U.S. Supreme Court Upholds Affordable Care Act

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On June 17, 2021, in California v. Texas, the Supreme Court rejected a challenge to the Patient Protection and Affordable Care Act (ACA) for the third time in nine years. Texas, 17 other states, and two individuals brought this challenge to the ACA following the enactment of the Tax Cuts and Jobs Act of 2017, which effectively nullified the ACA’s monetary penalty for failing to obtain minimum essential health coverage by setting the penalty to $0. The challengers to the ACA contended that absent the monetary penalty, the ACA’s minimum coverage provision, commonly referred to as the “individual mandate,” was unconstitutional, and the rest of the ACA must fall as well. The Supreme Court, in a 7-2 opinion by Justice Stephen Breyer, ruled that neither the states nor the individuals had standing to sue regarding the ACA’s individual mandate, since they were not harmed by that provision. Consequently, the Court did not reach the question of the ACA’s constitutionality.

In 2012, in National Federation of Independent Business v. Sebelius (NFIB), the Supreme Court held in a 5-4 decision that the ACA’s minimum coverage provision was justified as an exercise of Congress’ taxing power. (This provision is commonly known as the “individual mandate.” In NFIB; however, the Court held that the provision does not impose a legal requirement to purchase health insurance.) Five years later, though, Congress effectively eliminated this provision by setting the tax penalty for failing to obtain minimum essential health coverage to $0. This change led to the most recent constitutional challenge to the ACA by Texas, 17 other states, and two individuals. They argued that the provision could no longer be justified as a tax because it no longer raised revenue for the government, and that the provision must therefore instead create a legal requirement to buy insurance, which Congress lacked the authority to do under its commerce power. They further argued that the remainder of the ACA was not severable from the minimum coverage provision, and that the Act must be invalidated in its entirety. The Trump administration did not defend the mandate. It initially also argued that at least some of the ACA’s other provisions were not severable from the so-called individual mandate. The Trump administration later changed positions to argue that the entire Act was invalid. Accordingly, the U.S. House of Representatives and several states, led by California, intervened to defend the law.

A federal district court in Texas agreed with the challengers that the ACA’s individual mandate was unconstitutional once the monetary penalty was $0 and that the rest of the ACA must also fall. On appeal, the U.S. Court of Appeals for the Fifth Circuit agreed with the district court’s analysis of the individual mandate but remanded the case to the district court for further consideration of whether the rest of the ACA must fall as well. The Supreme Court granted certiorari.
In a 7-2 opinion by Justice Stephen Breyer, the Supreme Court held that none of the plaintiffs had legal standing to pursue the lawsuit as to the constitutionality of the ACA’s minimum coverage provision, as none of them had shown a link between the unenforceable individual mandate and the harms that they alleged. Justices Alito and Gorsuch dissented; they would have held that at least the state plaintiffs had standing, that the mandate was unconstitutional, and would have invalidated additional, but unspecified, provisions of the ACA.

California v. Texas will almost certainly not be the end of litigation related to the ACA. Other challenges to discrete provisions of the statute remain pending in the lower courts. This case may represent the last broad constitutional challenge to the ACA in its entirety, however. Only time will tell.

The Supreme Court’s slip opinion in California v. Texas is available here.

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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