Ruling is stayed pending appeal

A lower court ruled late Friday that the entire Affordable Care Act (ACA) must be overturned because Congress zeroed out the tax penalty for the law’s mandate that everyone purchase health insurance they could afford.

The decision by Judge Reed O’Connor in the U.S. District Court for the District of Texas has no immediate impact as he stayed his ruling pending appeal. However, because it was timed to coincide with the December 15th end of the open enrollment period for most ACA Marketplaces, it is likely to cause broad confusion among consumers, providers, and insurers.

Judge O’Connor (appointed by President George W. Bush) actually relied upon the U.S. Supreme Court decision in 2012 that upheld the individual mandate and the entire ACA. In that case, Chief Justice John Roberts declared that the individual mandate was unconstitutional under the Commerce Clause but still permissible under Congress’ taxing authority because it gave consumers a choice between buying insurance or paying a tax.

Judge O’Connor reasoned that because consumers are no longer required to pay the tax starting in 2019 that means that the U.S. Supreme Court would now find that the individual mandate is unconstitutional. Because Congress did not include language allowing the individual mandate to be severed from the rest of the ACA, he concluded the entire 900 plus page law must fail in its entirety.

The case was brought last year by Texas Attorney General Ken Paxton (R) in a direct effort to get the issue before Judge O’Connor, a favorite of conservative opponents of the ACA since he had previously blocked specific ACA provisions on gender discrimination and health insurer taxes. It was joined by 19 other Republican-controlled states and two Texas residents.

Three Department of Justice attorneys withdrew from the case last fall to protest the White House’s decision not to defend against the lawsuit. However, the White House had asked the court only to strike down the consumer protections that were impossible to separate from the individual mandate, namely the requirement that insurers provide coverage regardless of pre-existing conditions and not vary premiums based on health status.

The White House acknowledged at the time that even the loss of these three key provisions would cause “chaos” in the individual marketplace. Judge O’Connor’s ruling does not evaluate the mass disruption and uncertainty that would result from undoing the ACA’s system-wide reforms, which would not only eliminate the popular protections from pre-existing condition discrimination, but terminate coverage for more than 20 million Americans who gained coverage under the ACA (including expanded Medicaid programs in 34 states).  The lost provisions would specifically include:

  • Giving parents the ability to put dependent children on their group plans until age 26.
  • Closing the Medicare Part D “doughnut hole” in which enrollees had to pay all of their drug costs.
  • Providing rebates to consumers whenever insurers claimed excess profits.
  • Expanding state authority to protect consumers from excessive premium increases.
  • Creating an FDA approval pathway for biosimilar drugs that are less costly than biologic products.

The decision was widely-criticized by legal experts from both sides of the aisle, with the typically-conservative Wall Street Journal agreeing with the defendants’ position that Judge O’Connor failed to consider the intent of the amending Congress in repealing only the tax penalty for the individual mandate, which the editorial board argued should weigh just as heavily as the intent of the Congress that enacted the ACA.  Several Republican lawmakers that voted in favor of repealing the tax penalty, including Senator Susan Collins (R), insisted that neither they nor their colleagues intended to disturb the rest of the law.

California Attorney General Xavier Becerra (D), who is leading the 17 Democratically-controlled states that signed on as defendants in the lawsuit, pledged to promptly appeal Judge O’Connor’s decision to the Fifth U.S. Circuit Court of Appeals. Many of those states have already taken action to preserve key provisions of the ACA for their residents and Congressional Democrats along with several Republicans indicated they will introduce legislation next year seeking to do so at the federal level.






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