Challengers to the Affordable Care Act Lose their Third Supreme Court Case: Will They Bring a Fourth?

Updated:
Posted in: Constitutional Law

Last week the Supreme Court rejected a challenge to the Affordable Care Act (ACA). If you think you’ve seen this movie before, you have. The latest case, California v. Texas, marked the third time that the Court has heard and ruled against such a challenge.

In 2012, in NFIB v. Sebelius, five conservative Justices said that Congress lacked the power to directly require individuals to purchase health insurance because the constitutional authority to regulate commerce means a power to regulate existing commerce, not to require people to engage in commerce; nonetheless, the Court upheld the so-called individual mandate to purchase health insurance because Chief Justice Roberts joined his four more liberal colleagues to rule that Congress’s power to lay and collect taxes includes the power to give people a choice either to purchase health insurance or pay higher taxes as a penalty.

In 2015, the Court heard and rejected another challenge to the ACA, this time by a 6-3 margin. In King v. Burwell, the majority acknowledged that Congress had drafted the law inexpertly but nonetheless allowed that a provision authorizing states to create “exchanges” on which individuals could purchase ACA-compliant insurance tacitly authorized the federal government to stand in the shoes of those states that declined to create such exchanges. Nonetheless, killing the ACA remained a top priority of Republican politicians.

With a majority in both houses of Congress and the presidency occupied by Donald Trump, Republicans sought to repeal the ACA entirely. However, that would have required overcoming a Democratic filibuster in the Senate, so Republicans did the next best thing: using the “reconciliation” process that requires only a simple majority for revenue-affecting measures, in 2017 Congress included within a larger package of tax cuts a measure that reduced the tax penalty for failure to obtain private health insurance to $0. At the time, President Trump and other Republican politicians boasted—accurately—that they had effectively repealed the individual mandate.

Some clever conservative lawyers thought they could go further still. In NFIB, they said, the Supreme Court upheld the mandate only because a majority construed it as an exercise of the taxing power. But a tax of $0 is not an exercise of the taxing power, and because no other power supports the mandate, it is now unconstitutional, they argued. What’s more, all of the rest of the mandate is so inextricably intertwined with the mandate, that if the mandate is unconstitutional, so is the rest of the law. Thus, these lawyers said, Congress effectively repealed the entire ACA when it eliminated the tax penalty in 2017.

Remarkably, a federal district judge agreed that the 2017 change rendered the mandate unconstitutional and that the whole ACA had to fall with it. A federal appeals court said that the district court perhaps should salvage some of the completely unrelated provisions of the ACA. Before it had a chance to do so, however, the Supreme Court took the case. It ruled against the private and state plaintiffs last week on the ground that they lacked legal standing.

Could the Case Come Back?

Writing for a 7-2 majority in California v. Texas, Justice Breyer explained what probably seems obvious to non-lawyers: If the government tells you to do something or else nothing will happen to you, the government has not harmed or adversely affected you in any way. And because an “injury” has long been a requirement for bringing a federal court lawsuit, the individual plaintiffs—people who purchased health insurance pursuant to the mandate—lacked standing. In effect, the majority told the individual plaintiffs, if you don’t like having to purchase health insurance, then don’t. By law, nothing will happen to you.

As the case name indicates, individuals were not the only plaintiffs. Some states, led by Texas, also sued. They argued that various provisions of the ACA do injure them by requiring them to spend money. That’s a classic “pocketbook” injury that gives rise to standing.

The majority rejected the state plaintiffs’ standing too. Justice Breyer wrote that it was entirely speculative whether the mandate caused any increased costs. Indeed, one might think that insofar as the state plaintiffs challenged the 2017 amendment, by eliminating the tax penalty, it reduced the number of people who would purchase health insurance and thus correspondingly reduced administrative costs on the states.

The state plaintiffs advanced another argument for standing that was harder to dismiss. If the mandate is unconstitutional and so interconnected with every other provision of the act that its invalidation renders the entire ACA invalid, they contended, then the state plaintiffs are injured by the application of other provisions of the ACA that undoubtedly impose costs. The Court rejected this “standing-by-nonseverability” argument as not properly preserved in the lower courts or presented to the Justices, but Justice Alito, in a dissent joined by Justice Gorsuch, disagreed with that characterization.

Whether standing-by-nonseverability was properly before the Supreme Court and how it should be resolved are intricate questions that I addressed in an essay last week on my blog. How they will be resolved remains to be seen. What also remains to be seen is where and when they will be resolved.

In his dissent, Justice Alito warned that dismissal on standing grounds leaves the plaintiff states free to “file a new action.  . . . And in any event, many other parties will have standing to bring such a claim based on a variety of the ACA’s substantive provisions that are arguably inseverable from the mandate. Our Affordable Care Act epic may go on.” Perhaps in those future cases, courts will conclude that the plaintiffs cannot assert standing-by-nonseverability. But perhaps they will address the merits.

If so, how should they rule?

Nonseverability

Much of the public discussion of the latest (and possibly next) round of ACA litigation has focused on the audacity and outlandishness of the nonseverability claim. To say that an unconstitutional provision of a law is nonseverable from the rest is to say that the Congress that enacted it meant the law to stand or fall as a whole. The severability inquiry asks a counterfactual question: If Congress had known that the challenged provision would be invalid, would it prefer that the whole law go down with it?

Some counterfactual questions require considerable speculation, but with respect to the ACA, we have a ready answer. When in 2017 Congress zeroed out the tax penalty but left the rest of the ACA intact, it made evident its approval of the ACA without a mandate. We know Congress would accept an ACA without a mandate because that’s exactly what it created in 2017.

To be sure, most or perhaps even all of the Republicans who voted to zero out the tax penalty in 2017 would have also liked to pass another law eliminating the rest of the ACA. However, that kind of intent with respect to legislation that Congress did not pass is irrelevant. Consider that most of the Democratic members of Congress who voted for the American Rescue Plan Act in 2021 would also have liked to raise the minimum wage to $15 per hour, but the parliamentarian ruled that change out of bounds via reconciliation, so it did not make it into the law. Just as it would be absurd to argue that the American Rescue Plan Act tacitly imposes a $15 per hour minimum wage because that was the unenacted intent of most of the Democrats who voted for the Act, so it is absurd (or at least very much mistaken) to say that the unenacted intent of the Republicans who voted for tax cuts in 2017 invalidates the entire ACA.

Perhaps in recognition that Congress in 2017 effectively voted to eliminate the mandate but not the rest of the ACA, the district judge, in finding the mandate nonseverable, relied chiefly on the intent of the Democratic Congress that enacted the original ACA in 2010, at a time when it was widely (but in retrospect mistakenly) believed that the mandate was essential to the functioning of other aspects of the Act. Yet as the court of appeals recognized, when Congress zeroed out the tax penalty in 2017, it had information about how the ACA functioned in practice that was unavailable in 2010, so could well have reached a judgment about the viability of the ACA without an enforceable mandate. Moreover, severability is ultimately a matter of statutory interpretation, with respect to which the most recent enactment takes priority.

Accordingly, even if a court in future litigation finds that state plaintiffs or other plaintiffs have standing-by-nonseverability, those plaintiffs should lose for the simple reason that the mandate is severable.

Congress Needs no Enumerated Power to Tell People They Don’t Have to do Anything

There is, in addition, an even more basic reason why any reprise of California v. Texas should result in failure for the plaintiffs: the mandate is not unconstitutional; rather, the mandate does not exist.

To conclude otherwise requires a kind of collective amnesia. As everyone understood in the period leading up to and following the 2017 tax law, by zeroing out the tax penalty, Congress and President Trump repealed the mandate. That is how they talked about what they were doing, repeatedly. It is true that Trump often exaggerates or simply lies, but he was hardly alone in talking this way. Georgetown Law Professor Martin Lederman and I filed an amicus brief in California v. Texas in which we collected numerous examples of leading congressional Republicans who voted to zero out the tax penalty characterizing their action as repealing the mandate. Significantly, although Democrats opposed the zeroing out, they did not resist that characterization.

To state the obvious, an obligation that does not exist cannot be unconstitutional.

But wait. What about the plaintiffs’ argument—accepted by Justices Alito and Gorsuch—that the tax power was all that supported the mandate, so with the tax reduced to zero the mandate really is unconstitutional? That contention is badly misguided. As Professor Lederman and I argued in detail, an unquestioned line of Supreme Court cases establishes that Congress may give regulated actors a choice to do X or Y, even if Congress lacks an independent power to impose X, so long as Congress has the power to require Y.

To make the point concrete, consider an example from a 1987 case. The Twenty-First Amendment (which repealed Prohibition) deprives Congress of some of the power it would otherwise enjoy under the Commerce Clause to regulate alcohol sales. Nonetheless, in South Dakota v. Dole, the Supreme Court upheld a federal statute giving states a choice of either establishing a drinking age of 21 or forfeiting some highway funding. In that case, X was the requirement that states set the drinking age at 21. Even though Congress could not directly set or compel states to adopt a minimum drinking age, under the Spending Clause it had the power Y to withhold federal funds from states that maintained a lower minimum age.

NFIB was similar. There, X was the requirement (which Congress could not directly impose) of purchasing health insurance and Y was the power of Congress to tax. As Professor Lederman and I explained in our brief, however, what made the original version of the ACA

constitutional was not that Congress had exercised its taxing power as such, but rather that the second of the two alternatives . . . was something Congress had the constitutional power to impose upon individuals. That requirement does not turn on the particular constitutional source of Congress’s authority to offer the alternative choice.

According to the plaintiffs and the dissent in California v. Texas, when Congress zeroed out the tax, it eliminated the key Y, leaving only a direct obligation to purchase health insurance, a power Congress lacks. But we can now see why that analysis is wrong. Once Congress zeroed out the mandate, Y became the power of Congress to require nothing. The post-2017 version of the ACA gives people a choice: buy health insurance (X) or don’t if you don’t want to (Y). And Congress undoubtedly has the power to instruct people that they don’t have to do anything.

To be sure, the power of Congress to require nothing is not expressly enumerated in the Constitution, but it is a power Congress nonetheless routinely exercises. Every time Congress passes a law repealing some previous legal obligation, it exercises the power to require nothing. So long as the choice to do nothing is one Congress can validly impose—and it undoubtedly is—then the choice to do nothing or just about anything else is one Congress may offer.

The challengers in the latest and perhaps next round of ACA litigation claim to have vainly searched high and low for a power of Congress to impose a mandate not backed by a tax, but they have overlooked the most obvious source. The current version of the ACA is valid for the same reason that Mr. Ping’s Secret Ingredient Soup is so tasty. As Po discovered in the original Kung Fu Panda movie (spoiler alert!), the secret ingredient is nothing.

Comments are closed.