District Court Invalidates Affordable Care Act: The Decision’s Immediate Effect and Prospects for Appeal
On December 14, Judge Reed O’Connor from the United States District Court for the Northern District of Texas issued an opinion invalidating the 2010 Patient Protection and Affordable Care Act (the “ACA”), and the decision could have a dramatic and pervasive effect on health care for virtually everyone in the country. The decision “could” have a significant effect because the decision does not immediately invalidate any of the ACA’s provisions, and the parties and Judge O’Connor may elect to conduct further proceedings in the district court or for appellate courts to weigh in on this decision before it has any direct impact on health care laws and regulations.
The ACA’s Status Before the District Court’s Decision
The case was filed by the State of Texas and numerous other states, [1] along with two individuals, against the federal government, asserting that the ACA was unconstitutional and invalid in its entirety. The United States Supreme Court has twice affirmed the ACA’s constitutionality, but in this case the plaintiffs contended that the Supreme Court’s decisions were out of date. The Supreme Court previously affirmed the validity of most of the 900-page ACA in 2012, and it specifically affirmed the ACA’s “individual mandate,” which imposes a requirement that all individuals have health insurance and are subject to a tax penalty if they do not obtain it. The Supreme Court concluded that the Constitution’s Commerce Clause did not authorize the individual mandate, but its Tax Power did. Because the Court upheld the individual mandate as constitutional, the Court did not address then what would happen to the rest of the ACA if the individual mandate were invalidated.
When Congress eliminated the tax penalty for individuals who do not obtain health insurance as part of the 2017 Tax Cuts and Jobs Act, however, Congress effectively eliminated the tax associated with the individual mandate, reducing the amount of the tax penalty to $0. These plaintiff states then sought to invalidate the ACA, asserting that the individual mandate could no longer be sustained under Congress’s Tax Power because there was no longer a real tax tied to an individual’s violation of the mandate. The plaintiffs further contended that the individual mandate was so centrally important to the ACA that if it were invalidated, no portion of the statute could survive. The plaintiffs asked the court to prevent further enforcement or implementation of the ACA.
The federal government, the defendant in the case, agreed with the states that the individual mandate was unconstitutional. The federal government also agreed that the ACA’s “guaranteed-issue” and “community-rating” provisions, which, among other things, prohibit insurers from demanding higher payments or denying insurance based on pre-existing conditions, should not be enforced if the individual mandate were found to be invalid. However, the federal government argued that the rest of the ACA, including Medicaid expansion, subsidies for the purchase of health insurance, authorization for persons under the age of 26 to be covered under their parents’ insurance, and the maintenance of health insurance exchanges, should continue to be enforceable.
Given the federal government’s stance, a separate group of states intervened to argue that the entire statute was constitutional and that even if the individual mandate were declared unconstitutional, the rest of the ACA should remain in place. [2] These states also filed a separate action in September 2018 in the District of Maryland, seeking a declaration that the ACA was constitutional.
The District Court’s Decision
In his ruling, Judge O’Connor agreed with the states, led by the State of Texas, that the individual mandate was unconstitutional. The district court then concluded that the rest of the ACA was not severable from the individual mandate, and therefore the district court invalidated the entire statute. The district court did not, however, enter an order directing the federal government to cease enforcement or implementation of the ACA. Indeed, the federal government has opposed any injunction to cease enforcement of the statute, and in its order the district court expressly denied the plaintiffs’ request for an injunction. Following the district court’s ruling, the White House announced that it expected that the ruling would be appealed and, “Pending the appeal process, the [ACA] remains in place.” President Trump stated that he expects the Supreme Court to rule on the issue.
The Road to Appeal
Notwithstanding the uncertainty caused by the decision, the district court’s order is not immediately appealable on its own, and the district court has substantial control over whether the parties may appeal the order now. The court may elect to declare its order a “partial final judgment” on one of the plaintiffs’ claims and thus permit an appeal, or it may certify its order for “interlocutory” review. On Monday, December 17, the defendant states asked the court to permit an appeal under either approach. The defendant states also requested the court clarify that its December 14 ruling does not relieve anyone of their rights and obligations under the ACA until all trial court proceedings and appellate review are complete. The court has directed that the plaintiffs and the federal government respond to this request by Friday, December 21.
If the district court enters partial final judgment, the appellate court – the United States Court of Appeals for the Fifth Circuit, based in New Orleans – would be obligated to accept the appeal. If the district court instead certifies the issue for interlocutory review, the Fifth Circuit also would have to agree to take the appeal. (If the court states that his order requires the immediate cessation of enforcement of the ACA, that order likely would become immediately appealable.) The district court may elect instead to consider the remainder of the case before issuing a final judgment, and if the court declines to permit an immediate appeal, it is very unlikely that an appellate court would accept any such appeal.
Under any scenario, and sooner or later, the Fifth Circuit will hear the appeal from Judge O’Connor’s decision. The Fifth Circuit may expedite its consideration of any appeal, but if it does not, a ruling should not be expected for several months at least. If the Supreme Court then elects to review the appeal, it would likely do so during the 2020 Presidential campaign.
[1] The states that have participated as plaintiffs in this case are: Alabama, Arkansas, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, and West Virginia, and Wisconsin.
[2] The states that intervened to defend the ACA are: California, Connecticut, the District of Columbia, Delaware, Hawaii, Illinois, Kentucky, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Washington.