Oral Arguments Held in Affordable Care Act Case

The U.S. Supreme Court heard oral arguments Tuesday on the constitutionality of the Affordable Care Act (ACA), federal legislation passed in 2010 that generally provides a government-subsidized health insurance option, but until 2017, also mandated that all Americans have insurance whether through the ACA option or otherwise, or else pay a tax. The Supreme Court case is an appeal of a Fifth Circuit decision, Texas v. United States, that ruled that the “individual mandate,” which was effectively made moot in 2017 when Congress dropped the amount of the tax to $0, was unconstitutional because it was no longer a recognizable use of Congress’ taxing power.

In 2012, the Supreme Court in the case of Nat’l Fed’n of Indep. Bus. v. Sebelius, which challenged the constitutionality of the individual mandate under the Commerce Clause, ruled that the ACA’s mandate rang constitutional as it was an expression of the Constitution’s enumerated power that Congress may “lay and collect taxes.” The majority held that the individual mandate could be read as not a legal command to buy insurance, which the Court ruled violated the Commerce Clause, but rather a tax on those without health insurance. The Court admitted that “(t)he most straightforward reading of the mandate is that it commands individuals to purchase insurance. After all, it states that individuals ‘shall’ maintain health insurance.” However, the majority explained that the obvious interpretation of a statutory provision need not necessarily govern if said interpretation resulted in a statute being declared unconstitutional, while another “fairly possible,” and constitutionally permissive interpretation of that same statute existed. The law has mandated such an outcome, the Court concluded, since 1830 when Justice Holmes wrote, “[T]he rule is settled that as between two possible interpretations of a statute, by one of which it would be unconstitutional and by the other valid, our plain duty is to adopt that which will save the Act.”

Following Sebelius, “(a)s part of the Tax Cuts and Jobs Act, Congress set the ‘shared responsibility payment’ amount—the amount a person must pay for failing to comply with the individual mandate—to the ‘lesser’ of ‘zero percent’ of an individual’s household income or ‘$0,’ effective January 2019,” while leaving the text of the individual mandate in place. In response to the effectively repealed tax, states disfavoring the ACA, including Texas, Alabama, Arizona, Florida, and Georgia filed legal action against the federal government and intervening states favoring the ACA, including California, Connecticut, New York, North Carolina, and Oregon alleging the ACA no longer retained constitutional permissiveness.

This aforementioned litigation resulted in the Supreme Court appeal of the resulting decision, Texas v. Untied States, where the plaintiffs argued, and the Fifth Circuit agreed, that the only constitutionally permissive interpretation of the individual mandate was via the taxing power of Congress. The appellate panel explained that the law mandates that a statute passed as a result of the taxing power requires a resulting collection of revenue, which the $0 individual mandate failed to do. Therefore, the Fifth Circuit ruled that the individual mandate provision of the ACA was indisputably unconstitutional.

However, the appellate court left open the question of severability. In other words, the unanswered inquiry was whether the unconstitutionality of the individual mandate provision required the entirety of the ACA to be declared unconstitutional, or whether the individual mandate provision simply be severed from the rest of the ACA, leaving just the mandate provision declared unlawful. The opinion explained that “(t)he Supreme Court has said that the standard for determining the severability of an unconstitutional provision is well established…. Unless it is evident that the Legislature would not have enacted those provisions which are within its power, independently of that which is not, the invalid part may be dropped if what is left is fully operative as a law.” However, the court concluded, the district court failed to conduct a proper inquiry into severability, given the breadth of the ACA. Ergo, the Fifth Circuit remanded to the district court for further in-depth analysis as to the question of severability, leading the plaintiffs, in lieu of waiting for the additional district court analysis, to petition the Supreme Court for review.

In the two hours of oral arguments, the majority of justices centered their inquiries around questions of standing. The states opposing the ACA argued that the $0 penalty results in no recognizable injury, and thus no standing to pursue the present litigation. The appellees asserted that a taxing provision within a statute not actually resulting in dollars being exported, fails to meet the requirement of constitutional standing requiring a plaintiff to present a “concrete and particularized injury.” 7 out of 9 justices appeared to agree with the appellees, with only Justice Kagan and Justice Sotomayor presenting skepticism to the arguments. Kagan and Sotomayor appeared to indicate one could ascertain injury by the mere fact that a law, by rote existence of being a law, mandates compliance and thus recognizable injury by forced actions in furtherance of said compliance.

If the Court recognizes standing for the plaintiffs, the outcomes on the merits of the severability argument appears to be less clear. Justice Kavanaugh and Justice Gorsuch addressed the crux of the severability inquiry, noting that Supreme Court precedent provided for a rebuttable presumption in favor of severability, which absent the existence of an inseverability clause within the ACA (which the Court stated lacked clear existence), proved to be a difficult presumption to overcome.