Breaking News – Supreme Court Unexpectedly Decides to Hear Obamacare Case

The United States Supreme Court just granted a request to hear the case challenging the constitutionality of the Affordable Care Act (ACA) that I wrote about on my blog on January 27, 2020. At that time, it was called Texas v. United States, but for some confusing reasons that we don’t need to get into right now, it has actually become two cases that will be heard together called California v. Texas and United States House of Representatives v. Texas.

So, let’s break this all down so you know what this means, what the implications are, and what could happen.

Background

  1. The Affordable Care Act was passed in March of 2010.
  2. The constitutionality of the requirement that everyone (subject to certain exceptions) purchase qualifying insurance (called the individual mandate) was upheld by the United States Supreme Court in June of 2012. Congress may not pass laws requiring people to do or not do things unless it has a constitutional power to do so. The Supreme Court ruled that the Commerce Clause (that gives Congress the power to regulate commerce among and between the states) does not give Congress the power to compel people to enter commerce (which requiring people to purchase insurance would do). However, the Supreme Court saved the Affordable Care Act from being ruled unconstitutional by determining that while the ACA required people to purchase insurance, people still had a choice whether to do so or pay the penalty, which the Court construed to be a tax, in part because it raised revenue for the federal government. Thus, the requirement was a constitutional act of Congress based on it taxing power.
  3. The Republican Congress tried many times, but unsuccessfully, to vote to “repeal and replace Obamacare”.
  4. Finally, in 2017, Congress enacted the Tax Cuts and Jobs Act which in part, zeroed the penalty associated with the individual mandate to zero.
  5. A number of Republican states challenged the constitutionality of the individual mandate as being unconstitutional now that the penalty could no longer be construed as a tax given that it would raise no revenue.
  6. The district court judge ruled that (1) the individual mandate was no longer constitutional because it could no longer be construed as a tax, and Congress has no other authority other than the taxing power to enact such a requirement that requires people to purchase insurance; and (2) that because the individual mandate was so foundational to the ACA, the individual mandate could not simply be severed from the ACA, but rather the entire ACA must be struck down.
  7. The case went up on appeal to the U.S. Court of Appeals for the Fifth Circuit (5th Circuit) and that court ruled (2-1) to affirm the lower court’s decision that the individual mandate was unconstitutional, but remanded the case (sent it back for reconsideration) to the lower court to go through the ACA provision by provision to determine which provisions must be struck rather than just summarily concluding that the entire law must be struck.
  8. A request was made to the U.S. Supreme Court to take the case up for review on an expedited basis. Had expedited review been granted, it was likely the case would be heard and decided prior to the 2020 elections. Most experts agreed that this would be a bad outcome for Republicans running in the 2020 election. That request for expedited review was denied.
  9. However, a request for review in the normal course of review by the Supreme Court was also requested and today, the Court granted that review.

Why would the Supreme Court agree to hear this case?

To me, this is the million-dollar question. Frankly, I was quite surprised that the Court agreed to hear this case. First of all, it is quite unusual for the Court to take a case prior to it having worked its way through the lower courts. This case was back in the hands of the lower court for the severability analysis. I would not have expected the lower court’s decision on that issue until next year. From there, I would have expected the case to be appealed once again to the 5th Circuit. If the outcome coming out of the 5th Circuit was that the individual mandate was unconstitutional and it could be severed from the rest of the ACA leaving it as the law of the land, I would not have been surprised if the Supreme Court denied a request to hear the case.

Second, the Supreme Court has many more requests to hear cases than they have the time and ability to hear and decide. Therefore, the Court denies the vast majority of requests for appeal. For this reason, it has seemed to me that the Court does not often agree to hear cases just so it can affirm the lower court’s opinion, especially when there are no other lower courts coming to a different decision. In this case, the only matters that has been decided by the lower courts are that the plaintiffs were entitled to bring the lawsuit and that the individual mandate is unconstitutional. It seems overwhelmingly likely that the Supreme Court would come to the same decision about the individual mandate, especially in view of their prior ruling in 2012 I referenced above.

The Supreme Court does not indicate its reasons for agreeing to or denying a request to hear a case, so I am left to speculate. Of course, it is possible that the Court concluded that this is a case of tremendous impact to the country and the millions of people whose health insurance coverage under the ACA could be threatened, and therefore the Court should hear the case just to provide clarity and allow a more speedy resolution to all the uncertainty that exists given the initial ruling in this case. I don’t think this is the reason. I think if this were the case, the Court would have granted the request for expedited review, which it did not.

Another reason could be that a sufficient number of justices on the Court feel that the 5th Circuit is plainly wrong and doesn’t want this case to spin in the lower courts for another year or two. I don’t think this is the reason, either. In fact, it seems to me that the decision about the individual mandate is plainly right, and consistent with prior Supreme Court rulings.

 Another possibility that could explain why the Supreme Court is willing to jump in when the case has not run completely through the lower courts could be on a foundational question – did the plaintiffs who brought the case have standing to do so?

Standing is a legal concept that limits who can bring a lawsuit. To greatly oversimplify this, in essence, you cannot bring a lawsuit unless you have suffered a personal and identifiable harm that someone else wrongly inflicted. As an example, if someone were to wrongly terminate my sister from her employment, I might very well be outraged, but I do not have legal standing to sue anyone about that. My sister would be the one with a cause of action, if there was one. In this case, the question is far less clear and much more interesting to legal minds. Can someone be harmed if a law requires them to do something, but there is no penalty or consequence for not doing it? The individual plaintiffs assert that they have standing because they are law-abiding citizens, and if the law requires them to buy insurance that they otherwise would not have purchased, they have been harmed, even though there would not have been any consequence imposed upon them if they had merely decided not to comply with the mandate. Similarly, the states that brought this lawsuit are arguing that they have been harmed because, among other things,  employers in their states will still be burdened administratively by the requirement to report IRS form 1095 for their employees that verifies that the employee had qualifying insurance coverage for the tax year, even though there is no penalty to the employee for not having had such coverage. This is a very interesting legal question, one that I am not aware that the Court has ever addressed, and it could be that the Court wants to handle this issue before the lower courts spend a lot more time going through the severability analysis.

Though I suspect that the standing issue is the reason for the Court agreeing to hear this case, it is also possible, but less likely in my opinion, that the Court wants to intervene to provide guidance to the lower court as to how to conduct the severability analysis. When a court determines that a provision of a law is unconstitutional, that provision is, in essence, struck from the law. The next question for the court is whether the rest of the law can stand without that provision, and if not, which other provisions must be similarly struck down. The Supreme Court has in the past made clear that the presumption should be towards severability of the unconstitutional provision and not striking down the rest of the law, or any more of the law than is necessary, so as not to interfere with Congress’ constitutional authority to legislate. To some degree, courts have to grapple with the difficult decision of deciding what would Congress have intended had they known that the provision in question would be struck down – would it have wanted the remainder of the law to stand or fall? But, the answer to that question is seldom known. Sometimes Congress is clear and inserts a severability provision in a law that plainly states that if one provision of the law is struck, it is Congress’ intent that the remainder of the law stand. Such a provision was not included in the ACA.

For me, this case is much more easily decided on the question of severability. In this case, the only action Congress took to amend the ACA was to change the penalty to zero. Knowing that the individual mandate could no longer be enforced, and it was therefore not compulsory, Congress allowed the remainder of the ACA to remain unaltered. This seems to be the clearest evidence of Congressional intent, i.e., that if the individual mandate was no longer in effect – whether by Congress’ action of zeroing out the penalty, or by a court’s action of striking the provision as unconstitutional – Congress intended for the remainder of the ACA to stand.

It is possible that the Court wants to provide this guidance to the lower courts and avoid this case from dragging out for another couple of years while a lower court goes through the tedious and unnecessary process of reviewing a 2,700-page statute. That would not be typical of the Court, and therefore, I stick with my guess that the standing issue is the reason for the Court’s agreement to hear this case.

What are the implications and what might happen as a result of the Supreme Court’s review?

  1. This case will be heard during the Court’s 2020 term, which means that it will be heard and decided sometime between October of 2020 and June of 2021. The good news for Republicans is that the case will not be reviewed and decided prior to the election.
  2. The President, House of Representatives and Senate will be under great pressure to have a replacement bill at the ready in advance of the Supreme Court’s ruling, as the public will be concerned that the Supreme Court will uphold the lower court’s decision to strike down the entire ACA (I think this is the unlikeliest of all possible outcomes, but of course, my prediction could change if unexpectedly, one of the liberal-leaning justices was replaced with another conservative justice on the Court). However, with a Presidential election in November and many House and Senate seats up for election, the make-up of the White House and Congress could significantly change by January, and it may not be a result that facilitates agreement on a replacement bill (as it that was even likely with the incumbents).
  3. If I am correct and the Court focuses on standing and decides that the plaintiffs in this lawsuit do not have standing, then this case will be dismissed and all of the lower court decisions will be vacated (be of no effect and as if they were never made). This will be huge and will secure the ACA as it is today as the law of the land.
  4. If the Court does affirm the lower courts’ decisions that the plaintiffs do have standing, but overturns the lower court’s decision that the individual mandate is unconstitutional (I would be very surprised by this), then the case is over and the ACA remains the law of the land as it is today.
  5. If the Court does affirm the lower courts’ decisions that the plaintiffs do have standing and affirms that the individual mandate is unconstitutional, then I do think the Court will provide the lower courts guidance on the severability issue, otherwise, there seems like there was little reason for the Court to get involved in this case, earlier than would be customary. That could end up accelerating the lower court’s analysis and would lessen the chances that the case would go up on appeal again, so we could have a final decision later this year or early next year.

For those of us who want to solve the health care issues plaguing our country, even if we may find faults with the ACA, most of the scenarios I can imagine as an outcome of the Supreme Court’s review are favorable and not cause for alarm. Nevertheless, there can always be surprises, and certainly my speculations might be wrong. Fortunately, throughout history, the Supreme Court has considered the impact of its decisions and has largely tried to avoid situations that would plunge the country into chaos, which certainly striking down the ACA without a viable alternative would do. In more recent history (2012), we know that the Chief Justice went to considerable lengths to save the ACA from being ruled unconstitutional, even though he received great criticism from members of his own political party. At a time when I am unconvinced that politicians can set political interests aside for the best interests of the country, I remain convinced that the judicial system will set politics aside for the rule of law and the best interests of the country, perhaps not in all cases, but at least in the case of our Chief Justice.

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