Healthcare Reform Update - December 17, 2018

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Healthcare Reform Update: Judge Rules Affordable Care Act Unconstitutional

December 17, 2018

On Friday evening, Judge Reed O’Connor of the Federal District Court in Fort Worth, Texas issued a ruling finding that the Patient Protection and Affordable Care Act (“PPACA”) is unconstitutional in its entirety. The ruling was issued in a lawsuit that was filed earlier this year by 20 states in which the plaintiffs argued that they were harmed by an increase in the number of people on their state-supported insurance rolls. The plaintiffs claimed that  when Congress repealed the tax penalty for the so-called individual mandate last year, it effectively eliminated the U.S. Supreme Court’s rationale for finding PPACA constitutional in 2012. Judge O’Connor agreed with the argument put forward by the coalition of states and ruled that PPACA could no longer stand now that there is no penalty for Americans who do not maintain  health coverage for themselves.

In one of its most anticipated opinions, the U.S. Supreme Court upheld PPACA’s individual  mandate in 2012 by classifying the provision as a tax. But since Congress removed the penalty associated with the individual mandate in 2017, Judge O’Connor ruled that there is no constitutional way PPACA can be allowed to stand. In his ruling, Judge O’Connor stated that the individual mandate “can no longer be fairly read as an exercise of Congress's Tax Power and is still impermissible under the Interstate Commerce Clause - meaning the individual mandate is unconstitutional." The Judge then concluded that the mandate “is essential to and inseverable from the remainder of” the Act. He noted that Congress had “stated many times unequivocally - through enacted text signed by the President - that the individual mandate is ‘essential’ to [PPACA].” This “essentiality … means the mandate must work ‘together with the other provisions’ for the Act to function as intended.” And, because the individual mandate cannot be separated from the rest of the law, Judge O’Connor concluded that the rest of the law is also invalid, including popular provisions such as protections for pre-existing conditions. However, legal experts from both sides of the political spectrum have denounced the Judge’s rationale, noting that it is obvious that Congress wanted the rest of PPACA to remain when it effectively eliminated only the individual mandate penalty last year.

Shortly after the ruling was released, President Donald J. Trump tweeted his approval: “As I predicted all along, Obamacare has been struck down as an UNCONSTITUTIONAL disaster! Now Congress must pass a STRONG law that provides GREAT healthcare and protects pre-existing conditions.”

A spokeswoman for Xavier Becerra, the California attorney general, said California and the other defendant states would challenge the ruling with an appeal in the United States Court of Appeals for the Fifth Circuit in New Orleans.

In a separate statement, the White House noted: “We expect the ruling will be appealed to the Supreme Court. Pending the appeal process, the law remains in place.” A similar tone was struck by a CMS spokesperson who said that the decision “is still moving through the courts, and the exchanges are still open for business and we will continue with open enrollment. There is no impact to current coverage or coverage in a 2019 plan."

Conclusion

While the future of this litigation is unknown, it is important to emphasize that PPACA remains the law of the land and that no prudent employer should alter its course of action at this time based on Judge O’Connor’s ruling. Moreover, even if the lawsuit makes it to the United States Supreme Court where the nine Justices will consider the litigants’ arguments anew, it is constructive to remember that the five Justices who found PPACA constitutional in 2012 are still seated on the Court.

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The intent of this analysis is to provide general information regarding the provisions of current federal laws and regulation. It does not necessarily fully address all your organization’s specific issues. It should not be construed as, nor is it intended to provide, legal advice. Your organization’s general counsel or an attorney who specializes in this practice area should address questions regarding specific issues.