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California v. Texas

The Supreme Court Will Determine the Fate of the Affordable Care Act…Again

In the United States Supreme Court

ArgumentNovember 10, 2020
DecisionJune 17, 2021
Opinion Below
Fifth Circuit Court of Appeals
Petitioner BriefCalifornia, et al.
Respondents’ BriefsTexas, et al.
Neill Hurley and John Nantz
United States, et al.

Case Decision

On June 17, 2021, the Supreme Court ruled California, et al. Texas and other ACA challengers do not have legal standing to bring the case.

Scroll down for our Decision Analysis.

Argument Analysis

November 18, 2020

Several individuals and a group of GOP-led states are leading another fight to invalidate the Affordable Care Act (ACA). They are attacking the Individual Mandate as invalid and then arguing the rest of the ACA falls with it.

The Supreme Court will hear the case on November 10, 2020 joined by its new conservative-leaning justice, Amy Coney Barrett.

Background

Congress designed the ACA to provide all Americans affordable access to health insurance. Without getting rid of the private insurers, however, the government had to help them keep premiums down.

The Individual Mandate was designed to control costs in the marketplace by requiring everyone to buy insurance. If the healthier people choose not to buy insurance, they can’t subsidize the sicker, more expensive people. Thus, everyone must buy. If you don’t, you have to pay a tax.

Those concerned with their liberty rights — Republicans — have fought to get the Individual Mandate repealed from the start. They lost a big lawsuit in 2012. Then once Trump came into office he actually resolved the issue for them. If you don’t want to buy insurance, don’t. We won’t charge you a tax. That was the Tax Cuts and Jobs Act of 2017. It says the tax payment owed by people who do not buy insurance is now exactly zero dollars.

That wasn’t good enough. It’s really the whole ACA that the GOP wants to bring down. Now, Texas leads a group of states arguing that if the tax payment is zero, the Individual Mandate is no longer constitutional. And without the Individual Mandate, the whole ACA doesn’t work. In other words, the market balance Congress intended, which was essential to ACA policy, is ineffective. The GOP-plaintiffs argue Congress must go back to the drawing board to redesign the whole healthcare law.

The GOP argument won in the federal district court in Texas, which ruled that the ACA is invalid. On appeal, the Fifth Circuit gave the GOP a win on the invalidity of the Individual Mandate. Now the Democratic-leaning states defending the ACA are asking the Supreme Court to weigh in on the fate of the ACA. The ACA and its many provisions will continue to function until this case is resolved.

Read our earlier report on the case for a full background, including additional infographic.

The 2012 Case: NFIB v. Sebelius

To understand the argument in this case, you must know how the Supreme Court ruled in 2012. In National Federation of Independent Business v. Sebelius, the Supreme Court ruled that the Individual Mandate is valid as a tax. The federal government has the power to give people a choice between buying insurance and paying a tax. Thus, it’s not so much a mandate to buy insurance but the right of the federal government to tax people.

The Tax Cuts and Jobs Act of 2017

Enter liberty savior Donald Trump. Without actually legislating on healthcare, Trump’s Congress passed a tax law to cancel out the tax penalty of the Individual Mandate. The Tax Cuts and Jobs Act of 2017 vacated the tax penalty owed by people who do not buy health insurance. The Act reduced the payment to exactly zero dollars. In other words, there’s no tax penalty.

Now we have an Individual Mandate that is only constitutional as a tax, and now there is no tax. Does that mean the Individual Mandate is unconstitutional? That’s the argument in this new lawsuit.

Arguments by Texas, et al.

Team Texas includes GOP-led states and individuals who argue they are suffering from having to buy health insurance. They argue the Individual Mandate is unconstitutional now that the Tax Cuts and Jobs Act vacated the tax penalty.

According to the Supreme Court decision in NFIB v. Sebelius, the Individual Mandate is not valid under the other legislative powers, like the federal government’s power to regulate commerce. Thus, Texas et al. argue, the federal government cannot impose the Individual Mandate without a tax.

Team Texas won in the lower federal courts. The district court in Texas ruled that the Individual Mandate is unconstitutional now that there’s no tax. Further, it ruled that the ACA as a whole is no longer valid because the Individual Mandate was an essential part of it. On appeal, the Fifth Circuit agreed regarding the invalidity of the Individual Mandate reserved judgement on the question of severability (whether the rest of the ACA must fall with the Mandate).

The Intervenors: Team California

When Texas brought the case, it sued the federal government, which is the entity that passed the ACA and administers it. However the federal government led by Trump isn’t into defending the case. It supports Team Texas and argues that ACA should go down.

A number of Democratic-led states thus intervened in the case to defend the ACA. Team California argues that the Tax Cuts and Jobs Act does nothing to affect the constitutionality of the Individual Mandate. The tax act did not intend to make any changes to healthcare law; it merely declared that a tax would not be collected.

According to Team California, the 2012 Supreme Court decision already ruled that the Individual Mandate does not command anyone to purchase health insurance. As simply a tax, the Mandate gave individuals a choice: buy insurance or pay a tax. Now, the imposition on individuals is even less: buy insurance or suffer no consequence.

Team California argues that the challengers are trying to get an entire healthcare law to go down based on a small tax law change. Congress did not intend as much when it enacted the tax act; it would have said so. And the ACA certainly does not go down as a whole just because the Individual Mandate tax payment is zero. There’s much more to the ACA than the marketplace provisions. The rest of the ACA would stand even if the Individual Mandate goes down.

A Preliminary Question: Standing

When someone sues to change a government policy, they must allege that they are suffering or will suffer because of it. A federal court requires that someone has a “concrete and particularized” injury in order to bring a suit. For example, an immigrant who faces removal might sue against the policy underlying the removal. The injury is the possible removal. A social security claimant standing to lose her benefits might sue that the Social Security Administration rules are unfair. The injury is the potential loss of benefits.

In this case, the individuals who are bringing suit weren’t actually forced to pay anything. The tax penalty is zero. So they don’t stand to suffer financial injury from the tax penalty. Do they suffer otherwise? That’s what the ACA defenders ask: what is the harm you are complaining about? Without a “concrete and particularized” injury, the plaintiffs have no case.

The individual plaintiffs argue that their injury is the cost of insurance that they were compelled to buy. They tell the Court that even though they had a “choice” not to buy insurance (and suffer zero penalty), they are law-following people and felt compelled to buy the insurance. Thus, they were compelled to pay the cost of the insurance. The cost of the insurance is the injury. They further argue they suffer from “increased regulatory burden.”

The state plaintiffs claim the ACA causes them “fiscal injuries as employers.” The states must provide evidence of the financial injuries the ACA causes them.

The Supreme Court must address the standing question before addressing the merits (whether the Individual Mandate is constitutional).

Effect of the Decision

If the ACA goes down, an estimated 29.8 million people will lose their health insurance. As one community health center report puts it, that means that people will delay their healthcare needs until they end up in more expensive care like emergency rooms. The healthcare system will take the financial burden when inevitably those people are unable to pay.

Further, the Economic Policy Institute predicts that 1.2 millions jobs will be lost. People forced to pay more for their healthcare needs will be unable to spend that money elsewhere, like at grocery stores and other businesses.

The American Medical Association (AMA) filed a brief supporting Team California. The brief argues that the ACA should still stand, even if the Individual Mandate goes down. It highlights many elements of the ACA that are not dependent on the Individual Mandate, such as:

  • Premium Subsidies and Cost-Sharing Reductions,

  • Preventive Services

  • Essential Health Benefits

  • Voluntary Medicaid Expansion

  • Accountable Care Organizations

  • Preexisting Conditions Provisions

These provisions, it argues, are among innumerable others which are providing important benefits to the public and can function well without the Individual Mandate. According to the AMA, “Invalidating the ACA would throw the U.S. health care system into crisis, and doing so in the midst of a pandemic would risk collapse.”

AARP also filed a brief in support of the ACA, enumerating the harms to older adults if the ACA were invalidated. In total 37 amicus briefs were filed to support the Petitioners, who are defending the ACA.

Six briefs were filed to support the Respondents, including one from the CATO Institute, “a nonpartisan public policy research foundation that advances individual liberty, free markets, and limited government,” and the Center for Constitutional Jurisprudence,”whose stated mission is to restore the principles of the American founding to their rightful and preeminent authority in our national life, including the principle at issue in this case that Congress has been delegated only limited, enumerated powers.”


Decision Analysis

On June 17, 2021, the Supreme Court threw out Texas’s challenge to the Affordable Care Act (ACA), deciding the plaintiffs did not have legal “standing” to bring the case. 

Case Background

California v. Texas argued that the ACA’s Individual Mandate — the requirement that individuals buy health insurance — is unconstitutional. The Supreme Court already upheld the Individual Mandate as constitutional, but this case generated a different argument about the provision’s constitutionality based on a 2017 change in the law.

In 2012, the Supreme Court upheld the Individual Mandate as a constitutional tax, meaning the federal government has the right to impose a tax on individuals for various means, including for not buying health insurance (NFIB v. Sebelius). Then in 2017, Congress passed the Tax Cuts and Jobs Act, which decreased the tax penalty of the Individual Mandate to zero. The plaintiffs in this case alleged that with a zero tax penalty, the Individual Mandate is not a tax and thus cannot be constitutionally justified as a tax.

The Fifth Circuit Court of Appeals ruled in favor of the plaintiffs, which include Texas and other Republican-led states plus a number of individuals challenging the ACA. The Fifth Circuit ruled that, indeed, the Individual Mandate could not stand now that it does not impose a tax penalty. Further, the Fifth Circuit ruled, the rest of the ACA would fall with the Individual Mandate because the Individual Mandate is not “severable” from the rest of the ACA.

Given the Fifth Circuit ruling, the stake for healthcare was huge in this case. The ACA was set to go down in its entirety.

The Case Turned on Article III Standing

The Supreme Court decided the case not on the “merits” of whether the ACA’s Individual Mandate is constitutional. The Court ruled on the preliminary question of “standing.”

In order to bring a case in federal court, a plaintiff must stand in a particular position relative to the claims in the case. The plaintiff must face a “concrete and particularized” injury, the plaintiff’s injuries must have been caused by the legal violation alleged in the case, and the plaintiff’s injuries must be “redressable” by the resolution in the case.

Standing turned out to be a problem for the plaintiffs in the case, including both the state plaintiffs and the individual plaintiffs.

The Supreme Court Ruling

Regarding whether the individual plaintiffs had standing, the Supreme Court evaluated the injuries the individual plaintiffs alleged. The two individuals in the case said they faced financial harm in the amount they were required to pay for insurance coverage required by the Individual Mandate. However, the Supreme Court noted, now that there is no penalty for not complying with the Individual Mandate, the plaintiffs’ injuries are not traceable to the Individual Mandate. The individuals don’t actually have to comply, so they don’t have the type of injury required for Article III standing.

Regarding whether the state plaintiffs had standing, the Supreme Court evaluated the injuries the states claimed they faced. The states claimed they faced increased costs to run state-operated medical insurance programs. The states claim that the Individual Mandate causes more residents to enroll in healthcare programs that they must administer, so the Mandate costs the states more money. However, the Supreme Court ruled that the states failed to show that their increased costs were traceable to the Individual Mandate, especially given that the Individual Mandate is an unenforceable provision. The states additionally claimed the ACA caused them other indirect financial injuries, but the Supreme Court similarly held that the states were unable to show their financial injuries were caused by the Individual Mandate, which was the only aspect of the ACA alleged to be illegal in the case. 

As a result of the ruling, the Supreme Court threw out the case. The Affordable Care Act’s unenforceable Individual Mandate, as well as the rest of the ACA, stands.

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About the Author

Mariam Morshedi

Mariam Morshedi

Mariam Morshedi is the Founder and Executive Director of Subscript Law. Before starting Subscript Law, she practiced civil rights law for AARP Foundation, where she litigated housing, consumer and disability rights issues.

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