tactics and said it agrees with O'Connor's ruling that the entire ACA should be struck down—a reversal that surprised some policymakers and legal experts.

Republican-appointed judges question Congress' intent on ACA, individual mandate

The appeals court panel during Tuesday's oral arguments appeared likely to strike down the ACA's individual mandate, but seemed mixed on whether it would scrap the entire health reform law along with it.

Two of the panel's Republican appointed judges—Judge Jennifer Walker Elrod and Judge Kurt Engelhardt—frequently raised questions regarding whether the ACA's individual mandate is constitutional now that it does not include a tax penalty, and whether the rest of the ACA could stand if the individual mandate is struck down. The panel's third and only Democratic appointed judge—Judge Carolyn Dineen King—remained silent during the more than 90-minute hearing.

Elrod and Engelhardt asked attorneys representing the Democratic AGs and House lawmakers to explain why the entire ACA should not be struck down if the individual mandate is found to be unconstitutional, noting that the ACA does not include a severability clause. Elrod asked, "If you no longer have the tax, why isn't [the ACA] unconstitutional?"

The lawyers representing the Democratic AGs argued that Congress did not eliminate the individual mandate's penalty, but simply reduced the penalty to $0.

But Elrod pushed back on that argument, questioning whether it was federal lawmakers' intention to strike down the ACA when they zeroed out the individual mandate's penalty. "How do we know that some members of Congress didn't say, 'Aha! This is the silver bullet that's going to undo the ACA?'" she asked.

Samuel Siegel—deputy solicitor general of California, which is one of the states defending the ACA in the lawsuit—argued that federal lawmakers had intentionally decided to only lower the individual mandate's tax penalty and not to eliminate the entire law. "All the court has to do is look at the text of the [tax reform law and] see that Congress zeroed out the only thing enforceable," Siegel said.

Engelhardt questioned why Congress did not act to pass legislation that would resolve the issue. "There's a political solution here that you, various parties, are asking this court to roll up its sleeves and get involved in," Engelhardt said to Douglas Letter, general counsel for the House. "Why does Congress want the Article III Judiciary to become the taxidermist for every legislative big game accomplishment that Congress achieves? Congress can fix this."

Letter said that the appeals court "cannot and should not draw any meaning from the fact Congress has not done any additional legislating" on the matter. Letter argued that the court must leave as much of the ACA intact as possible.

Judges' questions leave final ruling unclear

The judges during the hearing did not clearly indicate how they would rule, but Elrod's and Engelhardt's questions made it seem likely they would uphold the lower court's ruling striking down the individual mandate.

It is less clear how the panel might rule on whether to strike down the entire ACA along with the individual mandate. Elrod and Engelhardt indicated that the panel could send the severability question back to the lower court.

The panel did not say when they plan to issue a ruling in the case, but judges typically try to issue their decisions within a few months of oral arguments. August Flentje, special counsel to DOJ's civil division, said the Trump administration would continue to enforce the ACA until a final decision in the case is made.

Some experts believe the case eventually will end up before the Supreme Court, regardless of the appeals court's decision. For instance, Nicholas Bagley, a health law professor at the University of Michigan, in "The Incidental Economist" wrote, "If the panel holds that all or part of the ACA is invalid, this case is likely headed to the Supreme Court. Out of respect for a co-equal branch, the Trump administration will adhere to the Supreme Court's judgment across the whole United States, even if no injunction is entered and the judgment in a formal, technical sense only binds the plaintiffs who brought the suit."

Reaction

Robert Henneke—general counsel for the Texas Public Policy Foundation, who is serving as lead counsel for plaintiffs in the case—after the arguments said it was a "good day" for those challenging the ACA. "Today's arguments seem to have gone very, very well," he said.

Bagley in his post also noted that the oral arguments appeared to favor the plaintiffs, writing, "yesterday's argument went about as badly as it could've gone" for the defendants. "Instead of scoffing at the frivolousness of the red states' legal arguments, two judges on the panel appear open to holding that the ACA is wholly or partly invalid. We could be in for a long, bumpy ride," Bagley wrote.

Meanwhile, some Republican lawmakers suggested Congress would take action if the ACA eventually is struck down.

Sen. Kevin Cramer (R-N.D.) said, "If the appellate court upholds the lower court's decision, then I hope they're able to provide a transition. If the court decides [the ACA is] not [constitutional], then we have our work cut out for us."

Senate Majority Leader Mitch McConnell (R-Ky.) said, "There's nobody in the Senate not in favor of covering pre-existing conditions, nobody. And if that were, under any of these scenarios, to go away, we would act quickly on a bipartisan basis to restore it."

McConnell added that he expects the case ultimately will reach the Supreme Court (Baker, Axios, 7/9; Goldstein, Washington Post, 7/9; Kendall, Wall Street Journal, 7/9; McIntire, Roll Call, 7/9; Demko, Politico, 7/9; Levey, Los Angeles Times, 7/9).

Cheat sheet: What you need to know about the ACA

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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