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Texas Federal District Court Opines That the Affordable Care Act Is Invalid in Its Entirety: Where Does It Go from Here?

January 3, 2019

Overview

On December 14, 2018, a federal judge in Texas, in response to a lawsuit brought by 20 Republican states, issued a judgment opining that the Affordable Care Act (“ACA”) is invalid in its entirety.

That is a very sweeping declaration. If it stands, the ruling will rescind all of the protections accorded under the ACA, including the prohibition on pre-existing condition exclusions, the ban on annual and lifetime limits, the federal premium tax credit subsidies to assist lower income individuals to purchase health insurance, and the extremely popular provision requiring coverage for children through age 26.

The ACA also governs matters that do not directly pertain to health insurance. This includes Medicaid expansions coverage, drug purchasing reform proposals, limits on flexible spending account (FSA) contributions, and various taxes on higher income workers. However, if the ACA is chopped off with the cleaver, then these provisions of the law would be rescinded as well.

The lawsuit (Texas v. Azar) is described in very simple terms below.

  1. The lawsuit was sparked by the repeal of the “individual mandate” by the Tax Cuts and Jobs Act (“TCJA”). The individual mandate, of course, is the provision of the ACA that requires most individuals to either secure minimum essential health coverage or pay a penalty. The TCJA effectively eliminated the penalty, and thus the individual mandate, effective for 2019.
  2. The repeal of the individual mandate prompted 20 GOP states to file the lawsuit on the basis of language contained in various congressional findings and in the dissenting opinion of one of the two Supreme Court cases upholding the ACA. This language suggested that the individual mandate was such an essential feature of the ACA that it could not be separated from the remainder of the statute. Thus, if the individual mandate was no longer part of the law, the entire law could not be supported.
  3. The defendant in the lawsuit was the U.S. government, which enacted the law, and the federal agencies that administer it. However, the U.S. government, represented by the Department of Justice, declined to provide a defense and was willing to have the state plaintiffs have their way.
  4. However, the Department of Justice did not remain totally silent. It stated that while it did not object to the state plaintiffs’ positions, its view was that the individual mandate was essential only with respect to the provisions of the ACA pertaining to guaranteed issue (which includes the ban on pre-existing additional conditions and cost-sharing limits) and community ratings, and that these provisions could be severed from the remainder of the statute. Consequently, the repeal of the individual mandate only required the repeal of these guaranteed issue and community ratings provisions.
  5. A coalition of 12 Democratic states submitted a challenge to the lawsuit, essentially arguing that both the state plaintiffs and the Department of Justice were way off base.
  6. The judge accepted the argument of the state plaintiffs, and thereupon rendered a judgment that the ACA in its entirety became invalid upon the repeal of the individual mandate.

This lower court decision is merely the beginning of the judicial review. This recognition is reflected in the following statement from the Department of Health and Human Services regarding the court decision:

“The recent U.S. District Court decision regarding the Affordable Care Act is not an injunction that halts the enforcement of the law and not a final judgment. Therefore, HHS will continue administering and enforcing all aspects of the ACA as it had before the court issued its decision. This decision does not require that HHS make any changes to any of the ACA programs it administers or its enforcement of any portion of the ACA at this time.”

None of the parties believe that this is the end-all. In fact, all three, including the plaintiff GOP states (who won the case) requested that the trial court certify its order for interlocutory appeal. This would allow the Fifth Circuit Court of Appeals to more promptly review the core aspects of the case to allow for a speedier conclusion.

On December 30, 2018, the trial court responded and issued an order that places its December 14 decision on hold (i.e., “stayed”). It also entered an order that allows an immediate appeal to the Fifth Circuit Court of Appeals.

Therefore, the saga continues.  For the time being, as noted by the Department of HHS, the law continues in effect without interruption. It is fully expected that whatever the Court of Appeals decides will be appealed to the U.S. Supreme Court.  All this will take time.

It should be further noted that the federal lawsuit, whatever its outcome, will not override the power of the states to enact their own standards, to the extent not prohibited by federal law. Many states, including Oregon, have provisions in their Insurance Codes that prohibit pre-existing condition exclusions and have other rules that are patterned after the ACA.

For further information or questions regarding the federal lawsuit, please contact Wally Miller at 541-686-3299 or wmiller@schwabe.com.

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