Not with a Bang, But a Whimper—Supreme Court Kicks Latest ACA Challenge for Lack of Standing

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On June 17, 2021, the Supreme Court of the United States issued its opinion in California v. Texas (No. 19-840) and Texas v. California (No. 19-1019), holding 7-2 (Justice Breyer, joined by Chief Justice Roberts, and Justices Thomas (concurring), Sotomayor, Kagan, Kavanaugh, and Barrett; Justice Alito, dissenting, joined by Justice Gorsuch) that neither the individual plaintiffs nor the states had standing to challenge the constitutionality of the Affordable Care Act’s (ACA) minimum essential coverage provision because none of them sustained any injury in fact.

The Tax Cuts and Jobs Act of 2017 amended the penalty for failing to maintain such coverage, changing it from $695 to $0. As a result, the ACA imposed no penalty on individuals who opted not to purchase minimum essential coverage effectively rendering the provision unenforceable; no harm, no foul. The individual plaintiffs had sought both injunctive and declaratory relief holding that the minimum essential coverage provision is unconstitutional. But standing requires an injury premised on a statute’s actual or threatened enforcement. Given the lack of enforceability:

To find standing here to attack an unenforceable statutory provision would allow a federal court to issue what would amount to ‘an advisory opinion without the possibility of any judicial relief.’ It would threaten to grant unelected judges a general authority to conduct oversight of decisions of the elected branches of Government. Article III guards against federal courts assuming this kind of jurisdiction.

(Slip Op. at 9 (internal citations omitted)).

The Court also declined to find that the states had standing because they failed to show an injury in fact fairly traceable to the allegedly unlawful conduct. Texas and the other 17 states challenging the ACA argued that the states were harmed because their residents enrolled in Medicaid and other programs that cost states money both indirectly and directly. But, Justice Breyer noted, those states failed to demonstrate any linkage between the unenforceable mandate and residents’ decisions to enroll in coverage, the states’ alleged indirect pocketbook injury. The Court explained “the States have not demonstrated that an unenforceable mandate will cause their residents to enroll in valuable benefits programs that they would otherwise forgo.” (Slip Op. at 14). Likewise, Texas and the other states failed to tie direct harms, such as tax penalties for failure to provide coverage to state employees, to the minimum essential coverage requirement. Instead, those cited provisions operate independently of the minimum essential coverage provision and “[n]o one claims these other provisions violate the Constitution.” (Slip Op. at 16). Again, no harm no foul.

By disposing of the case on standing, the Court avoided wrestling with the merits: (1) whether the lack of a tax penalty for maintaining minimum essential coverage invalidates the Court’s holding in NFIB v. Sebelius, 567 U.S. 519 (2012) that the ACA presents individuals with a lawful choice to purchase health insurance or pay a tax—a constitutionally permissible exercise under the Taxing Clause rather than the Commerce Clause, at least in part because it has the “essential feature” of a tax since it generates at least some revenue; and (2) if the ACA is constitutionally infirm, is the minimum essential coverage provision severable from the remainder of the Act? Many had speculated that even if the Court did reach the merits and held that the minimum essential coverage and penalty provisions were invalid, recent precedent on severability strongly suggested the bulk of the ACA would endure. See Abbe Gluck, “A scalpel rather than a bulldozer”: Severability is in the spotlight as the newest ACA challenge looms, SCOTUSblog (Jul. 28, 2020, 10:33 AM) (discussing severability analysis in Seila Law v. CFPB and Barr v. American Ass’c of Political Consultants and implications for California v. Texas).

Justice Alito, dissenting, refers to today’s decision as the third installment in an “epic Affordable Care Act trilogy” and summarized the outcomes of each decision as “an improbable rescue” pulled off by the Court. But because the decision did not reach the merits, it leaves the door open for yet another challenge to the ACA—if a plaintiff can establish standing. The ingenuity and tenacity of the ACA’s opponents ought not be underestimated and we may find ourselves with yet another constitutional challenge to the ACA in the future, particularly if healthcare remains a potent political wedge issue.

Indeed, one such challenge already is pending before Judge Reed O’Connor in the U.S. District Court for the Northern District of Texas, the trial court from which California v. Texas sprung. That case, Kelley v. Becerra, No. 4:20-cv-00283 (N.D. Tex.) is comprised of both individuals and businesses challenging the constitutionality of the ACA’s zero cost-sharing preventive services coverage mandates. The plaintiffs allege that the mandates violate the Constitution’s Appointments and Vesting Clauses, the non-delegation doctrine, and the Religious Freedom Restoration Act. We will provide more detailed analysis of Kelley in the weeks to come.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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