Texas judge strikes down ACA as unconstitutional, but long legal path remains

Affordable Care Act highlighted
Industry groups were quick to criticize the judge's ruling, as President Trump called it "great news for America." (Getty/Ellenmck)

A federal district judge struck down the Affordable Care Act on Friday evening, ruling the entire law is unconstitutional and setting up a lengthy legal battle that could ultimately bring the law back to the Supreme Court once more. 

U.S. District Judge Reed O'Connor of the Northern District of Texas sided with 20 attorneys general in their lawsuit against the Affordable Care Act, ruling that the individual mandate is "essential to and inseverable from the remainder of the ACA."

"Congress stated many times unequivocally—through enacted text signed by the President—that the Individual Mandate is 'essential' to the ACA," O'Connor wrote in a 55-page decision (PDF). "And this essentiality, the ACA’s text makes clear, means the mandate must work 'together with the other provisions' for the Act to function as intended."

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By bringing its associated penalty down to $0, the Tax Cuts and Jobs Act stopped the individual mandate from functioning as a tax, rendering the mandate unconstitutional, the conservative AGs argued. 

The ruling also effectively wipes out Medicaid expansion, premium tax credits or protections for consumers with pre-existing conditions. It's not yet clear how it could impact consumers that are signing up for coverage for the 2019 benefit year. However, Centers for Medicare & Medicaid Administrator Seema Verma said exchanges would remain open. 

Though the judge invalidated the law, it won't take effect immediately, University of Michigan law professor Nicholas Bagley wrote on Twitter. States that defended the ACA, including California, are likely to appeal to the Fifth Circuit Court of Appeals. It's possible the case could wind up in front of the Supreme Court. 

"Our fight to save Obamacare is far from over," California Attorney General Xavier Becerra, who led the defense, wrote in a tweet. "We will continue to fight these efforts to take Americans' health care away."

But industry executives lamented the timing of the decision that could disrupt the final day of open enrollment. 

"Having this decision come in the closing hours of open enrollment also sows seeds of unnecessary confusion," Chip Kahn, president and CEO of the Federation of Amercian Hospitals said in a statement, adding that the judge "got it wrong."

President Donald Trump, meanwhile, celebrated the decision calling it "great news for America."

The Trump administration refused to defend the law in an unusual move for the Department of Justice. 

“The Executive Branch has a longstanding tradition of defending the constitutionality of duly enacted statutes if reasonable arguments can be made in their defense. But not every professionally responsible argument is necessarily reasonable in this context,” U.S. attorney general Jeff Sessions wrote in a letter to Speaker Paul Ryan in June. 

In August, Centers for Medicare and Medicaid Services Administrator Seema Verma promised to ensure people with pre-existing conditions continue to receive coverage, but Democrats in Congress were skeptical. 

Amid the administration’s unwillingness to back the law, 17 additional attorneys general, all Democrats, stepped up to the plate. Led by Becerra, they filed a motion to intervene in April, shortly after the original complaint was filed. 

Industry reacts

Payers and providers were quick to react to the decision, voicing displeasure over the judges ruling. 

Rick Pollack, president and CEO of the American Hospital Association, called the decision "disappointing," adding that it "puts health coverage at risk for tens of millions of Americans, including those with chronic and pre-existing conditions, while also making it more difficult for hospitals and health systems to provide access to high-quality care."

"We strongly disagree with the ruling and urged the court not to accept the plaintiff’s severability argument in an amicus brief filed earlier this year along with other national organizations representing hospitals and health systems," he added. "We join others in urging a stay in this decision until a higher court can review it and will continue advocating for protecting patient care and coverage."

Bruce Siegel, M.D. president and CEO of America’s Essential Hospitals called it a "profoundly troubling development" that threatened to leave millions of Americans uninsured.

"The crushing rise in the number of uninsured patients likely to follow this decision, absent a higher court’s reversal, would push these hospitals to the breaking point," he said. "Communities across the country are in jeopardy."

America's Health Insurance Plans CEO Matt Eyles called the ruling "misguided and wrong" and urged consumers to continue signing up for coverage. 

“For Americans who buy coverage on their own through state and federal exchanges, they can continue to sign up during open enrollment," he said. "This is just the first step in a lengthy legal process. AHIP will continue to engage as this decision is appealed."

"Putting aside this decision, health insurance providers will continue to work hard to ensure the people they serve have confidence that their coverage remains a strong and stable resource to improve their well-being and security," he added.

In a statement, Blue Shield of California said coverage would remain in place for members. 

"Open enrollment for 2019 individual coverage also is unaffected, and we will continue to help consumers find the coverage they need at the best possible price," the insurer added. 

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