Affordable Care Act Held Unconstitutional by Federal Trial Court

A federal trial court has held that, beginning in 2019, the Affordable Care Act (ACA) is unconstitutional. Several states (including Texas) challenged the constitutionality of the ACA’s individual mandate after the Tax Cuts and Jobs Act (TCJA) reduced the penalty for failing to have minimum essential coverage (the shared responsibility payment) to zero beginning in 2019 (see our Checkpoint article). They argued that, based on the U.S. Supreme Court’s holding in National Federation of Independent Businesses (NFIB) (see our Checkpoint article), the individual mandate was unconstitutional unless permitted under Congress’s power to tax; because the mandate will no longer trigger a tax in 2019 when the shared responsibility payment produces no revenue, it cannot be sustained by the taxing power. They also argued that the mandate could not be severed from the rest of the ACA, so the entire ACA should be struck down. The federal government agreed with the challenging states that the mandate was unconstitutional, so other states were permitted to intervene. The intervening states argued that the individual mandate was still constitutional after the TCJA under Congress’s powers to tax and to regulate interstate commerce, and that it was severable from the remainder of the ACA.

The court held that the individual mandate is unconstitutional because it cannot be read as triggering a tax when the shared responsibility payment is zero. And according to the court, the mandate was an impermissible regulation of interstate commerce under the reasoning of NFIB. The court also held that the mandate could not be severed from the rest of the ACA, noting that the ACA’s text states multiple times that the mandate is essential and the keystone of the law. In addition, the court reasoned that under the U.S. Supreme Court’s decisions in NFIB and King v. Burwell (which upheld the ACA’s premium tax credit—see our Checkpoint article), the mandate was not severable from the rest of the law. Because upholding the ACA in the absence of its “signature provision” would change the effect of the law as a whole, the court declared the ACA’s remaining provisions inseverable from the unconstitutional individual mandate and therefore invalid.

EBIA Comment: Notably, the court did not issue an injunction halting enforcement of the ACA, and HHS has issued a news release cautioning that the decision is not a final judgment and that it “will continue administering and enforcing all aspects of the ACA.” Thus, the ACA continues in force as we wait for this case to work its way through the courts. For more information, see EBIA’s Health Care Reform manual at Sections I.D (“Judicial Challenges to Health Care Reform”) and XXIX (“Shared Responsibility for Individuals (Individual Mandate)”).

Contributing Editors: EBIA Staff.