Appeals court appears likely to call for lower court to settle unanswered questions on ACA lawsuit, experts say

Supreme Court
An appellate court is likely to ask a lower court to untangle key issues in a lawsuit led by red states seeking to dismantle the Affordable Care Act. (Getty/BrianPIrwin)

An appellate court appears likely to send a lawsuit seeking to strike down the entire Affordable Care Act (ACA) back to a lower court to settle key issues, such as which parts of the law can exist without the individual mandate, several experts say.

A three-judge panel that was part of the Fifth Circuit Court of Appeals heard oral arguments Tuesday on a lawsuit against the ACA led by 20 red states and supported by the Trump administration. At the heart of the lawsuit is whether the ACA can survive without the individual mandate's financial penalty, which was dropped to zero in the 2017 tax reform law.

The red states, which are led by Texas, argue that because the mandate’s penalty was zeroed out, Congress has lost its taxing authority and the mandate is unconstitutional. The rest of the law must be struck down because the mandate is such an integral part of it, they say in court filings.

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Legal experts say that the red states’ argument that the mandate is not “severable” from the rest of the law is a unique approach.

RELATED: Appellate court has ACA's individual mandate in crosshairs after hearing

“Severability is usually under discussion when a court will take a look at a law, strike down part of it and say should the rest of this bill stand or not?” said Earl Pomeroy, senior counsel with the law firm Alston & Bird’s Employee Benefits and Executive Compensation group. “Here it was Congress that struck down part of the law through congressional action.”

One possibility is that a majority of the three-judge panel decides to remand the case back to District Judge Reed O’Connor, who ruled last December in favor of Texas, to take “another crack at severability," University of Michigan law professor Nick Bagley wrote in a blog post Wednesday.

But it remains unclear what, exactly, would be severed from the law.

“Should [O'Connor] excise only those parts that regulate the individual insurance market, including the protections for people with preexisting conditions? Or also the entire private insurance market, even as to employer-sponsored coverage? What about the Medicaid expansion?” Bagley wrote.

Either the red or blue states could appeal the Fifth Circuit’s ruling to the Supreme Court, or they could ask for a hearing before the 17 judges that make up the full court.

If the Fifth Circuit's ruling is appealed to the Supreme Court, four of the nine justices must agree to hear the appeal.

“If [the appellate court judges] strike the mandate and say everything else remains in place then maybe the Supreme Court could say they don’t want this case,” said Katie Keith, a former Georgetown University law professor who now leads the consulting firm Keith Policy Solutions. “If there is any other ruling and take down any other parts of the law, I don’t see how the Supreme Court doesn’t take it.”

The case could wind up on the court’s 2020 docket, meaning a final decision by the Supreme Court would be made in June of that year, right as the presidential election heats up.

RELATED: DOJ injects further uncertainty into ACA markets, but for some it's just more legal noise

Pomeroy doubts the lawsuit would succeed if it even reached the Supreme Court.

“In my opinion it is unlikely that the Supreme Court is going to say when Congress left part of the law, they really meant to repeal that part too,” he said. “That gets into justices deciding what Congress meant instead of the action.”

A group of 17 blue states led by California who are defending the ACA argued at the hearing Tuesday that Congress’ intent was clear when it decided to not get rid of the rest of the law.

But the two Republican-appointed judges were receptive to the red states’ argument that the mandate couldn’t be severed. Carter appointee Carolyn King, the lone judge appointed by a Democrat, did not ask questions during the hearing.

“How do we know that Congress didn’t say that this was the silver bullet that would undo the ACA because we understand the tax issue and it is no longer a tax?” said Judge Jennifer Walker Elrod, who was appointed by former President George W. Bush.

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