The Affordable Care Act Survives Another Challenge in the U.S. Supreme Court

I have previously posted a number of blog pieces on the legal challenges to the Patient Protection and Affordable Care Act (commonly referred to as the Affordable Care Act) since its enactment in March of 2010. To understand the basis for the latest challenge to the constitutionality of the Affordable Care Act (“ACA”), one needs to understand a prior challenge decided by the Supreme Court in 2012.

The Supreme Court was presented with the question as to whether Congress had a Constitutional power that would allow it to pass a law, the ACA, that required people to purchase insurance or pay a penalty. This requirement in the ACA is referred to as the individual mandate, a requirement that notwithstanding certain exceptions, required adult Americans to have qualified health insurance, referred to in the law as “minimum essential coverage,” or pay a penalty each year when they file their taxes.

So, let’s back up a minute. The U.S. Congress may only enact laws for which a power has been granted to it under the U.S. Constitution. One of the broadest powers granted to Congress is under the Commerce Clause of the U.S. Constitution, which allows Congress to regulate interstate commerce. Those challenging the constitutionality of the ACA acknowledged Congress’ power to regulate interstate commerce when people choose to be engaged in the buying and selling of products, but argued to the Court that the Commerce Clause is not so broad as to grant Congress the power to force people into commerce. In other words, if a business sells its products across state lines, Congress certainly has a right to regulate that commerce; however, Congress cannot force persons to buy those products. The U.S. Supreme Court agreed and held that the Commerce Clause of the U.S. Constitution did not grant Congress the power to enact the individual mandate in the ACA and penalize persons for choosing not to purchase insurance. Thus, the U.S. Supreme Court could have struck the ACA down as unconstitutional because Congress’ act exceeded the power granted to it by the Commerce Clause had the Commerce Clause been the only source of authority to Congress in a matter such as this, however, the Court’s majority determined that another power, the Taxing Power, did allow Congress the constitutional power to enact this provision of the ACA.

As broad as the Commerce Clause is, the Taxing and Spending Clause of the U.S. Constitution is even broader. Article I, Section 8 of the Constitution gives Congress the power to “lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States.” Although Congress had referred to a “penalty” for the failure to have qualified health insurance, the Court’s majority interpreted the penalty to be a tax in that it is collected by the IRS, the penalty is based upon income level, the IRS was authorized to deduct the penalty from any tax refund otherwise owed to the taxpayer and the penalty generates revenue for the federal government.

Now, skip forward to 2017. Congress passed an amendment to the ACA that zeroed out the penalty. In other words, while the mandate to have qualified health insurance remained in place, there was no longer a penalty for the failure to maintain such insurance coverage and the IRS changed the form 1040 to no longer require taxpayers to indicate whether they had maintained minimum essential health insurance coverage during that tax year.

This led a group of 18 Republican states led by the state of Texas and two individuals to file suit to again challenge the constitutionality of the ACA. Because there no longer was a penalty and thus no revenue generated by the federal government, plaintiffs argued to the U.S. District Court that the individual mandate could no longer be supported on the basis of the Taxing and Spending Clause (because it could no longer be construed to be a tax if there was no revenue to be generated given that the amount of the penalty was now $0), and therefore was unconstitutional. The District Court agreed.

When a provision of a law is found to be unconstitutional, the court must then decide whether the unconstitutional provision can be severed from the law to allow the remainder of the law to stand. In this case, the District Court judge held that the individual mandate was so critical to the overall functioning of the ACA and such an integral part of the law that the unconstitutional individual mandate could not be severed from the law, and therefore, the entire ACA must be struck down as unconstitutional.

The case went up on appeal to the U.S. Court of Appeals for the Fifth Circuit. That court upheld the lower court’s decision that the individual mandate was now unconstitutional, however, the court determined that the district court judge had not conducted a sufficient legal analysis to determine whether the individual mandate could be severed from the law leaving the remainder of the ACA intact, and therefore, remanded the case back to the district court for this determination.

In a bit of an unusual and certainly surprising move, the U.S. Supreme Court decided to hear this case in this term that began in October of 2020. The reason that is unusual and surprising is that it is generally the practice of the Court to allow cases to fully play out in the lower courts before they hear a case. In other words, what many of us expected was that the district court would decide the issue of severability, that decision would then be appealed to the 5th Circuit by whichever party that did not prevail, the 5th Circuit would then render a decision and then the case would be considered by the U.S. Supreme Court, perhaps in the Court’s term that would begin in October of 2021.

Nevertheless, the Supreme Court heard oral arguments on November 10, 2020 and issued its opinion on June 17, 2021. The case is styled California et al v. Texas et al.

Justice Breyer wrote and delivered the opinion of the majority (7 justices) of the Court.

To understand the Court’s opinion, one must understand what cases are allowed to come before a court. The U.S. Constitution says that federal courts may only decide “cases” and “controversies.” If you are not an attorney, that probably seems like almost anything would qualify, but in fact, there are important limits on the courts. Here are some of the limitations:

  1. Statute of limitations. There are some very important reasons that we place time limits on most things that might otherwise be a cause of action and subject someone to financial liability or could subject someone to arrest for a crime. Examples of those considerations include the availability of records which may no longer be in someone’s possession and witnesses who may no longer be available or remember the event in question. So, as an example of a statute of limitation, if I believed that I was wrongly terminated from my job six years ago, but I didn’t worry about it because I found a new job that I thought was probably better, but then I became disabled and could no longer work and felt that I could really use the money that I might get in a lawsuit against that former employer from six years ago, the laws of most states would bar my lawsuit due to the passage of those intervening six years. Thus, while this may constitute a “controversy,” a federal court would lack the ability to hear the “case” because it would be barred by the applicable statute of limitations.
  2. Another limitation is when a case becomes “moot.” As an example, let’s consider a case in which a homeowner’s association might file suit against a developer who has announced that he will be undertaking a project adjacent to that HOA’s neighborhood that the HOA believes will impair the values of its members’ homes. After the case has been filed, but before the court renders a judgment, the developer announces that his funding has fallen through and he will not be able to undertake the project afterall. The court would then dismiss this case as “moot,” because there no longer is a “controversy.”
  3. There are other limitations that could be considered, but let’s now turn to the limitation that is at question in this case. This is the issue of “standing.” Courts must determine that those who file suit have the standing to do so in order for the court to hear and decide the case. A plaintiff has standing only if he can “allege personal injury fairly traceable to the defendant’s allegedly unlawful con[1]duct and likely to be redressed by the requested relief.”

Let me provide an example to help you understand why standing is so critical to bringing a case. Let’s assume that that someone who is uninsured backs into my mother’s car and causes $500 worth of damage. My mother decides that she doesn’t wish to file a claim with her insurance company because her deductible is $500 and she doesn’t wish to spend the time and go through the trouble to sue the individual who hit her car to recover the $500. However, I feel aggrieved by all of this so I decide to file a lawsuit to recover the $500. The court would likely determine that I do not have standing. It was my mother, not me who suffered the injury (the loss of $500), and absent some other legal right to stand in her shoes (e.g., if my mother was cognitively impaired and I had her power of attorney or if my mother had passed away shortly after the accident and I was named as the executor of her estate) it is my mother, not me who would have standing to file suit. Now, keep in mind, the defendant was wrong in backing into my mother’s car and the defendant did cause damage for which a court could provide a remedy (an award of $500), however, without me having standing, the court will never decide the defendant’s guilt or innocence, nor determine the damages. The case will simply be dismissed for my lack of standing.

So, now let’s see how standing is an issue in the constitutional challenge of the ACA. Recall that the rule of law is that a plaintiff has standing only if he can “allege personal injury fairly traceable to the defendant’s allegedly unlawful con[1]duct and likely to be redressed by the requested relief.” In this case, the Court held that “neither the individual nor the state plaintiffs have shown that the injury they will suffer or have suffered is “fairly traceable” to the “allegedly unlawful conduct” of which they complain.” Let’s examine why.

The individual plaintiffs made their case for standing along the line of this argument. We are law-abiding citizens. We do what the law requires of us, even if there is no penalty for failing to do so. Because the law (the individual mandate) requires us to maintain minimum essential coverage, we do so, but if it were not for the law, we would either not purchase insurance or we would purchase a health plan with far fewer benefits and at a far lower premium that would not meet the minimum essential coverage requirement. Therefore, we are harmed because the minimum essential health plan coverage that we obtain to comply with law is more expensive than the coverage we otherwise would have purchased.

The Court determined that the individual plaintiffs do not have standing because they fail to satisfy the “traceability” requirement of their alleged personal injury. Again, the rule of law is that a plaintiff has standing only if he can “allege personal injury fairly traceable to the defendant’s allegedly unlawful con[1]duct and likely to be redressed by the requested relief.” The Court points out that while the law tells them to maintain qualified insurance coverage, the government has no way to enforce this. With a penalty of $0, there is no ability for the IRS to enforce compliance with the law. The law only provided for the IRS’ ability to enforce payment of the penalty, not the ability to enforce the taxpayer to maintain minimum essential insurance coverage. Thus, the injury that the individual plaintiffs complain of – the cost of maintaining qualifying insurance – cannot be traced to any action on the part of the government. Thus, in order for the individual plaintiffs to have standing, they would have to demonstrate that the injury they complain of (the costs of maintaining the required insurance) can be traced to the government’s actual or threatened enforcement, and they cannot.

The Court then turns to the question of standing for the state plaintiffs. The states alleged that they suffered injury due to the increased administrative burden and costs associated with setting up and running the insurance exchanges, the growth in their Medicaid enrollment and the associated costs to the state as people seek to comply with the law’s requirements for minimum essential coverage and are determined to be eligible for Medicaid, and other acts to comply with the requirements under the ACA. The Court determined that the states had not demonstrated their injury in that they failed to show that in fact the individual mandate without any penalty to individuals did or would cause more people to enroll in state health programs than otherwise would. The Court’s majority again found that like the individual plaintiffs, the states have failed to demonstrate that even if they did incur financial injury that those injuries are due to any actual or threatened action on the part of the federal government or its agencies.

Further, the Court found that many of the administrative burdens and costs the states complained of were not in response to the individual mandate in question, but rather other provisions of the ACA for which the states offered no evidence that the burdens would be relieved if the individual mandate was struck down as unconstitutional and severed from the law. Thus, the states’ injuries are not fairly “traceable” to the section of the law that they assert is unconstitutional and therefore illegal.

Thus, the Court’s majority determined that there was no “case” because none of the plaintiffs had standing to bring the challenge. Thus, the decision of the 5th Circuit was ordered vacated and the case was remanded back to the District Court with instructions for the judge to dismiss the case for lack of standing.

So, the ACA stands as the law of the land. What are the important take-aways from this case?

  1. The first point I would make is that the institution of the Supreme Court has been preserved at a time when we have seen many of our other institutions falter or fail in response to political pressures. Although the Supreme Court is not immune from political processes and influences (justices are appointed through a very political process), it is critical that cases be decided based on the rule of law. The very functioning of our government, our legal system and society is highly dependent upon legal predictability, which requires an adherence to and respect for legal precedents in most cases. The fact that this decision was 7-2 with both Republican and Democrat-appointed justices and conservative and liberal justices in agreement was important to preserving the standing of the Supreme Court (pardon the pun). President Trump was not shy in expressing his disdain for the ACA and pledged that his three Supreme Court justice appointments would help ensure the striking down of the law. Instead, two of the Trump-appointed justices joined with the majority and only one joined the minority in dissent.
  2. The points made in number 1 call into question the very political process that the Senate goes through in regard to confirming judicial appointments to the bench. We will recall Senate Leader McConnell’s intense efforts to stall the confirmation of a justice appointed by a Democratic President in the last year of his term and the threat to do so again, while making a tortured distinction to justify appointing a justice during the last year of a President of the same party. And, then we all witnessed the drama and attempted character assassination of Justice Kavanaugh when he went through Senate confirmation hearings. To what effect? And, this is not a recent phenomenon. There have been many examples of justices being appointed to the bench based upon their expected conservative or liberal leanings who have decided cases in ways that surprised their political supporters. Senate confirmation will remain an important part of the process for judicial appointments, but it is not clear that all the political maneuvering is productive.
  3. The ACA has now withstood three constitutional challenges in the U.S. Supreme Court. It has been the law of the land for 11 years. The ACA is not perfect, but at this point, it seems that the best course is to do the hard work of either trying to improve upon the imperfections in the ACA or to replace it with something better. Further legal challenges are unlikely to be productive.
  4. While many legal experts expected that the challenge would not be successful, it could have been. It was irresponsible of Republicans to bring this case without having a contingency plan in place. It is hard to describe the disruption to the American health care system if all of the provisions of the ACA were suddenly terminated. Among the many disruptions would the end of funding to states for Medicaid expansion, the end of tax credits and subsidies for Americans to purchase health insurance, the end of the health insurance exchanges and their funding, the end of guaranteed issue (the prohibition against insurance companies declining to provide insurance coverage to people based on their past medical history or health risks), the end of community rating (the protection for those at higher risk against being charged significantly higher premiums) and many other provisions that would result in a significant increase in the uninsured and significant increases in bad debt and charity care for health care providers that could result in higher prices at a time when we need to focus our efforts at making health care more affordable.

In future blog posts, I will offer my analysis and recommendations for what we can do to improve the American health care system and reduce health care costs. Until we can address the opportunities to improve health care, I am relieved that the Supreme Court saved us from ourselves.

4 thoughts on “The Affordable Care Act Survives Another Challenge in the U.S. Supreme Court

  1. Dr. Pate, thank you once again for your clear language and fitting examples. I always come away from reading your blogs with a better understanding of what can be quite complex issues. Personally, I enjoyed Justice Thomas’ concurring opinion, and I recommend it to those, like you, who have closely followed the “epic Affordable Care Act trilogy” in the Supreme Court. Justice Thomas’ concurring opinion presents a very balanced view of this saga, both recognizing the flaws in the law and the “curious” SCOTUS decisions along this journey, but also explaining why this third challenge failed. While I personally believe that the Court got a little too cute in trying to thread the needle with the “tax” and “State” issues of the first two rulings, I feel that they got this one right for exactly the reasons that you provided. Thank you, and Happy Father’s Day.

    Like

    1. Thank you, Scott! I appreciate your insightful thoughts on the case, as well as your kind comments. Thank you for following the blog and Happy Father’s Day to you and all the fathers following this blog!

      Like

  2. Hello Dr. Pate.  I do not expect an answer regarding hospitals mandating COVID-19 vaccinations but these questions are weighing on my mind.  Are SLHS and St. Al’s employed physicians exempt from the mandate and will their employment also be terminated if they refuse?  If not, why would that be handled differently than other employees and why would unvaccinated surgeons continue to be permitted to practice; even a single one?  What about employees who had immediate negative symptoms with the first Pfizer injection so SLHS told them they will not require the second injection?  Will those employees also be mandated to undergo another dose (or two)?  What about RN travelers, contracted anesthesiologists and SLHS Life Flight pilots? 

    Like

    1. Hi. I am afraid that I don’t have any details other than those Saint Al’s and St. Luke’s have made public. I was not consulted on their policies and I have not seen their policies. My understanding from the information in the press and media is that the mandate applies to all employees (this would include employed physicians), as well as to students, RN travelers, contracted physicians, vendors and pilots. I don’t think reactions to the first vaccine would exempt them from the second shot unless the reaction was quite severe or life-threatening, such as anaphylaxis. I hope that helps!

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: