Update on California v. Texas, U.S. Supreme Court Case Challenging the Affordable Care Act

McGuireWoods Consulting

On Nov. 10, 2020, the U.S. Supreme Court will hear oral arguments for California v. Texas, the case challenging the Affordable Care Act’s (ACA) constitutionality. This case centers on the ACA’s minimum essential coverage provision, the “individual mandate” requiring that people maintain a minimum level of health insurance coverage.

In NIFB v Sebelius, the mandate was upheld as constitutional because the Supreme Court saw it as a tax. In 2017, Congress passed the Tax Cuts and Jobs Act, which eliminated the individual mandate penalty effective Jan. 1, 2019, raising questions about the mandate’s constitutionality.

At the time the ACA was passed, the individual mandate was seen as a principle part of the law and how it would work. Since Congress zeroed out the penalty for failing to have minimum coverage, the thinking on the importance of the mandate has changed. Originally, 20 states led by Texas brought suit. However, after the 2018 elections, two states chose not to continue their participation.

In the lower court decision, the judge found the mandate unconstitutional. The appeals court agreed, but sent the decision back to the lower court for the judge to review what elements of the law might be severable and thus would not fall. Twenty-one states, led by California, asked the U.S. Supreme Court to intercede before the lower court judge could review the law to determine what from the ACA was intertwined with the individual mandate and what was not.

The Trump administration has not defended the constitutionality of the ACA’s individual mandate. Instead, the Department of Justice agrees with the state and individual plaintiffs in the case that the individual mandate is no longer constitutional because of the penalty elimination by the 2017 Tax Cuts and Jobs Act.

Supreme Court to Address Standing

The U.S. Supreme Court will address whether the plaintiffs have standing to challenge the individual mandate, by considering the following:

  • Is the mandate unconstitutional now? If the plaintiffs have standing, then the Supreme Court must determine whether Congress’ act in zeroing out the penalty renders the individual mandate unconstitutional.
  • If the individual mandate is unconstitutional, what else from the law falls and what can be kept in place? Should the Supreme Court find the individual mandate unconstitutional, it then must decide if the entire law must be struck or if parts of the law can be retained because they do not rely on the mandate being implemented. This would include the Medicare and Medicaid sections of the law and provisions that went into effect before the implementation of the mandate. The court must decide whether insurance reforms in the law fall with the mandate.
  • If the entire ACA is determined invalid, then the Supreme Court will consider whether the entire law is unenforceable nationwide or whether it should be unenforceable only to the extent that provisions injure the individual plaintiffs.

The U.S. Supreme Court could hand down a decision as late as June 2021. The ACA’s future will be determined by litigation that likely will go on for several years.

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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