Appeals court ruling leaves large swaths of ACA in judge's crosshairs, experts say

A federal appeals court’s decision Wednesday on a case challenging the legality of the Affordable Care Act (ACA) portends years of uncertainty for the industry. While the Fifth Circuit Court’s decision keeps the in ACA place, for now, it declares the individual mandate unconstitutional while asking Texas District Judge Reed O’Connor to take a “fine-toothed comb” to the law and determine what, if anything, could be saved from the remaining provisions. 

And the judges gave little guidance on any elements of the law that should stick.

Legal experts say this could tack significant length on to the court battle that has already been ongoing for the better part of two years. It began after Congress zeroed out the mandate’s tax penalty in 2017. 

“It could drag out for years,” said Justin Giovannelli, an associate research professor at the Georgetown University Center on Health Insurance Reforms. “This was very much kicking the can down the road on a lawsuit that frankly has no business still being in court.” 

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

At issue is the question of “severability,” or to what degree an unconstitutional individual mandate can be cut away from the rest of the ACA. O’Connor’s initial ruling declared the entire law invalid in this scenario, but the circuit court’s opinion does indicate that some elements could be salvageable. 

The appeals court specifically called out restaurant menu labeling provisions as a possibility, said Katie Keith, an adjunct law professor at Georgetown, on a web briefing with reporters Thursday. Popular provisions put in place before the mandate took effect, such as allowing young adults to stay on their parents' coverage until they turn 26, could also be potentially safe, she said. 

However, the Fifth Circuit does leave O’Connor plenty of room to strike down most of the law, she said. 

“My sense is Judge O’Connor will probably re-issue a severability ruling as broad as possible, given his other decisions and his approach to this case so far,” she said. “I do think he will be more constrained as a result of this decision.” 

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

Ilya Somin, a law professor at George Mason University, echoed the sentiment in a blog post for Reason, noting that the court critically asked O'Connor to consider both the intent of the 2010 Congress that enacted the ACA and the 2017 Congress that invalidated the mandate.

The actions of the latter Congress make a strong case that the mandate can be severed, at least, from parts of the remaining law, as they negated the impact of the individual mandate while keeping the rest of the law in place. He said he can "understand" the appellate court's desire to see a more in-depth analysis, however, as there may be some elements that are clearly tied to the individual mandate.

"Given the complexity of Obamacare, such caution is understandable, even though probably unnecessary," Somin said.

Keith said the Trump administration’s shifting stance on the case also likely contributed to the circuit court’s decision to bounce it back to O’Connor. In March, the Department of Justice (DOJ) said it agreed with O’Connor’s decision and backed eliminating the ACA in full. 

DOJ then shifted that view to say only the parts that injure the plaintiff red states should be invalidated—and that those changes should only hold in those states. This introduced plenty of “confusion” into the proceedings, Keith said. 

Experts predicted that it would take a Supreme Court decision to fully settle the case, but requesting an additional severability analysis from O’Connor also lengthens the time it will take to reach the higher court as well. 

California Attorney General Xavier Becerra said Wednesday he would appeal to the Supreme Court, but the justices are less likely to take up a case that’s still winding its way through lower courts. 

It requires four justices to vote to take a case, and Chief Justice John Roberts would have to be on board to expedite the proceedings to reach a decision during the court’s current cycle, Keith said. If it elected to kick-start a speedy decision, the Supreme Court could hold oral arguments as early as March or April and render a decision by June 2020, Keith said. 

“The court is in a position to take it and provide some clarity to folks, so we don’t have this uncertainty over everybody’s heads,” Giovannelli said. 

Tina Reed contributed reporting to this article.