Appeals court puts Obamacare’s fate deeper in doubt

The long-running dispute over the constitutionality of the massive federal health insurance law – the Affordable Care Act, or “Obamacare” – headed into a new, and even more uncertain, phase on Wednesday after a federal appeals court issued an eagerly-awaited ruling. Dividing 2-to-1, the U.S. Court of Appeals for the Fifth Circuit found unconstitutional a key part of the ACA, but it then ordered a new round of review in a federal trial court in Texas on the ultimate fate of the entire, 900-page law.

After the 98-page Circuit Court ruling was released, it immediately became unclear where the case will move next, when any further step would occur, and whether anything would happen to the ACA’s current provisions in the meantime. Those provisions include the law’s popular guarantee that insurance companies cannot deny insurance or raise insurance rates for people who have pre-existing medical conditions.

A group of 18 states that have been defending in federal court all facets of the ACA, countering a sweeping constitutional challenge by the Trump Administration and by 18 other states, announced promptly that they will try to move the case directly to the Supreme Court, bypassing any further review in lower courts. The Justices would have the option of taking it on themselves, perhaps even in their current term if a fast-enough schedule were set, but they also could choose to stay on the sidelines themselves to await the outcome of the further review ordered by the appeals court.

The ruling by the appeals court came in a 62-page majority opinion and a 36-page dissenting opinion. The outcome was multi-faceted and complex. Here, in summary, are the key points of the majority’s controlling opinion:

First, it ruled unconstitutional the ACA’s so-called “individual mandate,” perhaps the most important part of the entire law as first passed in 2010; the mandate required everyone in the nation (other than the very poor) to obtain health insurance or else pay a financial penalty to the U.S. Treasury.

That provision, the majority said, is no longer valid because Congress in an ACA amendment passed two years cut the amount of the penalty to zero, with the result that the mandate can no longer be justified as a constitutional form of tax. If it isn’t a tax (the Supreme Court had ruled in 2012 that it was a tax and thus upheld the mandate as it then existed), the appeals court said, that key provision can no longer stand because the mandate cannot be justified under any other legislative power that Congress has. With the penalty set at zero, it would produce no revenue, so it cannot be a tax, the majority said.

Second, it ordered a federal trial judge in Fort Worth, Texas, to make a wide-ranging review of the entire law, end to end, to determine if the unconstitutionality of the individual mandate would have the effect of undercutting the legality of any other provision in the massive law. In a ruling one year ago, the Texas jurist, U.S. District Judge Reed C. O’Connor ruled just as the Circuit Court majority did Wednesday, that the individual mandate is invalid because it no longer is a tax, but he went further and ruled that all parts of the ACA were closely enough tied to the mandate that they would be invalid, too. In legal terms, Judge O’Connor ruled that no other parts of the law could be severed from the mandate, so the entire law shared its unconstitutionality.

The Circuit Court majority ruled that the trial judge had short-circuited the question of how the rest of the law would be affected with the mandate struck down. The two judges said there was a “need for a careful, granular approach to carrying out the inherently difficult task” of analyzing the interactive relationship of various aspects of a huge law when just one facet of it was directly nullified. The Fort Worth judge was given no specific instructions on just how he was to make such a detailed review, leaving it largely to his discretion.

Third, Judge O’Connor, as part of his new review, was told by the Circuit Court to weigh belated suggestions by the Trump Administration that perhaps the entire ACA did not have to fall across the whole nation with the striking down of the individual mandate. Those suggestions were a change from a previous position by the Administration, that all of the law should fall with the mandate. Instead of that, the Administration said more recently, Judge O’Connor should re-consider his previous nationwide order against the ACA as a whole, and instead nullify the law only as it applied to the 18 states that challenged it, leaving it entirely intact in the rest of the nation. The Circuit Court did not compel the judge to do that, but it said he should examine it and decide anew on the proper scope of a new ruling.

Fourth, there was nothing in the Circuit Court ruling that would have ordered the federal government to take any action to implement the ruling that the individual mandate was invalid. Judge O’Connor had not put his ruling into actual effect, and the Administration has not sought that, so the ACA has continued in operation largely as it has for the past nine-plus years. That apparently will continue to be the situation, at least until there is a new ruling by Judge O’Connor, or perhaps until the Supreme Court takes some action.

Since the 16 states acting as defenders of the law plan to try now to persuade the Supreme Court to review Wednesday’s ruling, the 18 states making the challenge could file their own appeal asking the Justices to go ahead and nullify the entire law in the same way that Judge O’Connor had ruled last December. The challenging states would also have the option of asking the Circuit Court to reconsider Wednesday’s ruling, instead of themselves filing an action in the Supreme Court.

Whether Judge O’Connor would make a start on the new review he is to make, in the face of possible action at the Supreme Court, is unclear at this point.

The Supreme Court is now getting close to the point in the calendar of its current term when it would be too late to take on a case and decide it before a planned completion of the term late next June. The Court, though, could do so by adopting a highly expedited schedule, if it thought that it was necessary to promptly clarify the fate of the ACA.

Lyle Denniston has been writing about the Supreme Court since 1958. His work has appeared here since mid-2011.