The only consistent characteristic of the Affordable Care Act (ACA) is its ability to generate litigation. The gift that keeps on giving for Obamacare opponents seems to defy common law doctrines curbing the practices of champerty and maintenance (frivolous lawsuits).
Last month 20 state attorneys general and two governors launched the latest lawsuit in federal district court in Texas, arguing that the upcoming repeal of tax penalties for the ACA’s individual mandate, as of January 2019, means that the entire law has become unconstitutional (or at least a number of its related insurance regulation provisions).
The basic theory of the case takes us back to the narrow, and highly unusual, 5-4 Supreme Court ruling in NFIB v. Sebelius (2012), in which Chief Justice Roberts bent the nature of the individual mandate from penalty to tax as needed, in order to uphold the overall law’s constitutionality. His shape-shifting maneuvers managed to find first that Congress had no constitutional authority under its power to regulate commerce to mandate that commerce (purchasing health insurance) must begin. But the congressional power to tax then was close enough for government work for the mandate to pass legal muster, even though the Congress that passed the ACA insisted that it was NOT a tax, and the High Court already had ruled that it was a penalty for purposes of bypassing other objections under the Anti-Injunction Act. The various Court rulings read like an update of the classic Abbott & Costello skit -- Who’s on first? What’s on second? I Don’t Know is on third. But the ACA always slides home safely at the Supreme Court…
In any case, a host of Red states will be pitching Tomorrow (and thereafter) their revised sets of arguments. Their core contention is that if the only remaining feature sustaining the ACA’s constitutionality was that the individual mandate was a “tax,” then eliminating any of its revenue collection after this year reverts its characteristics back to that of a regulatory provision, albeit one with no remaining penalty either. Led by the state attorneys general of Texas and Wisconsin, the plaintiffs contend that the previous rationale for saving the ACA has become legally impossible, and they ask the United States District Court in the Northern District of Texas to declare that the entire statute is both unlawful and not severable, and then enjoin its future operation.
One of the somewhat amusing features of this overtime version of legal squabbles over Obamacare is how the law’s many poorly crafted and contradictory provisions tend to push partisans on both sides into “repositioning” their previous contentions, depending on which ones best serve their bottom-line priorities of either saving or killing Obamacare.
For example, consider changing assessments of the effect of the individual mandate. Back in 2011 and 2012, and even in later years, it was portrayed by ACA defenders as an essential, indeed indispensable, ingredient of the law’s scheme for ensuring sufficient purchasers of highly regulated and generously subsidized health insurance, in order to balance the risk pools in ACA health exchanges.
More recently, however, weaker enforcement of the ACA’s mandate to purchase insurance appeared to present few problems in maintaining about the same levels of relatively modest enrollment in those exchange marketplaces. In the ACA’s Field of Dreams, if taxpayers subsidize it enough, enrollees will come. Total premium costs may rise, but that’s what income-related out-of-pocket premium caps, and federal budget deficits, are for.
On the other hand, some ACA critics are even more prone to inflate the negative effect on coverage and premium levels from upcoming elimination of the individual mandate, although they (mostly) supported its repeal. For the record, this ACA skeptic considers the individual mandate as more of a public policy nuisance; a half-hearted effort at trying to bluff unwary Americans into buying coverage they don’t want or can’t afford, but one that might someday mutate into a more coercive and binding burden if future political circumstances ever changed. Repeal of the mandate’s hypothetical dangers is more akin to unloading the bullets from an unused gun with a political trigger lock.
The new lawsuit, Texas et al. v. HHS, Azar, and Kautter, wants to finish the job left undone six years ago in NFIB v. Sebelius. It reconnects the revised dots logically in trying to hold the Court, and particularly Chief Justice Roberts, to previous reasoning about the constitutionality of a penalty-free and revenue-free individual mandate. However, it still must overcome objections involving standing and severability.
The standing issue is a common one that often arises in lawsuits brought by state officials against the federal government: Is there a real injury at stake here, rather than just a political disagreement over policy? The state plaintiffs first would respond that the nature of the ACA law has changed significantly since the 2012 decision in NFIB v. Sebelius. They then would try to emphasize that even a weaker individual mandate still increases their own budgetary costs -- through increased Medicaid enrollment. They further contend that a penalty-free mandate also raises insurance premium costs and reduces coverage levels in their individual and small-group insurance markets – by no longer helping to bolster the ACA’s intertwined regime of federal regulatory requirements (primarily guaranteed issue and community rating, along with more generous minimum benefits) with sufficient enrollment of healthier, lower-cost individuals. These contentions might be greatly exaggerated, but the trace elements of those purported effects still could reach the lower threshold for legal standing purposes. Moreover, the state plaintiffs can simply recycle the older (equally exaggerated) arguments of the Congressional Budget Office, defenders of the individual mandate in previous litigation, and parts of several Supreme Court cases (including King v. Burwell) to reinforce their current position.
Opponents of the new lawsuit may also contend that, when the current Congress removed future penalties under the individual mandate, it also reaffirmed congressional intent to operate the ACA without it. However, that line of argument overlooks the limited scope of action available to Congress under budget reconciliation rules, which prevented the Senate last year from repealing the regulatory features of the individual mandate without 60 votes, even though it was the clear intent of a Republican majority to eliminate as much of it as possible.
Of course, the state plaintiffs could have considered adding other parties, such as individual constituents claiming harm from being forced to purchase unaffordable or unwanted insurance, to the lawsuit to strengthen their standing claims. Admittedly, it might be hard to find unique individuals who could claim credibly that the mere existence of a federal command to purchase a particular type of insurance, without any financial penalty for failing to do so, was sufficiently coercive to command their reluctant obedience and produce resulting harm (probably the same type of person who never removes the tag from his or her mattress, under fear of federal prosecution). This would be particularly difficult when state attorneys general were eager to file this new lawsuit as soon as possible and claim maximum political credit for themselves. After all, their official organization known as NAAG (officially, the National Association of Attorneys General) is more commonly referred to as the National Association of Aspiring Governors.
The severability issue involving the ACA and the individual mandate has come up in court several times before, without being resolved definitively. The dissenting opinion of four justices in NFIB v. Sebelius indicated that they were prepared not only to declare the individual mandate unconstitutional but also rule that the rest of the ACA was so connected to it that the entire law must be invalidated. Note that it only requires the votes of four justices to approve consideration of an appeal of a future case on this issue from lower courts (assuming Justice Gorsuch holds views similar to those of the late Justice Scalia), even without any further changes in the High Court’s composition.
Moreover, lower courts that ruled the individual mandate unconstitutional earlier this decade were split on the severability issue. Two of the three federal district courts reaching that issue concluded that the entire law must fall. The 11th Circuit Court of Appeals did rule against non-severability in one of those cases on appeal. However, the latter’s underlying ruling that the individual mandate was unconstitutional (giving rise to the severability issue) was overturned by the Supreme Court in NFIB v. Sebelius, thereby rendering the severability issue moot for the time being. Even state plaintiffs involved in the previous case should be able to litigate an issue under new legal parameters that has yet to be decided.
For a more nuanced look at the severability issue that stops short of only an all-or-nothing conclusion, consider this 2012 amici curiae brief filed in the NFIB v. Sebelius case that suggested the alternative of just striking down title I of the ACA (essentially, federal requirements for insurance coverage plus the taxes and mandates to prop them up). The first cut may be the deepest, but it doesn’t have to be King Solomon-like, in the Biblical sense.
In short, the state plaintiffs have an uphill legal climb ahead, but far from a completely impossible one. Their case is built on an extended chain of attenuated contingencies and a series of unfortunate events -- like how the original ACA met Lemony Snicket. But the long list of naysaying experts (and frequently ACA backers) who doubted the viability of previous assaults on the ACA do not have a great track record. If nothing else, the prospects of either fully snuffing out the dying embers of the individual mandate as a weak, hortatory federal regulation, or at least forcing Chief Justice Roberts and others to perform a new set of Olympic-caliber somersaults through past precedents and the English language, should be worth another price of admission – assuming another future Congress doesn’t finally change the law again in the meantime.
Tom Miller is a resident fellow at the American Enterprise Institute.
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