TEXAS FOLD'EM: 5thC rules ACA mandate unconstitutional w/out penalty, kicks it back to O'Connor, DON'T PANIC (yet)!

Well, as if Impeachment Day wasn't tense and historic enough already, the 3-judge panel of the 5th Circuit Court of Appeals has finally issued their decision on the Texas vs. U.S. (aka Texas vs. Azar, aka Texas Fold'em) lawsuit intended to strike down the entire Affordable Care Act:

Before KING, ELROD, and ENGELHARDT, Circuit Judges. JENNIFER WALKER ELROD, Circuit Judge:

The Patient Protection and Affordable Care Act (the Act or ACA) is a monumental piece of healthcare legislation that regulates a huge swath of the nation’s economy and affects the healthcare decisions of millions of Americans. The law has been a focal point of our country’s political debate since it was passed nearly a decade ago. Some say that the Act is a much-needed solution to the problem of increasing healthcare costs and lack of healthcare availability. Many of the amici in this case, for example, argue that the law has extensively benefitted everyone from children to senior citizens to local governments to small businesses. Others say that the Act is a costly exercise in burdensome governmental regulation that deprives people of economic liberty. Amici of this perspective argue, for example, that the Act “has deprived patients nationwide of a competitive market for affordable high-deductible health insurance,” leaving “patients with no alternative to . . . skyrocketing premiums.” Association of American Physicians & Surgeons Amicus Br. at 15

None of these policy issues are before the court. And for good reason— the courts are not institutionally equipped to address them. These issues are far better left to the other two branches of government. The questions before the court are far narrower: questions of law, not of policy. Those questions are: First, is there a live case or controversy before us even though the federal defendants have conceded many aspects of the dispute; and, relatedly, do the intervenor-defendant states and the U.S. House of Representatives have standing to appeal? Second, do the plaintiffs have standing? Third, if they do, is the individual mandate unconstitutional? Fourth, if it is, how much of the rest of the Act is inseverable from the individual mandate?

We answer those questions as follows: First, there is a live case or controversy because the intervenor-defendant states have standing to appeal and, even if they did not, there remains a live case or controversy between the plaintiffs and the federal defendants. Second, the plaintiffs have Article III standing to bring this challenge to the ACA; the individual mandate injures both the individual plaintiffs, by requiring them to buy insurance that they do not want, and the state plaintiffs, by increasing their costs of complying with the reporting requirements that accompany the individual mandate. Third, 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. Fourth, on the severability question, we remand to the district court to provide additional analysis of the provisions of the ACA as they currently exist.

In short, they ruled that:

  • 1. Yes, the case has merit no matter how stupid that is
  • 2. Yes, the plaintiffs have standing to bring the case even though the elimination of the mandate penalty itself means there's NO HARM TO THEM for ignoring the mandate
  • 3. Yes, the individual mandate is unconstitutional because it's no longer a tax...because the amount was reduced from $695 to $0...even though there's plenty of federal taxes which continue to exist even if they're never actually collected or they're $0 for that year; however...
  • 4. They're kicking it back to the original district court judge, Reed O'Connor, to "provide additional analysis" of the ACA's provisions to decide whether or not the mandate can be "severed" from the rest of the law.

I'm no lawyer or Constitutional expert, so I'm gonna "borrow" University of Michigan Law Professor (& ACA expert) Nicholas Bagley's ongoing Twitter liveblog of his initial takeaways. To save time/space I'm just gonna copy/paste his tweets instead of embedding them all, so the formatting will be more bullet-pointy for now:

  • The Fifth Circuit decision in Texas v. United States is out. Here's the basic rundown: a win for the red states, and a defeat for the ACA, with a remand to the district court for further severability analysis.
  • The two individual plaintiffs have standing, the court says, because they're subject to a coercive command. (Never mind that there's no chance of enforcing and unenforceable command.):

"Because the undisputed evidence showed that the individual mandate caused these injuries, the district court reasoned that a favorable judgment would redress both injuries, allowing the individual plaintiffs to forgo purchasing health insurance and freeing them "from what they essentially allege to be arbitrary governance."

  • The court also holds that the red states have standing because they have to issue forms verifying who's subject to the individual mandate. (Please.)
  • On the merits, the individual mandate cannot be sustained as a tax. That's so, apparently, even though the Supreme Court authoritatively construed it as offering a "lawful choice."

Now that the shared responsibility payment amount is set at zero, the provision’s saving construction is no longer available. The four central attributes that once saved the statute because it could be read as a tax no longer exist. Most fundamentally, the provision no longer yields the “essential feature of any tax” because it does not produce "at least some revenue for the Government." Id. at 564.

  • In perhaps the silliest argument in the opinion, the court reads the legislative instruction to buy insurance as a command. In other words, the Fifth Circuit thinks that Congress made the individual mandate *more* coercive when it repealed the penalty. Which is ludicrous.

Now that the shared responsibility payment has been zeroed out, the only logical conclusion under NFIB is to read the individual mandate as a command, quite unlike the Flag Code. It is an individual mandate, not an individual suggestion.

  • On a quick read, it looks like the Fifth Circuit doesn't even address the straightforward argument that the Supreme Court in NFIB v. Sebelius authoritatively construed the meaning of "shall" -- and that the meaning didn't change when Congress zeroed out the mandate.
  • The court wrings its hands for a bit about the (nonexistent) difficulty of the severability analysis in this case.

Severability doctrine places courts between a rock and a hard place. On the one hand, courts strive to be faithful agents of Congress,39 which often means refusing to create a hole in a statute in a way that creates legislation Congress never would have agreed to or passed. See Murphy, 138 S. Ct. at 1482 ("[Courts] cannot rewrite a statute and give it an effect altogether different from that sought by the measure viewed as a whole." (quoting R.R. Ret. Bd. v. Alton R.R., 295 U.S. 330, 362 (1935))). On the other hand, courts often try to abide by the medical practitioner’s maxim of "first, do no harm," aiming "to limit the solution to the problem" by "refrain[ing] from invalidating more of the statute than is necessary."

  • Turning to severability, the Fifth Circuit thinks that Judge O'Connor should have been more discriminating, only striking down the parts of the ACA that are so entangled with the mandate that they have to fall.

In summary, then, this issue involves a challenging legal doctrine applied to an extensive, complex, and oft-amended statutory scheme. All together, these observations highlight the need for a careful, granular approach to carrying out the inherently difficult task of severability analysis in the specific context of this case. We are not persuaded that the approach to the severability question set out in the district court opinion satisfies that need. The district court opinion does not explain with precision how particular portions of the ACA as it exists post-2017 rise or fall on the constitutionality of the individual mandate.

  • The court describes Judge O'Connor's opinions, the arguments on the parties, etc., and then decides to punt.

Although we understand and share the district court’s general disinclination to engage in what it refers to as "legislative guesswork"—and what a Supreme Court Justice has described as "a nebulous inquiry into hypothetical congressional intent," Murphy, 138 S. Ct. at 1486 (Thomas, J., concurring) (quoting Booker, 543 U.S. at 321 n.7 (Thomas, J., dissenting in part))—we nevertheless conclude that the severability analysis in the district court opinion is incomplete in two ways.

  • How does it think that O'Connor went astray? Well, it says that the court didn't attend to the intent of the 2017 Congress (which, by the way, was to get rid of the mandate penalty and leave the rest of the ACA intact).

It does not explain its statement that the 2017 Congress’ failure to repeal the individual mandate is evidence of an understanding that no part of the ACA could survive without it.

  • And the court then says that he didn't do the "necessary legwork" to figure out which parts could be severed.

Second, the district court opinion does not do the necessary legwork of parsing through the over 900 pages of the post-2017 ACA, explaining how particular segments are inextricably linked to the individual mandate.

  • Which parts does the Fifth Circuit think might be salvageable? The court mentions the FDA calorie count disclosures for chain restaurants.

Take, for example, the ACA provisions in Title IV requiring certain chain restaurants to disclose to consumers nutritional information like "the number of calories contained in the standard menu item."

  • Or maybe some of the popular changes to the law, like letting kids stay on their parents' insurance until they're 26.

Finally, some insurance-related reforms became law years before the effective date of the individual mandate; the district court opinion does not explain how provisions like these are inextricably linked to the individual mandate. See, e.g., 42 U.S.C. §§ 300gg-11, 300gg-14(a).

  • But basically, it looks to me like the Fifth Circuit is saying that only some peripheral parts of the ACA can stand -- and that most of it will have to go. But the court won't say which parts should stay and which parts can go, even though that's purely a question of law.
  • The cowardice of the court's judgment is shocking. They won't even offer meaningful *guidance* to Judge O'Connor on remand.

We do the same here, directing the district court to employ a finertoothed comb on remand and conduct a more searching inquiry into which provisions of the ACA Congress intended to be inseverable from the individual mandate. We do not hold forth on just how fine-toothed that comb should be— the district court may use its best judgment to determine how best to break the ACA down into constituent groupings, segments, or provisions to be analyzed.

  • Oh, but they add this deliciously specious note, as if they have any doubt about whether Judge O'Connor will "only" strike down the mandate and leave the rest of the law intact.

It may still be that none of the ACA is severable from the individual mandate, even after this inquiry is concluded. It may be that all of the ACA is severable from the individual mandate. It may also be that some of the ACA is severable from the individual mandate, and some is not.

  • Finally, the court turns to a second reason for remanding, which is consideration about the "proper scope of relief." This is basically a question about the propriety of nationwide injunctions.

Remand is appropriate in this case for a second reason: so that the district court may consider the federal defendants’ new arguments as to the proper scope of relief in this case. The relief the plaintiffs sought in the district court was a universal nationwide injunction: an order that totally “enjoin[ed] Defendants from enforcing the Affordable Care Act and its associated regulations.”

  • The twist is that they're asking Judge O'Connor to think about whether the scope of relief that the judge enters can extend beyond remedying the plaintiffs' injuries.

The federal defendants admitted at oral argument that they had raised the scope-of-relief issue on appeal “for the first time,” but argued that it was necessary to address, as it went to the district court’s Article III jurisdiction. The federal defendants therefore suggested that it “would be appropriate to remand to consider the scope of the judgment.” The court agrees that remand is appropriate for the district court to consider these new arguments in the first instance. The district court did not

  • And it enters a cryptic footnote designed, I think, to arm the district court with the authority, should he wish to exercise it, of knifing the intervention of the blue states.

The consideration of limited relief may affect the intervenors as well. The district court is better suited to resolving these issues in the first instance.

  • Judge King's dissent opens on a strong note: this case is about NOTHING.

KING, Circuit Judge, dissenting: Any American can choose not to purchase health insurance without legal consequence. Before January 1, 2018, individuals had to choose between complying with the Affordable Care Act’s coverage requirement or making a payment to the IRS. For better or worse, Congress has now set that payment at $0. Without any enforcement mechanism to speak of, questions about the legality of the individual “mandate” are purely academic, and people can purchase insurance—or not—as they please. No more need be said; it has long been settled that the federal courts deal in cases and controversies, not academic curiosities.

  • For her, the plaintiffs don't have standing, the mandate is constitutional, and it's entirely severable anyhow. She's right on all counts, but never mind.

I would vacate the district court’s order because none of the plaintiffs have standing to challenge the coverage requirement. And although I would not reach the merits or remedial issues, if I did, I would conclude that the coverage requirement is constitutional, albeit unenforceable, and entirely severable from the remainder of the Affordable Care Act.

OK, so this sucks, but it's also pretty much what most legal experts/pundits were expecting given the makeup of this particular panel.

SO WHAT HAPPENS NEXT?

For that, I'm gonna make it easy on myself...

In other words...nothing. Or at least, nothing for awhile, other than giving millions of people the night sweats and even MORE anxiety on top of the stress they’re already under.

The case will likely be tied up for months or even years more either way. If the Supreme Court does agree to take the case now, then I assume it'll be heard sometime next spring and ruled on sometime next summer/fall (right in the middle of the 2020 Presidential election!), which is what I was already expecting to happen anyway.

If the SCOTUS doesn't agree to take it until Judge O'Connor has chimed in again and it's gone back from him up to the Fifth Circuit again, then, as Bagley notes, it could be another year or more before it gets to SCOTUS...who will then take another six months or whatever to issue their final ruling. At that point we're likely into 2021 or later.

In the meantime, I presume the ACA gets another stay of execution for another year...I hope.

IMPORTANT UPDATES:

  • Republican Senate HELP (Health, Education, Labor & Pensions) Committee Chair Lamar Alexander chimes in, confirming what the judges already knew:

Senate HELP Chairman Lamar Alexander, Republican of TN: “I am not aware of a single senator who said they were voting to repeal Obamacare when they voted to eliminate the individual mandate penalty.

“I thought the Justice Department’s argument in the case was far-fetchedhttps://t.co/GGBzCOLFtD

— Manu Raju (@mkraju) December 18, 2019

  • As expected, lead Attorney General on the defense, Xavier Becerra, is already preparing to file an immediate challenge to try and get the Supreme Court to take up the case immediately:

RE: the #ACA decision.
For now, Pres Trump got the gift he wanted—uncertainty in the healthcare system & a pathway to repeal—so that the care that seniors, workers & families secured under the ACA could be yanked from under them.

CA will move swiftly to challenge this decision.

— Xavier Becerra (@AGBecerra) December 18, 2019