Constitution Daily

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Texas federal judge strikes down entire Obamacare law

December 14, 2018 by Lyle Denniston


Eight years after Congress wrote a massive overhaul of the nation’s health care industry, a federal trial judge in Texas has ruled that the entire Affordable Care Act (“Obamacare”) is unconstitutional. If that ruling stands up after inevitable appeals to higher courts, the law could not be enforced after January 1.

U.S. District Judge Reed O’Connor of Fort Worth ruled that Congress, while repeatedly failing to repeal the law, actually intended the demise of the ACA two years ago when it “sawed off the last leg it stood on.” That was the law’s mandate that nearly every American must have health insurance, or else pay a penalty in the form of a tax.

Link: Read The Full Ruling

In a notable historic irony, the constitutional ruling was based on the judge’s interpretation of the very same provision – the tax penalty – that the Supreme Court six years ago had found sufficient to salvage the law’s constitutionality. Congress’s ending of the tax penalty in 2017, Judge O’Connor concluded, took away the essential foundation of the entire law, so every part of it must fall. The judge said repeatedly that this outcome was actually dictated by what Congress had done and what the Supreme Court had said about the constitutional foundation of the ACA.

If the defenders of the law are unable to get that ruling delayed or overturned, it would mean the end of such popular features of the law as the guarantee that people cannot be denied health insurance or charged higher premiums because of pre-existing medical conditions; the promise that children can stay on their parents’ health policies until age 26; a wide expansion of health insurance for poor people; a broad series of reforms designed to cut hospital and other medical costs; and a mandate that employers with a staff of at least 50 workers have to provide coverage or else pay a penalty.

At the Trump Administration’s request, the judge released his 55-page opinion on the night before the period for consumers to enroll in ACA health insurance plans for 2019 was set to end – that is, on Saturday. Granting another Administration request, the judge did not order the government to immediately stop enforcing the law; rather, he issued a declaration that all parts of the law are invalid, leaving it to government officials to decide how to wind down the law.

Thus, the immediate impact on the ACA health insurance system, and on the operation of the state-level marketplaces (“exchanges”) where insurance plans can be bought, was unclear Friday night. If a law is ruled unconstitutional, it simply cannot be enforced. Judge O’Connor’s ruling, however, could be put on hold while defenders appeal to a federal appeals court and, now or later, to the Supreme Court.

Nineteen states and the governor of Maine had sued to challenge the ACA’s constitutionality after Congress voted last year to reduce to zero the tax penalty for individuals who failed to obtain health insurance. That reduction is to take effect on January 1. The challengers argued that, since the Supreme Court in 2012 had upheld ACA after finding that the penalty was, in fact, a tax, the zeroing-out of that penalty meant that the entire law would not function as Congress intended in passing the original law, so all parts of the law were invalid. The challengers contended that the entire ACA was crafted to be closely interlocking and inter-dependent.

The Supreme Court, while upholding the individual mandate and the remainder of the ACA, had also declared in its 2012 ruling that the law would be unconstitutional if it depended on Congress’s power to pass laws regulating business among the states. So, the challenging states asserted, if the tax foundation is gone, there was no constitutional basis for any of the law.

The challenge was led by Texas, and it wound up being assigned to a conservative judge in Fort Worth, District Judge Reed O’Connor.

The Trump Administration, sued in the case, chose not to defend the law’s constitutionality but urged Judge O’Connor to rule that with the ending of the tax penalty, only the two provisions protecting those with pre-existing conditions had to fall. Those could not be severed from the individual mandate and its tax penalty, government lawyers contended.

A group of 16 states and Washington, D.C., entered the case to defend the constitutionality of all parts of the law. Noting that opponents of the ACA in Congress had never been able to gather enough votes for outright appeal of the law, despite attempting to do so more than 60 times, the defenders argued that Congress was only able in 2017 to zero-out the tax penalty, leaving everything else intact. The defenders argued that all of the remainder of the law could function without the tax feature – including the mandate for individuals to obtain insurance, even though they now had the option of declining to do so.

Judge O’Connor wound up siding with the broadest arguments by the challenging states, concluding that the individual insurance mandate and its tax penalty were vital to the entire legislative plan.

“Congress,” the judge wrote, “intended the individual mandate to serve as the keystone, the linchpin of the ACA. That is a conclusion the court can reach without marching through every nook and cranny of the ACA’s 900-plus pages because Congress plainly told the public when it wrote the ACA that” the individual mandate “is an essential part of a larger regulation of economic activity and without the provision, the regulatory scheme would be undercut.”

Without the mandate and its tax penalty, the judge declared, the law was beyond Congress’s power to pass a law regulating interstate commercial activity – as the Supreme Court had said in 2012 when it upheld the law under Congress’s constitutional power to impose taxes.

“In the face of overwhelming textual and Supreme Court clarity,” the opinion added, “the court finds it is unthinkable and impossible that the Congress would have created the ACA’s delicately balanced regulatory scheme without the individual mandate.”

The ruling gave a particularly narrow interpretation of what Congress had done last year when it zeroed-out the penalty that enforced the individual mandate. Congress did that, the judge said, using a legislative procedure that did not allow it to take a fresh look at the entire scope of the original 2010 law. All it intended to do, and all it did, the opinion concluded, was “to pass a tax cut.” But, in doing so, it undercut the only remaining constitutional basis for any of the law’s provisions, the judge decided.

If the defenders, as expected, appeal the decision, it could go first to the U.S. Court of Appeals for the Fifth Circuit. They also have the option of going directly to the Supreme Court, bypassing the Fifth Circuit Court level.

Because the ending of the tax penalty is to occur on January 1, there is no chance that either the appeals court or the Supreme Court could issue a final ruling on the ACA’s constitutionality before then. Thus, the defenders are expected to seek a delay of the decision pending an appeal.

If that question is put to the Supreme Court, it will take the votes of five of the nine Justices to put the decision on hold even temporarily.


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