Legal Update
Dec 19, 2019
Fifth Circuit Affirms Striking Down Individual Mandate of Affordable Care Act and Remands on Issue of Severability
In a bold but conservative 2-1 decision Wednesday, The United States Court of Appeals for the Fifth Circuit affirmed the ruling of a federal district judge in Texas striking down the individual mandate of the Affordable Care Act (“ACA”). The Fifth Circuit remanded the case to the district court to “employ a finer toothed comb” in determining whether the remainder of the law is severable or must also be held unconstitutional.
In a 62-page opinion penned by Judge Jennifer Walker Elrod and joined by Judge Kurt Engelhardt, the Fifth Circuit set aside the myriad policy issues associated with this “monumental piece of healthcare legislation” and launched immediately into whether a live case or controversy exists and whether certain parties—the 18 states bringing the lawsuit, two private-citizen plaintiffs, and various intervening defendant states—have standing.
The panel held that a live case or controversy does, in fact, exist. Although the plaintiffs and the federal defendants (including the United States and the U.S. Department of Health and Human Services) were “in almost complete agreement on the merits of the case,” the panel ruled that a live dispute nonetheless remains because the government continues to enforce the entire ACA and has never suggested that it intends to dismantle any part of it.
Turning to the standing issues, the panel held that various intervenor-defendant states had standing because they stood to suffer financially if the ACA were declared unconstitutional as a whole.[1] The panel also held that the individual plaintiffs have standing because they are subject to the ACA’s individual mandate, which inflicts a legally cognizable economic injury by requiring them to buy something they might not otherwise buy. As for the 18 state plaintiffs, the panel ruled that they are employers that must report on their coverage of employees, which constitutes a fiscal injury that confers standing.
The panel then turned to the merits. First, it held the individual mandate unconstitutional because recent federal legislation reduced individuals’ shared-responsibility payments of the mandate amount to $0, thereby changing the mandate such that it is no longer a tax. This change, the panel held, removed any justifiable congressional authority for enacting the mandate. The panel relied heavily on the reasoning in Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 538 (2012), in which the Supreme Court held the individual mandate constitutional because it could be read as a tax instead of a congressional command to purchase insurance. “Our decision breaks no new ground. We simply observe that [the individual mandate] was originally cognizable as either [an unconstitutional] command or a [constitutional] tax. Today, it is only cognizable as a command.”
Having found the mandate unconstitutional as amended, the panel remanded the case to the district court to determine whether and to what extent the rest of the ACA is severable (and may therefore survive). The panel gave the district court the option to consider the federal defendants’ newly-suggested relief—that is, either enjoining the enforcement of only those provisions that injure the plaintiffs or declaring the ACA unconstitutional only as to the plaintiff states and the two individual plaintiffs. In doing so, the panel noted:
[T]his issue involves a challenging legal doctrine applied to an extensive, complex, and oft-amended statutory scheme. All together, these observations highlight the need for a careful, granular approach to carrying out the inherently difficult task of severability analysis in the specific context of this case. We are not persuaded that the approach to the severability question set out in the district court opinion satisfies that need.
In a lengthy dissent, Judge Carolyn Dineen King argued that because the individual mandate lacked any enforcement mechanism, the legality of the mandate was purely academic, thereby depriving the plaintiffs of standing. Noting that “the coverage requirement now does nothing, [this] should be the end of this case. Nobody has standing to challenge a law that does nothing.” Judge King added that, were she to reach the merits, she would nonetheless find the mandate constitutional because, even with Congress zeroing out the shared-responsibility payment, it remained constitutional for Congress to pass a law that left in place the choice of maintaining health insurance or doing nothing. Finally, Judge King objected to remand, stating, “I fail to understand the logic behind remanding this case for a do-over.”
[1] The panel pretermitted the issue of whether the intervenor House of Representatives had standing.