Blog Post

The ACA lives another day: Supreme Court dismisses latest ACA challenge

By Heather Bell

June 17, 2021

    The Supreme Court on Thursday in a 7-2 ruling dismissed a case challenging the Affordable Care Act's constitutionality.

    The highly anticipated decision holds no surprises for those who have been following the case since February 2018, when a group of Republican-led states (later joined by two individual plaintiffs) filed the suit. In fact, the most surprising moments of this case can be attributed to the ever-changing position of the Department of Justice, which under former President Trump declined to defend the law in court, and then proceeded to issue briefing documents with conflicting opinions.

    What were the key legal questions?

    The case—California v. Texas—questioned whether the ACA's individual mandate, and by extension the entire law, can stand in light of the Tax Cuts and Jobs Act of 2017, which zeroed out the penalty for remaining uninsured. The plaintiffs argued that the Supreme Court in 2012 upheld the individual mandate as a tax, but because there is no longer a monetary penalty, the mandate is unconstitutional. They also argued that the individual mandate is the "heart of the ACA," and without the mandate, the rest of the ACA is invalid.

    As part of the case, the justices considered three key questions:

    1. Do the plaintiffs—a group of Republican-led states and two individuals—have standing to bring the lawsuit?
    2. Is the individual mandate unconstitutional?
    3. Is the rest of the ACA constitutional if the individual mandate is struck down?

    How did the justice's rule?

    In the opinion, written by Justice Stephen Breyer, the court ruled that the plaintiffs do not have a legal right to challenge the individual mandate because they have not demonstrated a past or future injury related to the defendants' conduct.

    The Justice's ruling is fairly straightforward: Since there is no financial penalty or enforcement mechanism for remaining uninsured, the individuals cannot claim to have been coerced into buying coverage. "Their problem lies in the fact that the statutory provision, while it tells them to obtain that coverage, has no means of enforcement. … Because of this, there is no possible Government action that is causally connected to the plaintiffs' injury—the costs of purchasing health insurance," Breyers wrote.

    The Court also dismissed the states' argument that the individual mandate harms them by increasing the number of people in state-funded programs, such as Medicaid and the Children's Health Insurance Plan, noting that those programs "have nothing to do with" the individual mandate. "Unsurprisingly, the States have not demonstrated that an unenforceable mandate will cause their residents to enroll in valuable benefits programs that they would otherwise forgo," Breyer wrote.

    In a concurring opinion, Chief Justice Clarence Thomas recounted the Court's "dubious history" with the ACA, but noted that the Justices "must assess the current suit on its own terms. And, here, there is a fundamental problem with the arguments advanced by the plaintiffs in attacking the Act—they have not identified any unlawful action that has injured them."

    However, it's worth noting that this decision was not unanimous. In a dissenting opinion, Justice Samuel Alito, joined by Justice Neil Gorsuch, agreed with the plaintiffs and wrote that the individual mandate with a zeroed-out penalty can no longer be viewed as a tax because it raises no revenue for the federal government, and is therefore an unconstitutional mandate. Alito further agreed with the plaintiffs that the individual mandate cannot be severed from the law. As such, Alito writes the states "are entitled to a judgment providing that they are not obligated to comply with the ACA provisions that burden them."

    What this means for health care leaders

    For health care leaders, the ruling is clear: The ACA will continue to be law, and HHS and its respective agencies will continue to enforce regulations implementing the law. In simpler terms, nothing is changing. The individual mandate will continue to exist in an unenforced capacity unless Congress changes the law, Medicaid expansion efforts will continue in holdout states, the federal health insurance exchange and related subsidies to buy insurance will still operate, the Center for Medicare and Medicaid Innovation will continue to lead the government's shift to value-based care, FDA's pathway for biosimilar approvals will continue, and much, much more.

    That said, this is not necessarily the final word on the ACA's constitutionality. This is the third time the law has made it to the Supreme Court, or as Alito phrased it, "the third installment in our epic Affordable Care Act trilogy." But it's not necessarily the final act; the majority opinion did not address the issues of constitutionality or severability, which leaves the door open for future legal challenges—so long as the plaintiffs bringing suit can demonstrate standing.

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