Texas Court Ruling on Constitutionality of the ACA
by Vita, on December 17, 2018
Who: This applies to all employers offering company-sponsored health insurance.
Action: There is no immediate employer action required.
On December 14, a U.S. District Court in Texas issued a declaratory order that the individual mandate of the Patient Protection and Affordable Care Act (ACA) is unconstitutional and declared that the rest of the ACA is unconstitutional. The individual mandate of the ACA requires most people to have a certain level of health insurance coverage or pay a penalty.
Earlier this year, twenty states filed a lawsuit asking the Court to strike down the ACA entirely after Congress passed the Tax Cuts and Jobs Act in December 2017 that reduced the individual mandate penalty to $0, starting in 2019.
The plaintiffs argued that, without the penalty, the individual mandate is unconstitutional, and argument that leveraged the Supreme Court’s prior ruling that the individual mandate was found to be constitutional on the basis of Congressional authority to tax. However, since there is no longer a tax, the constitutionality of the individual mandate cannot then rest on Congress’ authority to tax. In addition, they argued that the individual mandate is not severable from the rest of the ACA so if the individual mandate is unconstitutional, then the rest of the ACA is unconstitutional.
The U.S. Department of Justice (DOJ) argued that the individual mandate is unconstitutional without the penalty. They also argued that because the guaranteed issue and community rating provisions are inseverable from the individual mandate, the guaranteed issue and community rating provisions are also unconstitutional.
The Court found that the individual mandate is unconstitutional without the penalty and that the individual mandate is inseverable from the rest of the ACA. Therefore, it declared that the individual mandate and the entire ACA – including its guaranteed issue and community rating provisions – are unconstitutional.
However, it didn't grant the plaintiffs' request for a nationwide injunction to prohibit the ACA's continued implementation and enforcement.
On December 16, the Court issued an order that requires the parties to meet and discuss the case by December 21, and to jointly submit a proposed schedule for resolving the plaintiffs' remaining claims. The parties' proposed schedule for resolving these remaining claims is due to the Court by January 4, 2019.
At this time, the case's status does not impact employers' group health plans. We will keep you informed with any updates in regards to the final decision in this case.