On November 10, the Supreme Court will hear argument in California v. Texas, the latest prominent case involving challenges to the Affordable Care Act (ACA or Act). This case will mark the seventh time the ACA comes before the Supreme Court. The timing is dramatic. The case will be heard exactly one week after voters go the polls to decide whether to give a second term to President Trump, who has long advocated for repeal of the ACA. With expanded voting by mail this electoral season and possible litigation over election results, the outcome might not even be known on November 10. The Supreme Court, of course, has a vacancy following Justice Ruth Bader Ginsburg’s recent passing. President Trump has nominated circuit judge Amy Coney Barrett and Republican Senate leaders are moving quickly, over the vociferous objections of their Democratic colleagues, to confirm her before the election. Opponents of a speedy confirmation have argued that, if confirmed, Judge Barrett will join with (at least) four other conservative justices to invalidate the ACA (whether in California v. Texas or a future case).
In this series, we will examine various issues—some flagged by litigants and some not—that California v. Texas raises. In this first part we focus on the stare decisis effects of the Supreme Court’s initial blockbuster decision involving the ACA and demonstrate several ways—each of which may surprise, given commonly stated assumptions—that the earlier decision should shape how the Court views the present challenge.
California v. Texas is a renewed challenge to the minimum essential coverage requirement (or individual mandate) of the ACA. The mandate stated that individuals “shall” maintain health insurance and imposed a “shared responsibility” payment, made to the IRS, upon those who lack a health insurance policy satisfying minimum federal requirements. In 2012, in National Federation of Independent Business (NFIB) v. Sebelius, the Supreme Court (in a majority opinion written by Chief Justice John Roberts joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan) upheld the individual mandate as a constitutionally valid exercise of Congress’s taxing power. But five members of the Court (Chief Justice Roberts in an opinion for himself and four dissenting Justices in a separate joint dissent) rejected the government’s argument that the insurance requirement is a valid regulatory measure under the Commerce Clause or the Necessary and Proper Clause. And four of those Justices (all but the Chief), having rejected both the taxing power and any other powers as permissible bases, thus thought the mandate itself was unconstitutional and, further, that it could not be severed from any of the rest of the ACA; accordingly, those four would have invalidated the entire Act. But because they were only four, the Act survived (with exceptions not relevant here).
In 2017, after many failed efforts to repeal the ACA entirely, a Republican-led Congress reduced to zero the amount of the tax individuals had to pay if they lacked the requisite coverage, while leaving every other provision, including the part of the Act that said individuals “shall” maintain coverage, in place. A coalition of eighteen states led by Texas, along with two individual litigants, then brought suit in federal district court arguing that, as a result of the 2017 change, the individual mandate was now unconstitutional. The plaintiffs’ argument boiled down to a simple claim: now that there was no payment required and thus no governmental revenue generated, the mandate (i.e., the part of the ACA that said people “shall” maintain coverage) was no longer a taxation measure, but instead became a regulatory command that does not fall within any enumerated congressional power. That point by itself might sound unimportant, but the plaintiffs had a much grander goal. They further argued that because the individual mandate is inextricably linked to the other healthcare reforms enacted by the ACA—as stated in findings Congress enacted as part of the original law but did not revisit in 2017—it could not be “severed,” and thus the entire statute must fall. The DOJ declined to fully defend the statute, so California and 15 other States intervened to do so.
The district court ruled in favor of the plaintiffs, issuing a declaratory judgment that the individual mandate is unconstitutional in light of the repeal of the tax penalty, and that the rest of the ACA is not severable from it. On appeal to the Fifth Circuit, where the House of Representatives and several more States also intervened to defend the ACA, a divided panel agreed that given the zeroed tax the individual mandate is invalid but remanded the case to the district court for a closer examination of the severability issue. Before the district court did so, the Supreme Court granted review.
Many commentators have recently stated or suggested that the outcome of the upcoming California case is essentially predetermined by the positions various Justices took in the 2012 NFIB decision. We believe such claims are overstated. In this first essay of our series, we make three observations about the ways in which the stare decisis impact of NFIB does, and does not, control the issues at the core of California. We explain why, contrary to frequently aired views: (1) the Justices’ evaluation in NFIB of Congress’s power to enact the individual mandate does not control the current Court’s approach to the same question; (2) the Justices’ evaluation in NFIB of the mandate’s severability likewise does not control the current Court, but it actually presents an argument in favor of severability; and (3) the Justices’ interpretation in NFIB of the mandate’s meaning does have stare decisis implications, and it strongly favors an interpretation in California that saves the mandate’s constitutionality.
First: As noted above, in NFIB a five-member majority of the Court, in an opinion of the Court, upheld the mandate and tax penalty provisions as valid exercises of the taxing power. But a different group of five Justices also expressed the view that neither the Commerce Clause nor the Necessary and Proper Clause provided a valid basis for these provisions. How is this relevant for California v. Texas? If a majority of the Court today were to embrace the Commerce Clause or the Necessary and Proper Clause as a valid basis for the individual mandate (as one of us argued in academic commentary was the right way to go prior to NFIB, and as Justice Ginsburg joined by three others argued in dissent), then the present challenge would fizzle, because even if zeroing the tax penalty eliminates the Taxing Clause as a basis, the mandate could be upheld as a valid exercise of one of these other powers, and then there would be no need to consider which other provisions would fall if the mandate were unconstitutional.
But hasn’t—as many seem to believe—this question already been decided, given that five Justices rejected the commerce and necessary-and-proper arguments in NFIB? At the very least, don’t the expressed views of five Justices that these powers are insufficient create something that is, as fellow Verdict columnist Mike Dorf put it in an amicus brief co-authored with Marty Lederman, “for all practical purposes precedential”? Certainly the lawyers for Texas and the other challenger states seem to think so. Their brief says:
In NFIB, this Court squarely held that Congress may not use its power to regulate interstate commerce to order Americans to buy health insurance—as it purported to do in section 5000A—any more than it can order them to buy a new car or broccoli. 567 U.S. at 547-61 (Roberts, C.J.) (holding law also exceeded power under Necessary and Proper Clause); id. at 657 (dissenting op.).
And the Solicitor General (SG), in his California brief, also suggests (at least in some places) that NFIB has stare decisis force with respect to Commerce Clause and Necessary and Proper Clause powers, observing at one point that the “Court in NFIB held that neither the Commerce Clause nor the Necessary and Proper Clause authorized Congress to impose a legally binding command to obtain health insurance as a freestanding regulation” (our emphasis). Even the brief for California and the other petitioners says that by the time Congress acted in 2017 “NFIB had already held [a direct command to procure insurance] to be unconstitutional.”
We think all of this is too strong.
That suggestion contravenes conventional notions of what a “holding” means for purposes of stare decisis (which may explain why elsewhere in the same brief the SG is more careful, claiming instead only that in NFIB “[a] majority of the Court concluded that the individual mandate could not be sustained” under the Commerce Clause or the Necessary and Proper Clause). There were, to be sure, five Justices who across separate opinions endorsed this legal proposition, but, as one of us has explained in academic writing, such head-counting converts to a formal “holding” only when a majority endorses a legal proposition in service of the formal disposition of the case (though lower courts—and perhaps Congress too—might well pay heed to such head-counting despite not being bound thereby). Neither the Commerce Clause analysis nor the Necessary and Proper Clause analysis of five Justices in NFIB explained or supported the formal disposition of the case, so it’s conceptually wrong to say the Court “held” anything with regard to these provisions. Instead, all the Justices merely offered their conclusions on these matters, with five Justices expressing a view in one direction. And that remains true even though Chief Justice Roberts himself in NFIB carelessly (or perhaps aggressively?) said that “[t]he Court today holds that our Constitution protects us from federal regulation under the Commerce Clause so long as we abstain from the regulated activity.” So, while many have assumed otherwise, whether the individual mandate can be justified as a valid exercise of power under the Commerce Clause or the Necessary and Proper Clause remains an open question.
Of the five Justices who clearly answered this question “no” in NFIB, three remain on the Court. They may rethink their views freely without having to confront stare decisis presumptions, though there’s no particular reason to think any of them will change their minds this year. But more significantly, Justices Neil Gorsuch and Brett Kavanaugh and any newly appointed Justice will write on a clean slate, with the competing positions articulated in NFIB having persuasive force only. So the constitutionality of the individual mandate, even absent a taxing power argument and even if it is interpreted to require buying insurance, remains on the table in California v. Texas.
Even so, many senators and public commentators including Berkeley Law Dean (and sometimes guest Verdict columnist) Erwin Chemerinsky (writing in a recent essay with Howard Gillman in Time ) appear to assume that new Justices Gorsuch, Kavanaugh—and presumably Barrett—because of their general conservative leanings, will necessarily agree with the positions embraced by the four dissenters in NFIB. Here too, we think this view is overstated. For example, when Justice Kavanaugh was a judge on the U.S. Court of Appeals for the D.C. Circuit, he scrupulously avoided resolving the Commerce Clause question in a case challenging Obamacare, saying he saw strong arguments on both sides. And as a general matter, we should not assume that conservative Justices always join other conservative Justices and liberal Justices always join liberal Justices. For example, many of the most high-profile and politicized cases of last Term (including the so-called “faithless elector” cases—analyzed here—the presidential tax return cases, the DACA case, the Louisiana abortion-law case and the cases involving Title VII and discrimination against LGBT persons) featured majority opinions signed onto by Justices appointed by both Democratic and Republican Presidents.
Our bottom line: senators and commentators should not automatically assume that the skeptical views expressed in NFIB by five Justices regarding congressional power constitute definitive evidence that the Court in California will reach the same conclusion to invalidate the mandate ‒ much less invalidate the whole Act. With respect to the latter, this erroneous assumption also glosses over the important fact that, as we will explore below and throughout this series, many of the key questions presented in California are completely new, such that the upcoming case is not a replay of the constitutional fight in NFIB by any means.
Second: if the Court does strike down the individual mandate in California, then the Court will face the entirely separate question of how much of the ACA beyond the mandate should also be invalidated—the severability quagmire. Many of the same senators and commentators alluded to above suggest that we also all know where this train is heading on account of—to use the language of the Chemerinsky/Gillman essay—the three carryover dissenting Justices’ rejection of the mandate and the new Justices’ presumed “same hostility to federal power.” But the severability issue in California turns not on what Congress has the power to do, but on what Congress in fact would have wanted to do. It is clear, even to the SG, that Congress has the power to enact the provisions of the ACA other than the mandate that are in effect today; the issue is whether Congress would have preferred these other provisions to survive in the event the mandate provision is eliminated entirely. And on that severability question, NFIB creates no stare decisis effect because the Court upheld the mandate and had no reason to sever anything.
And yet, counter-intuitively enough, the reasoning of the four dissenting Justices who would have invalidated the mandate and undone the entire Act (of whom Justices Clarence Thomas and Samuel Alito remain on the Court) suggests that today the mandate’s invalidity should not pull down the rest of the Act, after the tax penalty has been zeroed. That’s because the logic the dissenting Justices employed focused not (as the SG does today) on any statement by Congress that the mandate is indispensable to the rest of the ACA, but on the economic interdependence between the incentives created by the mandate and the market dynamics implicated by the rest of the ACA. More specifically, the dissenters argued, if the incentives to obtain insurance created by the tax-enforced mandate went away, Congress would not have expected the rest of the ACA’s regulations to operate properly and helpfully. But Congress in 2017 consciously withdrew the monetary incentive to buy coverage that the mandate created and still chose to leave intact the rest of the ACA. This strongly suggests that the NFIB dissenters misunderstood the intent of Congress in 2010, or at least mis-predicted the intent of Congress in 2017 ‒ when (at least if one judges by the actions Congress took) it appears that Congress in fact believed the rest of the ACA can reasonably operate without the monetary incentive created by the tax penalty. Again, the reasoning of these four Justices on severability is not binding on anyone. But to the extent the two who remain on the Court want to be consistent with their own prior writings (which Justices often do), what Congress did in 2017 makes clear that what the dissenters said in NFIB on severability actually cuts against, not in favor, of Texas’s challenge.
Third: unlike NFIB’s discussions of power and severability, the Justices’ discussion of the individual mandate’s meaning does have stare decisis implications, and it strongly favors a statutory interpretation in California that preserves the mandate’s constitutionality. Let’s return to what Chief Justice Roberts’s NFIB opinion said about what Congress meant when creating the mandate that individuals “shall” maintain insurance coverage. The Chief Justice explicitly chose between the challengers’ reading, under which the “mandate is . . . a legal command to buy insurance,” and an alternative reading, under which the “mandate is in effect just a tax hike on certain taxpayers who do not have health insurance.” While he found the former reading more “straightforward” as an acontextual matter, he ended up embracing the latter given the entire context of the statute and his obligation to try to identify a sufficient constitutional foundation for the provision, in particular in the taxing power. This part of his opinion is for himself only, but—importantly—four other Justices (Ginsburg, Breyer, Sotomayor and Kagan) join a part of the Chief’s opinion that echoes this interpretation of the word “shall.” In discussing the challengers’ repeated suggestion “that Congress’s choice of language—stating that individuals ‘shall’ obtain insurance or pay a ‘penalty’—requires reading [the mandate provision] as punishing unlawful conduct,” Roberts—joined by these other four Justices in a part of the NFIB ruling styled as “Opinion of the Court”—interprets the mandate not “as a command,” but “only [as] ‘a series of incentives.’” (These points are made forcefully in the Dorf/Lederman amicus brief mentioned above.)
So five Justices in NFIB signed onto an interpretation of “shall” in the mandate provision as not a legal command or order, but as simply a statement that people should purchase insurance if they want to avoid potential tax consequences. Because a bald legal command making noncompliance unlawful would not be a permissible exercise of the taxing power, this statutory interpretation was necessary to the five Justices’ decision to uphold the mandate under the taxing power. And these same five Justices’ votes were necessary to and supported the Court’s disposition of the case. Therefore, this reasoning commands the force of stare decisis status with respect to the meaning of the word “shall,” at least as Congress used it in 2010 in this provision. Moreover, statutory stare decisis is very powerful—much more so than constitutional stare decisis. As Chief Justice Roberts reminded in South Dakota v. Wayfair just two years ago: “The [stare decisis] bar is even higher in fields in which Congress . . . can, if it wishes, override this Court’s decisions with contrary legislation.”
Why is this important? Because Texas’s current challenge to the mandate provision depends on “shall” being understood as ”you must get insurance,” rather than as “getting insurance may enable individuals to avoid potential tax consequences.” Given NFIB, the challengers will have to convince the Court either to ignore stare decisis, or to decide that the meaning of “shall” changed in 2017 when the tax penalty was reduced to zero. If not, i.e., if the mandate still means what the Court said it meant in a binding opinion in 2010, then the mandate is not constitutionally problematic because even if the tax consequences are zero, it seems clear that Congress has power to urge people to obtain insurance whether or not there remain any tax savings for doing so, provided it isn’t commanding them to do so. And then Texas’s challenge collapses.
In subsequent Parts, we will move away (somewhat) from NFIB and delve more deeply into the amended version of the ACA and the strength of various arguments against it presented in California. We’ll take up aspects of the question whether the challengers have standing, and analyze the strength of the claim that the meaning of “shall” has changed, before we plunge into how the severability analysis could play out if “shall” is now understood to mean “must” in a regulatory sense that exceeds Congress’s powers.
