Appeals court strikes down individual mandate in ACA case, but punts on severability

Gavel with scales of justice in background
The Fifth Circuit Court of Appeals issued its long-awaited ruling Wednesday evening (William_Potter / iStock / Getty Images Plus)

In a blow to the ACA, federal appeals judges have ruled 2-1 that the landmark healthcare law's individual mandate is unconstitutional but punted on the question of whether that mandate can be excised from the remainder of the law.

The Fifth Circuit Court of Appeals issued its long-awaited ruling Wednesday evening and chose to remand the question of "severability" which is central to the case back to the District Court for further consideration.

The judges did, however, ding the mandate itself.

Webinar

Breaking Through the Barriers to Better CX

Please join this webinar to learn how health plans can streamline member engagement and prioritize cross-departmental goals by leveraging CX technology.

"The individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power," they wrote in their opinion (PDF).

RELATED: Kentucky, West Virginia among states that would be hit hardest by an ACA rollback

Congress invalidated the individual mandate as part of tax reform legislation passed in 2017, thus knocking out a key leg in the three-legged stool of the Affordable Care Act.

A group of red states then sued to eliminate the law in full, and a Texas judge ruled in December that eliminating the individual mandate penalty invalidated the Obama administration's signature healthcare legislation in its entirety.

The Trump administration initially elected to avoid defending the ACA in court but did not step into the fray to negate it, either. However, they changed their stance earlier this year, with the Department of Justice saying it backs the Texas decision to strike down the law.

The court requests that Judge Reed O'Connor, who initially invalidated the law, analyze more in-depth which parts of the ACA would be potentially inseverable from the mandate, and to examine the Department of Justice request that parts of the law that do not harm the states challenging it to stay in place.

Nicholas Bagley, a law professor at the University of Michigan and an expert on the case who supports the ACA, said in a Twitter thread that position likely spells doom for major portions of the law.

The ruling was not unanimous, however. In a dissent, Fifth Circuit Judge Carolyn King wrote that she believes the mandate is constitutional, though rendered unenforceable by Congress, and would be severable from the ACA.

She noted that Congress took only the step to invalidate the penalty, but kept the remainder of the law intact, which would indicate that legislators believe that the mandate can be cut away from the rest of the ACA.

"The district court’s opinion is textbook judicial overreach," King wrote. "The majority perpetuates that overreach and, in remanding, ensures that no end for this litigation is in sight."

California Attorney General Xavier Becerra, who has been leading the blue states fighting the lawsuit, already signaled an appeal, potentially to the Supreme Court.

"California will move swiftly to challenge this decision, because this could mean the difference between life and death for so many Americans and their families," he said in a statement.

Legal experts have predicted that the Supreme Court will be tasked with the final word on the case, and getting to that point could take a substantial amount of time.

Industry reacts

Meanwhile, healthcare industry groups blasted the decision that continues to leave the fate of the ACA in the balance. 

"Without question, this decision stretches out the timeline on the final fate of pre-existing conditions and other important protections in the ACA," said Chip Kahn, president and CEO of the Federation of American Hospitals, in a statement.

AHA President Rick Pollack called the ruling "wrong-headed" in a statement.

"America’s hospitals and health systems are disappointed that the court has declined to rule on which parts of the ACA can remain," Pollack said. "Sending the decision back to the federal district court that invalidated the entire law puts health coverage – and peace of mind – for millions of Americans at risk."

Matt Eyles, CEO of America's Health Insurance Plans, echoed the sentiment.

“We had hoped the appeals court would have ruled outright that the entire ACA is valid, rather than returning the case back to the district court," he said in a statement. "The district court’s original decision to invalidate the entire ACA was misguided and wrong – and if the district court reaches the same conclusion as before, it will be misguided and wrong again."

The Blue Cross Blue Shield Association found a silver lining in the ruling.

"It’s noteworthy that the court recognized the gravity of a challenge to the entire law and did not immediately rule to invalidate it," said association president and CEO Scott Serota, in a statement. "We believe that to do so would have severe consequences for Americans’ coverage and access to the care they need."

Eyles added the fact that people would continue to have access to their needed coverage for the foreseeable future is another positive.

Suggested Articles

Humana has filed suit against the Trump administration over cost-sharing reduction payments.

CMS needs to press Congress to be able to penalize hospitals that submit incorrect wage data, according to one of recommendations in an OIG report.

The Trump administration has launched a new alternative payment model to provide upfront investments to rural healthcare providers.