What the Texas v. Azar Ruling Means for the ACA and Health Coverage

Illustration of hand taking away healthcare from a crowd
Illustration by Katie Edwards.

On December 14, a federal judge in Texas issued a sweeping ruling in a lawsuit that attempts to invalidate the entire Affordable Care Act (ACA). The decision by Judge Reed O’Connor of the Northern District of Texas in Texas v. Azar holds that the ACA is unconstitutional. Despite this expansive ruling and the ample confusion that it has already caused, the ACA remains the law of the land, and we believe that will remain the case for the foreseeable future.

O’Connor built his rationale for the ruling on the landmark 2012 decision in National Federation of Independent Business v. Sebelius, in which the Supreme Court upheld the ACA individual mandate as a tax. The mandate, through which people were charged a penalty for failure to obtain health insurance, was eliminated by Congress in 2017.

O’Connor reasoned that the removal of the penalty must mean the individual mandate no longer can be considered a tax. He further declared the mandate to be an “essential” component of the law, without which the entire ACA cannot properly function. He ruled that the entire law (PDF) — 974 pages that cover a wide variety of provisions integral to the US health care system — must be struck down as an improper exercise of the Commerce Clause of the Constitution. He also said that Congress must have intended for the whole ACA to be struck down if the mandate were deemed unconstitutional.

The net result of this ruling, if it is ever implemented, is that every provision of the ACA — the Medicaid expansion, Medicare reimbursement cuts, establishment of the Center for Medicare & Medicaid Innovation, exchange subsidies, limits on consumers’ out-of-pocket spending, preexisting conditions protections, and other consumer protections and innumerable health policies — would no longer have effect. After following this law for eight and a half years, the health care industry would find itself in considerable chaos.

Conservative Editorialists Condemn Decision

Even the harshest critics of the ACA quickly attacked the decision. The editorial board of the Wall Street Journal characterized the decision as a “blunder” and predicted it will be overturned. Philip Klein, executive editor of the conservative Washington Examiner, described the decision as “an assault on the rule of law.”

Both the White House and the Centers for Medicare & Medicaid Services issued statements immediately after the decision stating that the ACA remains the law of the land pending appeal, a determination echoed by numerous legal authorities and press outlets. Exchange enrollment continues, Medicaid expansion will still be funded, and all other aspects of the law continue to have effect. For practical purposes, nothing has changed, and it is unlikely anything will until the case is settled in higher courts.

The next important step is for the plaintiffs to appeal the ruling to the US Court of Appeals for the Fifth Circuit in New Orleans. A final decision there could take several months, after which the case could reach the Supreme Court during its 2019–2020 term. That could set up a decision in late spring 2020 — yes, just before the presidential nominating conventions. It’s possible a final ruling could take longer than that.

Reasons for Doubt

The Texas judge’s decision is dubious on at least three grounds:

  • The holding on the individual mandate itself
  • The ruling that the whole law must go down because of the invalidation of one provision
  • The finding that plaintiffs have been harmed, giving them standing to sue

We believe the appellate courts will reject this decision on at least one of these grounds and that the ACA will stand regardless of what becomes of the individual mandate provision. The circuit court and the Supreme Court could uphold the law by finding that: (1) Because the individual mandate now has no enforcement mechanism, it is not actually regulating any economic activity and thus does not violate the Commerce Clause; (2) Congress clearly did not intend for the entire ACA to be struck down over the invalidation of the mandate enforcement mechanism because it left the rest of the law in place; and (3) the plaintiffs do not have standing to sue because they suffer no harm under a mandate that no longer has authority to penalize anyone for noncompliance.

Given the predisposition of the Supreme Court, led by Chief Justice John Roberts, to defer to Congress and avoid overtly politicized decisions, we believe he and the four left-leaning justices will use at least one of these three grounds to uphold the remaining ACA provisions. If one of these justices is not on the court when the case is heard, that analysis could change. But even in that scenario, we suspect the court would limit the impact of the case by severing the mandate provision from most, if not all, of the rest of the law.

Celebration and Restraint

The Texas ruling was celebrated in the White House statement and President Trump’s tweets, but some Republican offices on Capitol Hill have been reiterating support for ACA preexisting condition protections. In the Senate, however, incoming Finance Committee Chairman Chuck Grassley called for hearings on the ACA to debate new insurance options.

Democrats are decrying O’Connor’s ruling but believe the Supreme Court will uphold the law.

Don’t expect Congress to jump in and provide clarity any time soon. If, theoretically, the Supreme Court strikes down components of the ACA beyond the mandate itself and Congress has the collective will to act, a minimalist “fix” would be to enact an explicit clause severing the mandate policy from the rest of the law.

Covered California Extends Deadline

In the meantime, Covered California is trying to combat confusion potentially created by the ruling and allow consumers ample time to get health coverage. The insurance exchange has extended the open enrollment deadline to December 21 for enrollees who want to obtain a health plan effective January 1, 2019. For those who want to begin coverage on February 1, open enrollment will continue as scheduled until January 15.