Tuesday, November 10, 2020
The Supreme Court hears arguments today in the latest challenge to the Affordable Care Act--a case that could take down the entire Act. Here's my preview, from the ABA Preview of United States Supreme Court cases, with permission:
The universal coverage provision is once again at the Supreme Court. This time, challengers argue that the provision is not a valid exercise of Congress’s taxing authority, because the provision lacks a critical feature of a “tax”: it cannot raise revenue for the government. (After all, the penalty for noncompliance is zero.) Moreover, challengers argue that because the universal coverage provision is so integrated with the rest of the Act, the provision’s invalidity also means that the rest of the Act must fall, too. But before we even get to these issues, the Court will first consider whether the challengers even have standing to bring their claims.
- Do individual and state plaintiffs have standing to challenge the minimum-coverage provision in the Affordable Care Act?
- Did Congress render the minimal-coverage provision unconstitutional by setting the tax penalty for individuals who lack health insurance to zero?
- If the minimal-coverage provision is unconstitutional, is the rest of the Affordable Care Act unconstitutional, too?
In 2010, Congress enacted the Patient Protection and Affordable Care Act (ACA). The central goal of the Act was to extend quality and affordable health insurance to all Americans. In order to achieve this goal, the ACA included a host of new policies and regulations of the health-insurance market.
Three of those policies stand out. First, the “guaranteed-issue provision” prohibits health-insurance companies from denying coverage for pre-existing conditions. Second, the “community-rating provision” bars health-insurance companies from charging individuals higher premiums because of their health conditions. And third, the “universal coverage provision” (or “individual mandate”) requires all individuals to obtain health insurance, or to pay a tax penalty. 26 U.S.C. § 5000A.
The three provisions complement each other in order to achieve the goals of the Act. The guaranteed-issue provision ensures that all individuals have access to health insurance. The community-rating provision ensures that no individuals pay an outsized rate based on their health conditions. And the universal-coverage provision helps to ensure that health-insurance rates are affordable, by expanding the pool of insured individuals who pay into the health-insurance system, including healthy, but previously uninsured, individuals. These provisions form a “three-legged stool” that sits at the center of the Act.
But the ACA contains a web of other reforms and regulations, too, all designed to help extend quality and affordable health insurance to all Americans. Most notably, the Act provides federal financial incentives to states to expand their Medicaid programs; it expands access to employer-based health insurance; it creates health-insurance marketplaces ( “exchanges”) where individuals can shop for insurance; it provides subsidies to insurance companies and individuals to help keep rates affordable; it requires health-insurance plans to provide certain minimal benefits; it allows young adults to stay on their parents’ health insurance plans until age 26; and more. The ACA also contains a number of provisions that are designed to expand access to quality and affordable healthcare and improve public health outcomes, even if they are not directly related to the health-insurance market.
Opponents of the ACA immediately sued to stop the Act. They argued, among other things, that Congress lacked authority to enact the universal-coverage provision, and that the provision was therefore unconstitutional.
The Supreme Court disagreed. A sharply divided five-to-four Court ruled that while Congress could not enact the provision under its Commerce Clause authority, Congress could enact the provision under its taxing authority. NFIB v. Sebelius, 567 U.S. 519 (2012). In other words, the Court held that Congress could not require individuals to purchase health insurance as a free-standing regulatory mandate. But it said that Congress could impose a tax penalty against individuals who failed to comply with the provision.
In explaining why Congress could enact the universal coverage provision under its taxing authority, Chief Justice John Roberts, writing for the Court, noted that the tax penalty for noncompliance with the universal coverage had all the indicia of valid tax. He observed that the provision was located in the Internal Revenue Code, and that the amount of the penalty was “determined by such familiar factors as taxable income, number of dependents, and joint filing status.” Most importantly, he noted that the provision “yield[ed] the essential feature of any tax: It produce[d] at least some revenue for the Government.” As a tax, Chief Justice Roberts observed, the provision “is not a legal command to buy insurance,” but instead “a condition—not owning health insurance—that triggers a tax.”
Before and after the ruling, opponents of the ACA waged several attempts to revoke the Act through legislation. These efforts failed. But in 2017, in direct response to the ruling, opponents in Congress, through the Tax Cuts and Jobs Act (TCJA), succeeded in undermining the universal-coverage provision indirectly, by setting the tax penalty for noncompliance at zero dollars.
After Congress enacted the TCJA, two private individuals and a group of states sued the government, arguing that the TCJA rendered the universal-coverage provision unconstitutional. They claimed that by zeroing out the tax penalty for noncompliance, Congress transformed the universal-coverage provision from a valid tax (under NFIB) to an unconstitutional direct requirement to buy health insurance (also under NFIB). Moreover, they argued that because the universal-coverage provision worked in concert with the many other provisions of the ACA, the universal-coverage provision was not “severable” from the rest of the Act, and the rest of the Act must necessarily fall, too.
The government sided with the plaintiffs on the universal-coverage provision, but adopted a somewhat more nuanced position on severability. In particular, the government maintained that the universal-coverage provision was inseverable only as to the guaranteed-issue and community-rating provisions, and so only those two additional components of the ACA must fall. Because the government sided with the plaintiffs, a group of states and the District of Columbia, and later the U.S. House of Representatives, intervened to defend the Act.
The district court ruled for the plaintiffs. The court held that the universal-coverage provision was no longer valid as a tax, and that it was inseverable from the rest of the Act. The court struck the entire ACA, but stayed the ruling pending appeal.
The Fifth Circuit agreed that the universal-coverage provision was no longer valid as a tax, and therefore exceeded Congress’s authority. But it remanded the case to the district court for further consideration of the severability question. The appeals court instructed the lower court to give more attention to the legislative intent behind the TCJA, and to more carefully consider how particular portions of the ACA were linked to the universal-coverage provision.
This appeal followed.
The case includes three distinct issues. Let’s take a look, one at a time. (The individual and state plaintiffs briefed a fourth issue—that the Court should uphold the district court’s nationwide injunction against the ACA—but the Court did not certify that question for appeal. We’ll refer to the parties defending the ACA, the states, the District of Columbia, and the U.S. House of Representative, together as the “petitioners.”)
In order to sue in federal court, plaintiffs must demonstrate that they have “standing.” This requires a plaintiff to show (1) that the plaintiff suffered a direct and concrete harm (2) that was caused by the defendant’s actions and (3) that would be redressed by the plaintiff’s requested relief in court. Only one plaintiff needs to demonstrate standing for a case to move forward, so this case could proceed if any of the individual plaintiffs or the states have standing.
The petitioners argue that the plaintiffs (now the respondents) lack standing. As to the individual plaintiffs, the petitioners claim that the universal-coverage provision, as altered by the TCJA, does not harm the plaintiffs, because it doesn’t require them to do anything, and because it doesn’t penalize them if they don’t buy insurance. The petitioners say that the zeroed-out universal-coverage provision simply gives individuals a choice—buy insurance or don’t—but that it doesn’t impose any consequence. They say that any harm is therefore self-inflicted, and doesn’t count for standing purposes. As to the states, the petitioners point out that the universal-coverage provision doesn’t even apply to them. Moreover, the petitioners maintain that they simply have failed to introduce any evidence that the zeroed-out universal-coverage provision itself inflicts any injury on them at all (even if other provisions of the ACA may increase their costs).
The plaintiffs argue that they have standing. The individual plaintiffs contend that they have standing, because the universal-coverage provision, even without a penalty, still requires them to purchase insurance—an actual harm for standing purposes. The states claim that the universal-coverage provision, even without a penalty, imposes several costs on them: increased enrollment in their Medicaid programs (because some individuals will enroll in Medicaid to comply with the universal-coverage provision); increased reporting and regulatory requirements under other provisions in the ACA; and increased costs in providing state employees with health insurance in order to comply with the ACA’s employer mandate. The states say that all of these costs count toward standing, notwithstanding the petitioners’ unduly narrow focus on the lack of particular harms that derive from the universal-coverage provision.
The government argues that the individual plaintiffs have standing. (The government does not make an argument one way or another about the states’ standing.) The government claims that the individual plaintiffs are injured by the ACA’s provisions that regulate health-insurance plans (the government calls these “insurance reform provisions”), because these provisions limit the individual plaintiffs’ choices and increase their costs in the health-insurance market. The government says that the individual plaintiffs can leverage this harm to challenge the universal-coverage provision, because the insurance reform provisions are inseverable from the universal-coverage provision, and all other portions of the ACA, because they, too, are inseverable. But the government maintains that the Court can only grant relief with regard to those provisions that actually injure the individual plaintiffs—relief that would redress only the individual plaintiffs’ harms. The government urges the Court to rule the entire Act unconstitutional, but then to remand the case “for consideration of the scope of appropriate relief redressing the plaintiffs’ injuries.”
Constitutionality of the Universal-Coverage Provision
The petitioners argue that the universal-coverage provision is still constitutional, even after Congress reduced the tax penalty to zero. They say that while the provision may encourage individuals to buy insurance, it doesn’t require anyone to do anything. They contend that this kind of action is well within Congress’s authority, either as a precatory statement, or as a suspended exercise of its taxing power (a placeholder provision in the law that is currently dormant, but that Congress could reactivate in the future). And they note that Congress did not revoke the provision; it simply zeroed out the penalty. The petitioners claim that the Fifth Circuit’s ruling to the contrary—that Congress transformed the universal-coverage provision into an invalid exercise of its Commerce Clause authority—flies in the face of NFIB itself, which says that the courts must “construe a statute to save it, if fairly possible.”
The plaintiffs and the government respond that the universal-coverage provision is no longer constitutional under Congress’s taxing authority, because it no longer raises revenue. As the government says, “Under NFIB’s functional approach, a statute that imposes no tax liability on anyone cannot be sustained as a tax.” The plaintiffs and the government say that the provision now reads most naturally to directly require individuals to buy insurance. They contend that this is exactly what the Court in NFIB ruled that Congress could not do.
The petitioners argue that even if the universal-coverage provision is no longer constitutional, it is severable from the rest of the Act. They note that when Congress zeroed-out the tax penalty in the TCJA, it left the rest of the Act in place. According to the petitioners, this shows that Congress intended only to remove the enforcement mechanism for the universal-coverage provision, but not to undermine the rest of the ACA. (Importantly, the petitioners focus on congressional intent in 2017, when it enacted the TCJA, and not 2010, when it enacted the ACA.) The petitioners maintain that, as a practical matter, the rest of the ACA has continued to operate since 2017, even without the tax penalty.
The individual and state plaintiffs and the government counter that the universal-coverage provision is inseverable from the rest of the ACA, because Congress enacted the provision as an essential part of the larger Act. They say that the universal-coverage provision is an indispensable part of the “three-legged stool” (along with the guaranteed-issue and community-rating provisions), and that the many and myriad other provisions in the Act cannot operate without the Act’s core three-legged stool. (In contrast to the petitioners, the individual and state plaintiffs emphasize congressional intent in 2010 and before the TCJA. They note, however, that the TCJA retained statutory findings as to how these provisions work together to achieve the goals of the Act.)
This case is easily one of the most important cases of the Term. That’s because it tests the entire ACA—a sweeping piece of legislation that comprehensively restructured the health insurance market in the United States and brought quality and affordable health insurance to millions of individuals. A ruling for the challengers could mean the end for many or all of the ACA’s reforms, and could result in millions of individuals losing health insurance and other protections and benefits under the Act. Given that Congress has not offered a viable alternative to the ACA, a ruling for the challengers would likely return the health-insurance market to its pre-ACA status.
This is all the more significant in the middle of a pandemic, with an illness, Covid-19, that has infected millions of Americans and killed over 200,000. Infected individuals require various levels of health care, often quite significant, paid at least in part by their health insurance. Many previously infected individuals continue to show signs of longer-lasting, even chronic, conditions that will require future health care and health insurance. A ruling for the plaintiffs could affect these individuals’ health-insurance policies, and their ability to obtain quality and affordable health care for treatment. At the same time, lingering Covid-19-related conditions could drive up insurance rates or even prevent some previously infected individuals from obtaining new health insurance without the community-rating and guaranteed-issue provisions in the ACA.
But that’s only if the Court rules for opponents on each of the three issues in the case. Such a ruling is not at all certain. For starters, the Court could dismiss the case for lack of standing, vacate the lower courts’ rulings, and leave the ACA in place, exactly as it is. Despite the plaintiffs’ and the government’s arguments, and despite the lower courts’ rulings, the plaintiffs’ standing is tenuous. The universal-coverage provision doesn’t require any of the individual or state plaintiffs to do anything, and the states’ theory of standing hinges on other provisions of the ACA. It’s not at all clear that the Court will rule for the plaintiffs on standing. That said, the Court’s rulings on standing often seem to turn on the underlying merits. That may be true here, too: if a majority wishes to address the merits, the Court will likely find standing.
As to the universal-coverage provision, the Court seems primed to rule this unconstitutional. Remember that Chief Justice Roberts wrote for a bare majority in NFIB that the universal-coverage provision fell within congressional authority to tax, because it could raise revenue. But with the provision now zeroed-out, it is not at all clear that Chief Justice Roberts would vote to uphold it. Even if the other current justices who joined this portion of the NFIB ruling (Justices Breyer, Sotomayor, and Kagan) voted to uphold the provision, there may now be a five-justice majority against the provision. Since Justice Ruth Bader Ginsburg’s death, the Court has only eight justices. (More on this below.) A four-four tie would affirm the Fifth Circuit’s ruling striking the universal-coverage provision, but without setting a Supreme Court precedent.
As to severability, we just don’t know. To be sure, there is language in NFIB that suggests that the universal-coverage provision is inextricably linked to other provisions of the Act, particularly the guaranteed-issue and community-rating provisions. But that language does not necessarily foretell the Court’s ruling on severability. (The inextricability of the universal-coverage provision as a matter of policy may be different than the inseverablity of the provision as a matter of constitutional law.) If the Court were to strike the universal-coverage provision, it could (1) rule all of the Act severable (and strike only the universal-coverage provision), (2) rule only the guaranteed-issue and community-rating provisions inseverable (and strike only the three provisions), (3) rule certain other provisions of the ACA also inseverable (and strike only those provisions), or (4) rule the entire ACA inseverable (and strike the whole Act). Because the Fifth Circuit did not rule on the severability of specific ACA provisions—remember that the Fifth Circuit remanded the case for further consideration of severability—the Court may similarly kick the question back to the lower courts. (As described above, in standing, the government urges the Court to rule the entire Act unconstitutional, but to remand the case for a determination of which provisions harm the individual plaintiffs.)
The timing of the case, just a week after the 2020 presidential election, is critical. As this piece goes to print, President Trump has nominated Judge Amy Coney Barrett to replace Justice Ruth Bader Ginsburg on the Court. Justice Ginsburg voted to uphold the universal-coverage provision in NFIB, and has consistently voted against other challenges to the Act. Judge Barrett, in stark contrast, is on the record opposing the Court’s holding in NFIB that Congress validly enacted the universal-coverage provision under its taxing authority. A Justice Barrett would almost certainly tilt the Court—with possibly a six-justice majority—further against the universal-coverage provision. We probably don’t have enough information to predict the way a Justice Barrett might rule on severability.
At publication, the Senate just began confirmation hearings. If the Senate confirms Judge Barrett before November 10, as now seems likely, she will sit for oral arguments and participate in the case. If the Senate does not confirm Judge Barrett before November 10, under ordinary practice, she won’t—unless the Court orders a reargument in order to include her. With the current eight-justice Court, a tie would simply leave the Fifth Circuit ruling in place.
One final point. Even if the Court were to rule for the plaintiffs on all the issues, Congress could probably restore much or all of the ACA, if it had the votes. Remember that the Court in NFIB held that Congress could enact the universal-coverage provision with a tax penalty under its taxing authority. That ruling still stands, for now, at least. Again, a Justice Amy Coney Barrett could move the Court against it.