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Fifth Circuit Rules Individual Mandate is Unconstitutional; Sends Severability Issue Back to Trial Court



Texas v. United States, 2019 WL 6888446 (5th Cir. 2019)

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The Fifth Circuit has held that the individual mandate is unconstitutional. As background, after the Tax Cuts and Jobs Act reduced the Affordable Care Act (ACA) penalty for failing to have minimum essential coverage (the shared responsibility payment) to zero beginning in 2019 (see our Checkpoint article), several states (including Texas) challenged the constitutionality of the individual mandate. They argued that, based on the U.S. Supreme Court’s holding in National Federation of Independent Businesses (see our Checkpoint article), the individual mandate was unconstitutional unless permitted under Congress’s power to tax. The trial court agreed, ruling in December 2018 that, with the penalty reduced to zero, the individual mandate could not be sustained by the taxing power and could not be severed from the rest of the ACA, so the entire ACA should be struck down (see our Checkpoint article).

On appeal, the Fifth Circuit has affirmed that the individual mandate is unconstitutional because it can no longer be read as a tax. However, on the question of severability, the Fifth Circuit concluded that the trial court’s analysis was incomplete and sent the case back to the trial court to determine whether and to what extent other provisions of the ACA may be severable from the individual mandate. Highlighting the need for “a careful, granular approach to carrying out the inherently difficult task of severability analysis,” the court directed the trial court to “employ a finer toothed comb” and “conduct a more searching inquiry” into which provisions of the ACA Congress intended to be inseverable. Vacating the trial court’s decision on severability, the Fifth Circuit also directed the trial court to consider whether the requested nationwide injunction against enforcing the ACA and associated regulations was an appropriate remedy.

EBIA Comment: The remand to the trial court could add considerable time to the resolution of this case. Although it seems destined for the Supreme Court, it will be interesting to see if the Court will take it up in 2020. 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.

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