Affordable Care Act Faces Third Supreme Court Challenge

By Katherine Goelz

On November 10, the U.S. Supreme Court listened to oral arguments in California v. Texas. This is the third case seeking to invalidate the Affordable Care Act (ACA) that has come before the Supreme Court since the regulation was signed into law in 2010. The Court generally upheld the ACA as a whole in 2012 and 2015. 

In 2012, the Court held that the mandate requiring individuals to maintain health insurance or pay a monetary penalty was constitutional under Congress’ taxing power. In 2015, the Court concluded that the ACA’s tax credits—used to lower monthly premiums—were available for insurance purchased on any Health Insurance Marketplace (the “Exchange”) created under the ACA, regardless of whether the Exchange was established by a state or by the Health and Human Services.

In December 2017, with the passage of the Tax Cuts and Jobs Act (TCJA), Congress reduced the penalty associated with the ACA’s mandate to $0. This penalty, deemed a tax, was the rationale that was used to justify the constitutionality of the law under Congress’ taxing power in 2012.  

California v. Texas challenges the constitutionality of the ACA under the taxing power. The complaint was originally filed by the State of Texas in February 2018. Texas was joined by the Trump Administration, twenty Republican state attorneys general and Republican governors, and two Texas residents. The residents, John Nantz and Neill Hurley, are both self-employed. They claim that they were forced to purchase insurance in order to comply with the ACA’s mandate, even though the penalty had been reduced to $0. They are alleging direct harm by the ACA because the funds they are using to pay their expensive insurance premiums could instead go to their businesses.  

The State of Texas’ argument centers around the premise that because the penalty was reduced to $0 by the TCJA, it could no longer be considered a tax. Without a tax, the ACA cannot be constitutional under Congress’ taxing power. The plaintiffs contend that the tax is so intertwined with the rest of the regulation that it cannot be severed; thus, the entire ACA must be struck down. The named Defendant, California, argues that, even if necessary, the mandate can be “severed” without invalidating the entire Act. “Severability” means that even if part of a contract or legislation is deemed unenforceable, the remainder of the contract or legislation remains effective.   

Two conservative justices have already signaled their support of severability in the pending case. Chief Justice Roberts, speaking to the attorney for Texas, stated, “I think it’s hard for you to argue that Congress intended the entire Act to fail if the mandate was struck down when the same Congress that lowered the penalty to zero did not even try to repeal the rest of the Act.” Justice Kavanaugh added, “I tend to agree with you on this very straightforward case for severability.”  

All eyes are on the newly appointed Justice, Amy Coney Barrett, who had previously criticized the Court’s 2012 decision. The ACA has provided healthcare to over twenty million Americans. However, it will likely take several months for the Court to rule on California v. Texas. The Court made its decision three months after the first oral arguments in the 2012 case, while the 2015 challenge to the ACA was decided within four months.

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