On Wednesday, December 18, 2019, the U.S. Court of Appeals for the Fifth Circuit held in Texas v. Azar that the Affordable Care Act’s (ACA) individual mandate is unconstitutional and remanded the case to the lower court for further review. In a split 2-1 panel decision, the Fifth Circuit held that the individual mandate is unconstitutional because it can no longer be read as a tax. The district court must now determine whether the individual mandate is severable from the remainder of the ACA, or whether the entire law must be struck down. Judge Reed O’Connor of the U.S. Federal District Court for the Northern District of Texas previously ruled that the individual mandate is inseverable and therefore the entire law is unconstitutional (previous HL Pulse discussion here).
In the Fifth Circuit’s decision on Wednesday, the majority explained that without the ACA’s tax penalty, which Congress reduced to $0 in the Tax Cuts and Jobs Act, it is no longer “‘fairly possible’ to save the mandate’s constitutionality under Congress’ taxing power.” Since the tax penalty is now “set at zero” for everyone, “the four central attributes that once saved the statute because it could be read as a tax no longer exists.” There is no longer a portion of the individual mandate that yields any “essential feature of any tax” because it no longer produces revenue for the federal government. Using that finding, the Fifth Circuit determined that the individual mandate is currently a “command” and the penalty is no longer constitutional under Congress’s power to lay or collect taxes.
To determine how much, if any, of the ACA remains constitutional without the individual mandate, the Fifth Circuit examined the Supreme Court’s severability doctrine and noted that the “[s]everability analysis is at its most demanding in the context of sprawling (and amended) statutory schemes like the one at issue here.” Therefore, determining severability in relation to the ACA “involves a challenging legal doctrine applied to an extensive, complex, and oft-amended statutory scheme.” The Fifth Circuit stated that Judge Reed O’Connor’s district court opinion fails to “explain with precision how particular portions of the ACA as it exists post-2017 rise or fall on the constitutionality of the individual mandate.” The opinion directs Judge O’Connor to address the severability question with a “finer-toothed comb” and to do the “legwork of parsing through the over 900 pages of the post-2017 ACA.”
The dissenting opinion by Judge Carolyn Dineen King explained that the lower court’s decision should be vacated since the plaintiffs lack constitutional standing. In addition, Judge King explained that answering whether the ACA should remain in force without the individual mandate should be easy “since Congress removed the coverage requirement’s only enforcement mechanism but left the rest of the ACA in place.” If Judge King were to reach a decision on the merits, she stated that she “would conclude that the coverage requirement is constitutional, albeit unenforceable, and entirely severable from the remainder of the ACA.”
The timing of the Fifth Circuit’s decision is notable since it occurred merely hours before the ACA enrollment period ended for 2019. With remand of the case to the lower court, it is unlikely that the overall fate of the ACA will be resolved before the 2020 presidential election. California Attorney General Xavier Beccera has already announced that the intervening states will likely immediately appeal to the Supreme Court.
*Special thanks to Hayley White, Law Clerk and District of Columbia Bar license pending, for her assistance in preparing this post.