Is the So-Called Mandate Without Any Tax Consequences Unconstitutional? And If So, How Should a Court Remedy That? Part Three in a Series Examining Underexplored Issues in the California v. Texas Affordable Care Act Case

Posted in: Constitutional Law

As readers of this series will no doubt recall, in 2012 the Supreme Court in National Federation of Independent Business (NFIB) v. Sebelius (in a majority opinion written by Chief Justice Roberts and joined by Justices Ginsburg, Breyer, Sotomayor, and Kagan) upheld the so-called “individual mandate” component of the Affordable Care Act (ACA or Act) as a valid exercise of Congress’s power. In so doing the Court interpreted the word “shall” connected to the mandate not as a legal command but simply as a statement that people should purchase insurance if they want to avoid potential tax consequences. Chief Justice Roberts (writing for himself) explained his view that this was not the most natural reading of the word “shall.” But in the context of the statute, it was a “fairly possible” interpretation and thus had to be preferred over a reading under which Congress directly commanded the purchase of insurance, insofar as that reading could (in his eyes) render the provision unconstitutional. And the other four members of the NFIB majority joined a part of Roberts’s opinion that firmly embraced this non-obligatory interpretation of “shall.” The challengers in California v. Texas argue that when Congress in 2017 reduced to zero the amount of the tax owed for failure to maintain insurance coverage, the construction used in NFIB was rendered unavailable, the meaning of “shall” changed to “must,” and this part of the ACA turned into an unconstitutional command.

We think the challengers are incorrect.

Notably, the California challengers are not faithful to the interpretive canon invoked by the Chief Justice in NFIB, to wit: “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.” That canon applies just as strongly after the 2017 amendment as it did in 2012 when NFIB was decided, and the canon means that if the challengers’ proposed reading would render the provision unconstitutional, then the Court must reject their reading in favor of any other “fairly possible” interpretation that avoids the constitutional difficulty. (The challengers invoke dictionaries, statements in unrelated cases, and other sources to argue that the best meaning of “shall” involves imposition of an obligation or requirement. But that evidence is no more weighty today than it was in NFIB when, applying the requisite canon, the Court embraced what some might view as a less common or obvious meaning of the word.)

“Shall” Can Easily (Still) Have a Non-Obligatory Meaning

At least a couple of alternative interpretations that would uphold the “shall” language today are (more than) fairly possible. Perhaps the strongest is the very same interpretation adopted in NFIB, under which the amended Act still offers a choice between purchasing insurance or being potentially liable for a tax ‒ only now the amount of the tax is zero for everyone. The challengers take the position that a non-obligatory reading of “shall” is not possible now that no one who fails to maintain insurance will make an actual tax payment to the government and no tax revenue will be generated by the mandate. But, in emphasizing how the 2017 amendment zeroed out tax liability and revenue, the challengers overlook an important feature of the ACA’s mandate component as originally enacted, under which some individuals who elected to go without insurance faced no tax as a result of their choice. The ACA’s instruction that persons “shall” obtain insurance applies to all “applicable individuals.” Separately, the Act provides that “any applicable individual” who lacks coverage pays tax according to a schedule. But—and this is key—that schedule has always exempted from any tax penalty (i.e., has always set at zero the tax penalty for) people who do not pay federal income taxes because their household income is less than the filing threshold specified in the Internal Revenue Code. Thus, some people have always been subject to the “shall” language of the ACA but incurred no tax liability either way from the choice whether to obtain insurance. The Court majority in NFIB did not, of course, conclude that those individuals who faced no tax consequences from failing to procure insurance were nonetheless violating the law by not obtaining insurance, or that as to those persons Congress had imposed a command beyond congressional power. Nor did the Court say that “shall” was a command that was permissible because for most people it was related to tax liability and other people were merely swept in by some acceptable overbreadth. Instead, the Court said more simply that ”shall” wasn’t a command at all, but descriptive of an option. And that option, which has always been most properly described as a choice between maintaining coverage or potentially being subject to a tax, persists today, with the only difference being that the potentiality for tax liability has been reduced to zero for everyone, in effect putting every “applicable” individual into the exempt category. To be sure, the revenue-generating aspects of the tax penalty (which are now nil) might have been important in NFIB for upholding the tax-penalty schedule itself under the taxing power, but interpreting the ACA’s “shall” language in NFIB to mean “may” rather than “must” in no way depended, or depends today, on whether any revenue is generated. Put another way, when one analyzes NFIB carefully, one sees that the Court didn’t really uphold the “shall” part of the Act under the taxing power—it upheld the tax penalty incurred by some persons (triggered by the failure to procure insurance) under the taxing power, and upheld the “shall” part because that part (notwithstanding the use of “shall”) did no more than educate individuals about potential tax consequences that some would face without insurance. And that meaning of “shall” abides.

A hypothetical confirms that nothing has changed in this respect. Imagine that instead of amending the statute in 2017, Congress in 2010 had specified ex ante that, beginning in 2017, the tax-penalty schedule would drop to $0 (say, because Congress predicted that by that year no tax incentive would be needed to encourage individuals to maintain coverage). It is almost inconceivable that the NFIB Court would have concluded that the construction it used was not available simply because in 2017 the tax was slated to zero out. And if Congress could have included a zeroing provision in the original statute, there is no reason why Congress could not accomplish the same thing in later legislation (and with the benefit of actual experience), as it did in 2017.

Even if one thinks the meaning of “shall” must take on a new meaning after the tax-penalty is zeroed out, there is still a(nother) way to plausibly interpret “shall” to avoid constitutional difficulty, namely, that ”shall” is now merely part of a hortatory statement—“everyone should have insurance”—with neither a tax nor any other kind of consequence for people who disregard the exhortation. In other words, instead of an election between maintaining coverage and possibly paying a tax, as in NFIB, the option now could be viewed simply as a choice to maintain insurance coverage or not, with the federal government having suggested that one choice is better than the other. That too is a saving construction. Although in places in their brief Texas and the other challenger states seem to suggest otherwise, Congress plainly does not need an enumerated power to exhort voluntary action. It can urge people to get health insurance just as it can urge them to respect the flag, buy war bonds, vote, or wear a mask.

If either of these interpretations is “fairly possible” then the challengers’ case evaporates. And given the 2017 amendment and its context, in fact these two interpretations are more than just “fairly possible” but are now the two most natural readings of the word. In NFIB, the plaintiffs (and the four dissenting Justices) understood the insurance requirement as a legal obligation backed up by a monetary penalty upon (some of) those who fail to comply largely because there were significant consequences of a failure to procure insurance; for the NFIB dissenters, the penalty provision was the primary evidence of obligation. With the tax penalty now removed from the statute (and no other negative consequence for failure to obtain insurance in its place), any reading of the mandate that includes an element of legal compulsion is considerably less plausible. While arguably an obligation can be said to exist without penalty, certainly the removal of a penalty makes reading “shall” as obligatory much less natural. A reader today with no knowledge of the ACA’s history or the litigation over it would be more, not less, likely to read “shall” as non-obligatory than would a reader looking at the original statute in 2010. In sum, the challengers/dissenters lost on their statutory interpretation of “shall” in NFIB, and their reading is even more far-fetched today.

Another problem with the challengers’ argument takes us back to the issue of statutory stare decisis we introduced in Part One. Statutory stare decisis is a judicial doctrine, but it plays a big role in the work of Congress and helps shape the relationship between Congress and the courts. Two cornerstones of statutory stare decisis—flip sides of the statutory stare decisis coin, if you will—are that (absent extraordinary circumstances) only Congress can correct the Court’s interpretation of statutory language, and that Congress is deemed to accept judicial interpretations it does not correct. Of particular importance to California v. Texas, the Court has explained (in a 2017 case) that if Congress amends or reenacts a statute and in doing so preserves statutory language the Court has previously interpreted, “principles of statutory interpretation require . . . [the Court] to respect Congress’ decision to ratify those precedents.”

Thus, we must remember that in 2017 when Congress reduced the tax to zero, it did so against the backdrop of NFIB. Congress at that time was therefore entitled to assume—and should be presumed to have intended—that the provisions the Court had interpreted in NFIB would (absent congressional alteration) continue to have the very same meaning the Court had given them in that case. When Congress left the word “shall” intact, it did so with the expectation that the Court would continue to read the provision as a choice rather than a command. The state challengers contend that “when a statute materially changes, this Court is free once again to interpret the statute given that change.” But challengers do not point to any particular material change bearing on the word “shall” (nor could they, since the only section Congress touched was the tax-penalty schedule); instead they say the material change in the statute was that a choice (you can buy insurance or face a tax) was converted to a command. But that’s not a change in the text of the statute; that’s a conclusion about the consequences of statutory change in other language, and indeed the very conclusion that is in dispute in California. (Of course the challengers do point to the change in the penalty provision even absent a change to the “shall” provision, but we’ve just explained why that change doesn’t affect the best interpretation(s) of “shall.”)

California v. Texas implicates yet another reason to apply statutory stare decisis with particular force. The Court assumes that when Congress legislates, it does so consistently with the Constitution. As we explained last time, although many observers read NFIB as holding that Congress lacked power under the Commerce Clause or Necessary and Proper Clause to impose an insurance command, that understanding is decidedly not correct. Nonetheless, because five Justices (the Chief in his own opinion and the four dissenters) did express their view that neither the Commerce Clause standing alone nor the Commerce Clause and the Necessary and Proper Clause together would allow Congress to require the purchase of insurance, it is quite reasonable to expect that Congress would have paid serious attention to the expressed views of these five members of the Court (four of whom remained on the Court in 2017) even absent a binding holding. Accepting the notion that in 2017 the mandate converted to a command to purchase insurance requires not only understanding Congress as having silently rejected NFIB’s interpretation of the word “shall” but also as having done something about which five Justices had indicated significant constitutional doubt in NFIB. That strikes us as extraordinary unlikely.

Even if Shall Means Must, Does That Make the Mandate Unconstitutional?

Let’s suppose that a majority of Justices buy the notion that “shall” need be understood today as a command (albeit one without currently meaningful legal consequences for disobedience). If so, then the Court would still have to decide whether Congress may issue such a (toothless) directive. We have already mentioned that the Commerce Clause arguments and Necessary and Proper arguments connected to commerce in support of the mandate in NFIB remain available today. And there may be other arguments not reflected directly in the briefs that are also still available to the Court and worth considering (and perhaps worth seeking additional briefing on). This may be especially true given that the Solicitor General has taken the very unusual step of not defending the ACA, and even some of the primary defenders of the Act have, as we showed in Part One, themselves conceded too much about what the NFIB Court held with regard to the Commerce Clause and related Necessary and Proper Clause arguments.

Some possibilities beyond those addressed in NFIB are discussed in a thought-provoking 2011 article by Yale Law Professor Akhil Amar (with whom each of us have had a great deal of interaction while at Yale, albeit at different times, as well as since) that can be viewed here. And another possibility that the three of us find particularly interesting and worth thinking about is whether a command to procure insurance would be Necessary and Proper to Congress’s Article I power to “support” the armed forces.

To sketch out this latter notion, let’s first go back to NFIB, where a majority of the Justices indicated their view that Congress couldn’t dictate the private acquisition of health insurance under the Commerce Clause because, while Congress may regulate preexisting commercial endeavors, it may not mandate new ones. This analysis of federal commerce authority was (to us) unpersuasive in 2012. But it is even less persuasive today. Imagine, for example, that six months ago we had a vaccine for COVID-19 and that (as seems likely) the vaccine would be effective nationally only if the overwhelming majority of Americans were inoculated to create meaningful herd immunity. To forestall extended cycles of interstate-commerce-disrupting business closures or slowdowns, shouldn’t Congress have enjoyed federal power (putting aside arguments about individual rights) to require people to obtain the vaccine, even in states where local leaders don’t believe in vaccination? (Or consider the similar debate about—and regional resistance to—masks.) And if Congress could mandate the procurement of vaccines, why shouldn’t it be able to mandate the acquisition of health insurance, which makes it more likely that people could afford the vaccines and would know how, when, and where to obtain them?

This last observation brings us back to our point that the Commerce Clause power (and others discussed in NFIB) needn’t and shouldn’t be the only authority to consider. Recent headlines about the U.S. military sheltering in place remind us all that military preparedness in the 21st century might depend on creating—even by mandate—herd immunity, just as other forms of military preparedness throughout American history have required compulsion (e.g., selective service conscription). Today’s coronavirus is from all indications a natural phenomenon, but what if the next super-virus is introduced in America intentionally as a form of biological warfare? Professor Akhil Amar also emphasized in another essay (in 2012) that germ warfare may become the modern norm, and that McCulloch v. Maryland itself rested in part on grounds of military preparedness; in the wake of the War of 1812, Chief Justice Marshall explained how a national bank was useful in fighting wars and supporting armies. If the creation of a national bank reasonably promotes military readiness, why wouldn’t facilitation of herd immunity be equally if not more reasonably fit and appropriate to the same end? The ultimate question on the merits, after all, is not whether any particular provision of the Constitution supports federal action, but whether Congress enjoys federal power somewhere in our national charter to accomplish a specific goal. To paraphrase McCulloch, it is a Constitution, not a clause, we are expounding.

Even if the Mandate Is Unconstitutional, Does That Mean It Must Be Enjoined?

Finally, even if the Court is mistakenly tempted to conclude that the tax-zeroing action in 2017 changed the meaning of the mandate into an unconstitutional command, the Court need not blithely accept the challengers’ request to enjoin the mandate and then ask which (if any) other provisions need also fall. Rather, the Court could simply enjoin the 2017 tax repeal itself (an idea we haven’t seen offered in the parties’ briefs). Indeed, the Court routinely enjoins amendments that change underlying statutes so as to create constitutional problems, most recently this past term in Barr v. American Association of Political Consultants, Inc. when the Court enjoined a content-based exception that had been added onto an otherwise content-neutral and pre-existing regulation of robocall speech.

Enjoining the 2017 repeal and restoring the tax penalty would unquestionably preserve the meaning of “shall” as an option between procuring insurance or being subject to tax liability. If that were the remedy the Court fashioned, then there would be no occasion to engage in the complex business of severability analysis regarding the mandate (which we begin to explore in the next Part), because the purported inseverability-driving congressional “findings” concerning the mandate on which the challengers rely would no longer be relevant if the statutory framework were returned to the form already blessed in NFIB. More on this intriguing remedial possibility next time.

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