Texas xas vs. Un vs. United Stat ited States es Th The Repea e Repeal l of A of ACA? CA? Larry Grudzien Attorney at Law
ABOUT LARRY Lawrence (Larry) Grudzien, JD, LLM is an attorney practicing exclusively in the field of employee benefits. He has experience in dealing with qualified plans, health and welfare, fringe benefits and executive compensation areas. He has more than 35 years’ experience in employee benefit law. Mr. Grudzien was also an adjunct faculty member of John Marshall Law School’s LL.M. program in Employee Benefits and at the Valparaiso University’s School of Law. Mr. Grudzien has a B.A. degree in history and political science from Indiana University, J.D. degree from Valparaiso University School of Law and LL.M. degree in tax from Boston University School of Law. He is a member of Indiana and Illinois Bars.
AGENDA • What was decided by the court? • What was the basis for the decision? • What will happen as a result of the decision? Questions to be answered following the presentation.
What was decided by the court?
WHAT WAS DECIDED BY THE COURT? • On December 14, 2018, Judge Reed O’Connor of the Fifth United States District Court for the Northern District of Texas ruled that the Affordable Care Act or ACA (a/k/a “Obama Care”) is unconstitutional and therefore invalid. • The lawsuit, Texas v. United States, was commenced by 19 states and two individuals.
WHAT WAS DECIDED BY THE COURT? • The intervenor states (Democratic Attorney Generals) later joined the litigation to defend the ACA. • The federal defendants, which include the US, HHS, and the IRS, did not defend the individual mandate's constitutionality, but argued that the mandate was severable from other ACA provisions.
WHAT WAS DECIDED BY THE COURT? This decision, if ultimately upheld through the appeals process, would eliminate: not only the Marketplaces, • Medicaid expansion, • premium subsidies, • employer mandate, • and other provisions governing individual insurance and • employer-sponsored health plans, but also provisions that created the Center for Medicare and Medicaid Innovation, that apply the Mental Health Parity and Addiction Equity Act to individual and small group plans, that close the Medicare Part D donut hole, and that created an approvals process for biosimilar drugs, among numerous other provisions.
WHAT WAS DECIDED BY THE COURT? Judge O’Connor reached three conclusions: • the plaintiffs have standing to sue; • the individual mandate is no longer permissible under Congress’s taxing power and is unconstitutional; and • the individual mandate is essential to and inseverable from the entire ACA, meaning the entire law is declared invalid.
WHAT WAS DECIDED BY THE COURT? • We are a nation of limited Congressional authority. • If Congress is to act constitutionally, it must find a basis to do so in the Constitution. • In 2012, in what is known as the NFIB case, the Supreme Court upheld the constitutionality of the individual mandate by saying that its individual mandate imposed a tax on those who did not buy ACA-approved insurance. A majority of the Supreme Court reasoned that the individual mandate represents a legitimate exercise of the Congressional power in the Constitution to levy taxes .
WHAT WAS DECIDED BY THE COURT? • At the time, the Solicitor General (arguing on behalf of the Obama administration) argued that the individual mandate was inseparable from the prohibition on pre-existing condition exclusions, meaning if the Court were to deem the individual mandate unconstitutional, other provisions of the law would likely have been struck down as well. • In 2017, as part of the Republican tax cuts law known as the Tax Cuts and Jobs Act or TCJA, Congress reduced the ACA individual mandate tax to $0, but did not repeal the mandate itself.
What was the basis for the decision?
WHAT WAS THE BASIS FOR THE DECISION? • The Constitution’s taxing power cannot, after the TCJA eliminated the tax, be used to make the ACA constitutional because a tax is not a tax if there is no revenue generated – it is more of a penalty. • A majority of the Supreme Court in NFIB said that the Constitution’s Commerce Clause power did not extend to mandating that Americans buy products, so there is no Constitutional underpinning for the ACA after the taxing power becomes irrelevant by virtue of TCJA.
WHAT WAS THE BASIS FOR THE DECISION? • Judge O’Connor ruled on summary judgment that the ACA's individual mandate was no longer constitutional because it no longer triggers a tax and did not enjoin the federal government from enforcing the non-individual mandate aspects of the ACA. • He has not (yet) granted the plaintiffs’ request for an injunction.
WHAT WAS THE BASIS FOR THE DECISION? Standing: • A collection of 19 Attorneys Generals and 2 individuals sued the United States • District Court found plaintiffs has standing because the individual mandate was still in place. • The Supreme Court requires an injury in fact to sue in federal district court. • If TCJA removes any possibility of a tax penalty, where is the injury?
WHAT WAS THE BASIS FOR THE DECISION? The individual mandate is no longer permissible under Congress’s taxing power and is unconstitutional: The Supreme Court agreed that Congress did not have the authority to require private • individuals to engage in a private transaction (that is, purchase health insurance) but the Court upheld the law as a proper exercise of Congress’ power to tax. In the view of the Court’s majority, Congress created a tax on those who refused to • purchase health insurance as defined under the ACA. Absent the penalty for failing to purchase health insurance, the plaintiffs argued • that the law was no longer an exercise of Congress’ taxing power and, therefore, should be assessed under other Congressional powers that the Supreme Court had previously found insufficient. The Texas federal court agreed, finding the post-TCJA ACA mandate • to be unconstitutional.
WHAT WAS THE BASIS FOR THE DECISION? The individual mandate is essential to and inseverable from the entire ACA, meaning the entire law is declared invalid: • The court also held that the unconstitutional mandate cannot be severed from the rest of the ACA, citing the text of the law itself and Supreme Court decisions describing the individual mandate as essential to the proper functioning of the ACA, and that without the mandate, the entire ACA must fall. • The court determined that the individual mandate is essential to, and must work together with, the ACA’s larger regulation of the health insurance market.
What will happen as a result of the decision?
WHAT WILL HAPPEN AS A RESULT OF THE DECISION? • On December 21, 2018, the plaintiffs and the federal government asked the Judge to allow for an immediate appeal to the Fifth Circuit Court of Appeals of his decision to invalidate the entire Affordable Care Act (ACA). • This means that all parties to Texas — the plaintiffs, the federal government, and the intervenor states —now agree that Judge O’Connor should certify his decision for interlocutory appeal and stay additional proceedings while the case is on appeal. • The federal government and intervenor states additionally encourage Judge O’Connor to confirm that his decision does nothing to disrupt the ACA and that the ACA remains the law of the land while the case proceeds.
WHAT WILL HAPPEN AS A RESULT OF THE DECISION? • Following the district court's December 14, 2018 order, the intervenor states requested clarification regarding whether the order was immediately binding. • In response, on December 30, 2018, the district court: • Entered final judgment on the December 14 order. • Issued a stay of the December 14 order. • The court also issued an order staying the remaining claims in the litigation. (As an example of the remaining claims, Count II of the plaintiffs' complaint challenges the individual mandate on a Due Process Clause theory.)
WHAT WILL HAPPEN AS A RESULT OF THE DECISION? • The Trump Administration has announced that it will continue to enforce the ACA notwithstanding Judge O’Connor’s decision. • Texas v. United States, so far, has changed nothing, • It is possible, given how litigation moves in the Courts, that the Supreme Court could be considering this decision at the time of the 2020 election.
WHAT WILL HAPPEN AS A RESULT OF THE DECISION? • On January 3, 2019, the intervenor states in Texas litigation challenging the ACA’s individual mandate appealed to the Court of Appeals for the Fifth Circuit. • The U.S. House of Representatives, under Democratic control as of January 3, submitted a motion to intervene in the litigation – as to the plaintiffs' claims other than Count I. • In an accompanying filing, the House set out its bases for intervening and defending the ACA's validity.
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