The Affordable Care Act is once again in front of the Supreme Court

On November 10, 2020, the U.S. Supreme Court heard oral arguments in the case California v. Texas, the most recent challenge to the Affordable Care Act (ACA). A decision from the court is expected by June. The following is a summary of the case, the legal questions the Supreme Court will be considering, how potential outcomes will affect the future of the ACA and the health care of millions of Americans, and what was learned from the oral argument session.

Please note that even with this pending Supreme Court decision, the ACA is still currently the law of the land, and the current open enrollment period (Nov. 1 – Dec. 15) for ACA Marketplace coverage is proceeding as normal.

Who is challenging the ACA? Who is defending it? What are their positions?

In 2018, a group of Republican state attorneys general and governors from 20 states, led by Texas, and two individuals filed a lawsuit in a Texas district court seeking to strike down the ACA because they argue its individual mandate is unconstitutional. The ACA’s individual mandate requires people to maintain a certain level of health insurance coverage or pay a financial penalty. In a 2012 decision, the Supreme Court ruled that the individual mandate is constitutional because it falls under Congress’ power to issue a tax.

The 2018 plaintiffs argue that because the mandate’s financial penalty was removed by Congress in the 2017 tax cut bill, the mandate is no longer a tax and is, therefore, unconstitutional. They also argued that because the individual mandate is an essential component of the ACA and cannot be “severed” (removed) from the rest of the law, the entire ACA should be invalidated.

The federal government took the unusual position of not seeking to uphold a federal law, siding instead with the plaintiffs. At first, the federal government argued that while they agree with the plaintiffs that the individual mandate is no longer constitutional, they believe only the ACA’s provisions protecting people with pre-existing conditions should be struck down, while the rest of the law’s provisions should remain. The federal government later changed this position to agree with the plaintiffs that the mandate is inseverable and the entire ACA should be invalidated. They also made a new argument that any order from the Supreme Court prohibiting them from enforcing the ACA should only apply to provisions that “injure” (negatively impact) the state and individual plaintiffs.

Since the federal government refused to defend the ACA, the Democratic state attorneys general from 21 states, led by California, and the U.S. House of Representatives have been allowed to intervene in the case to defend the ACA. The defendants argue that the mandate is still constitutional and that even if it wasn’t, it would be severable from the rest of the ACA as it currently stands.

What did the lower courts decide?

In December 2018, the district court judge ruled in favor of the plaintiffs and agreed with their argument that the individual mandate was unconstitutional and the whole ACA was invalid. This ruling was then appealed to the U.S. Court of Appeals for the Fifth Circuit. In December 2019, the Court of Appeals also ruled that the mandate was unconstitutional. On the issue of severability, they sent the case back to the district court judge to have him explain which specific provisions of the ACA are inseverable from the mandate.

The defendants went to the Supreme Court to argue that the Court of Appeals should have decided on the question of severability instead of sending it back to the district court. They asked the Supreme Court to review the case and the court agreed.

What legal questions will the Supreme Court consider?

The Supreme Court will consider whether the individual plaintiffs and the Republican-led state plaintiffs have “standing” to challenge the individual mandate in court. They will decide whether the plaintiffs have been actually injured or if an injury is imminent because of the individual mandate, and whether ruling in their favor would fix the injury if they decide there is one.

If the court decides the plaintiffs do have standing, they will consider whether the mandate is now unconstitutional because of the 2017 tax cut bill that removed the mandate’s financial penalty. If the court finds the mandate unconstitutional, then they will consider whether the entire ACA is invalid, or if the mandate is severable from the ACA’s other provisions and those provisions can remain.

If the court rules that the entire ACA is invalid, then it would consider whether the federal government would be prohibited from enforcing ACA provisions across the country, or only to those plaintiffs that would be injured by them.

How would potential Supreme Court decisions impact people’s health care?

If the Supreme Court decides that the plaintiffs do not have standing to bring a lawsuit or decides that the mandate is still constitutional, then the ACA remains as it does today.

If the court rules that the mandate is unconstitutional but that it is completely severable from the rest of the ACA, then the ACA would also remain as it does today—a law without an enforceable financial penalty for individuals.

The most harmful consequences to Americans’ health care would occur if the court rules that the mandate is unconstitutional and is inseverable from certain ACA provisions or the entire law. For example, if the court were to decide that the ACA’s protections for people with pre-existing conditions need to be struck down because they are inseverable from the mandate (the federal government’s earlier position), that would be detrimental to the millions of Americans with pre-existing conditions like high blood pressure, diabetes, heart disease or kidney disease. People could be refused health coverage or kicked off their existing coverage, and this would happen during a worldwide pandemic.

If the entire ACA were invalidated, our health care system would be thrown into chaos. The ACA is a complex law that expanded access to health insurance for millions of Americans through the ACA Marketplaces and Medicaid, ensured coverage of essential health benefits and prohibited health plans from placing annual and lifetime dollar limits on essential benefits—just to name a few of the law’s provisions. These and all the other ACA provisions, including the protection for people with pre-existing conditions, would be gone.

What did we learn during the Supreme Court oral argument session?

While oral arguments are not a perfect indication of how the Supreme Court will eventually rule on a case, two of the conservative justices, Chief Justice John Roberts and Justice Brett Kavanaugh, were wary of the plaintiffs’ argument that the individual mandate is inseverable from the rest of the ACA.

Justice Kavanaugh cited the court’s severability precedent, in which the Supreme Court in past cases has opted to remove a constitutionally flawed provision while upholding the rest of the statute, saying this case is “a very straightforward case for severability under our precedents.” Justice Kavanaugh also said that “it does seem fairly clear that the proper remedy would be to sever the mandate provision and leave the rest of the act in place — the provisions regarding pre-existing conditions and the rest.”

Chief Justice Roberts pointed to Congress’ intent when it zeroed-out the mandate’s penalty, noting that “Congress left the rest of the law intact when it lowered the penalty to zero.”

When combined with the three liberal justices who expressed support during oral arguments for upholding the ACA, it appears there would be the five votes required to uphold most of the ACA, at least on the question of severability of the individual mandate.

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About the Author

Mike Ly

Mike Ly is the director of public policy at the American Kidney Fund.

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