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Affordable Care Act

The Current Constitutional Challenge to the Affordable Care Act

  • 1Vanderbilt Health Policy Center, Vanderbilt Law School, Vanderbilt University, Nashville, Tennessee
  • 2Vanderbilt University School of Medicine, Vanderbilt University, Nashville, Tennessee
  • 3Owen Graduate School of Management, Vanderbilt University, Nashville, Tennessee

Affordable Care Act (ACA) opponents have challenged its constitutionality since it was enacted in 2010, with some limited successes. For example, the US Supreme Court ruled in 2012 that states must be allowed to opt in to expand Medicaid without facing the threat of losing all preexisting Medicaid funding if they chose not to expand. With respect to the challenge to the individual mandate—that all people must buy insurance or pay money—the Supreme Court upheld the required payment as a tax, not as an exercise of power under either the Commerce Clause or the Necessary and Proper Clause of the Constitution. Because federal legislation must have a constitutional source of authority, the tax rationale was questioned in 2017 during the budget reconciliation process when Congress set the tax rate at zero. The mandate remained, but the penalty was deleted.

This set the stage for the current constitutional challenge, which has 2 dimensions. First, can this residual mandate without the penalty still be justified as a tax? The lower federal courts have answered no. A tax must raise revenue, and a zero rate does not. As the chief justice stated in 2012, an “essential feature” of a tax is that it “produces at least some revenue for the Government.”1 Because the court rejected the Commerce Clause and the Necessary and Proper Clause as grounds of authority for the mandate, the chief justice deemed the mandate a tax as a plausible way to save the law. But if the mandate is no longer a tax because it raises no revenue, the constitutional foundation for the mandate has vanished. I believe the lower courts are on firm footing on this score. In a Wall Street Journal op-ed in 2017,2 I sketched out how this constitutional strategy could work.

The second dimension of the current challenge is more far-reaching and more difficult. If the mandate is no longer constitutionally defensible, how much more of the law, if any, must be jettisoned?

The US District Court for the Northern District of Texas invalidated the entire ACA, finding its components inseverable.3 The US Court of Appeals for the Fifth Circuit found the district court’s severability analysis incomplete and sent the case back to the district court for more intensive analysis.4 The Supreme Court declined, without a recorded dissent, to fast-track an appeal.5 There is no final judgment yet, and courts traditionally discourage piecemeal appeals, so the case may return to the district court for a more in-depth severability analysis.

The bottom line on severability is for courts to give effect to congressional will. That is easier said than done. First, courts must decide if the law’s major provisions related to the individual mandate—the preexisting-condition protections made possible by the guaranteed-issue and community-rating requirements—can operate independently. In passing the law, the 2010 Congress stated that the mandate was necessary for the preexisting-condition protections to operate. In defending the law before the Supreme Court in 2012, the Obama administration acknowledged that the mandate was inseverable from the guaranteed-issue and community-rating provisions. These past statements, relied on by the district court, support that these provisions are inseverable and must fall. In its initial filing in the district court, the Trump administration accepted that stance but stated that other ACA components were severable. Preservation of other components of the ACA, such as Medicaid expansion and the exchange subsidies, might be a reasonable outcome, although the courts must be satisfied that the resulting provisions, including the winners and losers, are consistent with the original design. The concern is that the courts would be choosing this outcome, even though the resulting winners and losers might not have been envisioned by the enacting Congress.

Second, courts must assess whether unrelated, unchallenged provisions of the law must be excised, too. Does the remainder of the law fulfill broad congressional objectives consistent with the law’s design? Would the enacting Congress have passed this legislation knowing that portions were unenforceable?

The ACA contains taxes, cross-subsidies, and myriad political trade-offs and compromises. Providers accepted slower growth in projected revenues in exchange for reduced financial burdens from uncompensated care (because more patients were to be covered). Higher expenses from covering patients with preexisting conditions would be offset to some extent with coerced premium payments from the mandate.

The ACA prioritized working within a market-based framework. However, requiring coverage for those with preexisting conditions (guaranteed issue) and disallowing insurance rates to turn on past or expected claims experience (community rating) are broadly inconsistent with market principles; they truncate incentives for people to secure insurance before they become ill. The coercive mandate substantially countered those incentives, but prices for health insurance increased.

For those receiving subsidies, the price increases for health insurance may have been entirely or partially offset. For those not receiving subsidies, for example, a family of 4 with about $100 000 in income, premiums rose substantially. A severability analysis necessitates a court asking whether Congress in 2010 would have enacted the ACA knowing that it would threaten the health insurance market and substantially increase premiums for consumers without subsidies in the individual health insurance marketplace. Democrats in the US Senate had just 60 votes needed to overcome a Republican filibuster, so it is difficult to determine what the enacting Congress would have done under the circumstances.

Once the case is returned to the district court, the court must address in detail whether the ACA can fully function without the unconstitutional provisions and whether the enacting Congress would have passed such a law. Because Congress was acting under special budget reconciliation rules in 2017 when it set the mandate rate at zero, one cannot infer congressional intent on these issues from the 2017 tax act. Congress was limited, under the budget reconciliation procedure, to reducing taxes; dealing with the severability issue was beyond its scope. The earlier failure to repeal and replace the ACA is not informative. Congress can only speak through enacted legislation, not failure to act,6 and failure to act in 2017 does not shed light on what the enacting Congress would have done in 2010 under the revised circumstances or what a subsequent Congress preferred regarding severability.

This exercise of determining what stays and what goes challenges the judicial role. These decisions are political and should be made by Congress. Perhaps the most prudent pathway for the federal courts is to follow the lead of the district court and allow Congress to redo the ACA. That is, the courts can create the political climate and preconditions to motivate Congress to reconsider and enact a revised version of the ACA with appropriate attention to the problems of preexisting conditions, exchange subsidies, and Medicaid expansion that have political traction with voters.

Article Information

Corresponding Author: James F. Blumstein, LLB, MA, Vanderbilt Health Policy Center, Vanderbilt Law School, Vanderbilt University, 131 21st Ave S, Nashville, TN 37203 (james.blumstein@vanderbilt.edu).

Conflict of Interest Disclosures: Dr Blumstein reported owning publicly traded stocks in health-related companies, such as drug companies and mental health companies.

Additional Contributions: The author gratefully acknowledges the excellent contribution to this article, as a research assistant, of Peter G. Cornick, Vanderbilt Law School class of 2020.

References
1.
National Federation of Independent Business v Sebelius, 567 US 519, 564 (2012).
2.
Blumstein  JF. How to end ObamaCare in two pages: call John Roberts’s bluff by disavowing the taxing power. Wall Street Journal. September 19, 2017. Accessed January 29, 2020. https://www.wsj.com/articles/how-to-end-obamacare-in-two-pages-1505774945
3.
Texas v United States, 340 FSupp3d 579 (ND Tex 2018).
4.
Texas v United States, 945 F3d 355 (5th Cir 2019).
5.
Howe  A. Court will not fast-track ACA petitions. SCOTUSBlog. January 21, 2020. Accessed January 22, 2020. https://www.scotusblog.com/2020/01/court-will-not-fast-track-aca-petitions/#more-291375
6.
Immigration and Naturalization Service v Chadha, 462 US 919 (1983).
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