Appeals court may strike down ACA


Appellate judges appeared to doubt that the Affordable Care Act should survive without the law’s signature insurance mandate during oral arguments on July 9, in a highly watched legal battle that may upend the health care law.

Katie Keith, an attorney and health law analyst

Katie Keith

During the 2-hour hearing, a three-judge panel for the 5th U.S. Circuit Court of Appeals peppered attorneys with questions about whether Congress intended the ACA to function without the individual mandate, and the panel seemed doubtful the law can stand if the regulation is parsed, according to an audio transcript of the arguments. As written, the individual mandate required that all Americans have insurance or pay a tax penalty. However, budget legislation in 2017 zeroed out the penalties associated with the mandate, rendering it unenforceable.

Appeals Judge Kurt Engelhardt, a President Trump appointee, asked defense attorney Samuel Siegel why Congress failed to add a clause in the original law that would have allowed ACA components to be severed if such sectioning was acceptable.

“Congress could have included a severability clause when it adopted the ACA in 2010. Couldn’t it have done so?” Judge Engelhardt asked during oral arguments. “It seems like it did the opposite, where it said, ‘This is a complete overhaul,’ and it set forth a bunch of factual findings. Couldn’t Congress have said, ‘Oh by the way, we think all of these provisions are such excellent ideas and helpful to the public that if any go by the wayside, then we would want the remainder to continue to apply’?”

Congress’s silence on the severing of the ACA does not create a presumption against parsing of the law, argued Mr. Siegel, who is representing the Democratic states suing to retain the ACA in Texas v. United States. He emphasized that in 2017, when Congress terminated the individual mandate penalty, it chose not to repeal preexisting protections or other important reforms instituted by the ACA.

“With that action, your Honor, Congress expressed its views that the individual marketplace and indeed the entire Affordable Care Act can operate without an enforceable individual mandate,” Mr. Siegel said. “We think that’s all this court needs to know to resolve the severability question.”

However, Appellate Judge Jennifer Elrod, a President George W. Bush appointee to the court, questioned whether legislators zeroed out the mandate penalty because they knew the law could not survive without the core provision. She surmised that Congress might have assumed, “Aha, this is the silver bullet that’s going to undo Obamacare.”

Kyle Hawkins, an attorney representing the Republican-led plaintiff states, meanwhile, argued the text of the ACA clearly declares the individual mandate essential to the law and to the goals that Congress intended to achieve.

“The Obama administration thought of that as an inseverable clause,” Mr. Hawkins argued. “The district court directly synthesized those considerations ... and it reached the correct conclusion: The individual mandate is unconstitutional and it is inseverable from the remainder of the law.”

Texas v. United States stems from a legal challenge by a group of 18 Republican state attorneys general and two individuals in 2018 who argue the ACA should be declared unconstitutional. The plaintiffs say that, because budget legislation in 2017 effectively eliminated the penalty associated with the mandate, the requirement itself is invalid. Without the mandate, the entire law must fall, the plaintiffs contend. The Department of Justice declined to fully defend the law, so 16 Democratic state attorneys general intervened. In December 2018, a district court declared the entire ACA to be invalid, a decision immediately appealed to the 5th U.S. Circuit Court of Appeals by the Democratic attorneys general.

The Trump administration initially agreed that the mandate was unconstitutional and should be parsed. Attorneys for the administration said, if the mandate is found unconstitutional, the court should also consider finding two other provisions – the guaranteed issue and community rating requirements – of the ACA invalid. At the time, the Trump administration said the remainder of the ACA can stand without the three linked provisions. The administration later shifted its stance and asserted that much of the ACA should fall because provisions of the law cannot be severed. However, the DOJ expressed support in keeping some provision intact, such as certain criminal statutes that prevent health care fraud.

Most recently, the DOJ has indicated that, if the ACA is struck down or severed, the decision should only apply in the 18 plaintiff states and not to the entire nation. The fickle position of the Trump administration was questioned during the Court of Appeals hearing with judges asking DOJ attorney August Flentje to clarify why a final ruling should not apply nationwide.

“A lot of this stuff would need to get sorted out,” Mr. Flentje responded. “And it’s complicated. How it applies in the states and which parts can’t be applied at all because they would injure the states ... that raises a lot of complicated issues which I think [will be determined after] a final resolution.”

By their line of questioning, the appellate panel appeared to lean toward the plaintiffs’ position more so than toward the defendants’, said Katie Keith, an attorney and health law analyst who writes about Texas v. United States for the Health Affairs Blog.

“At least two of the three judges – the only two that were asking questions – seem very inclined to at, a minimum, strike down the individual mandate itself,” Ms. Keith said in an interview. “The conventional wisdom had been that this court would overturn the lower court’s decision, and I think folks are walking away, myself included, from oral arguments feeling less certain that that’s going to happen.”

Robert Henneke general counsel for the American Future at the Texas Public Policy Foundation

Robert Henneke

Robert Henneke, general counsel for the American Future at the Texas Public Policy Foundation, said that plaintiffs “had a good day in court” and that the defendants’ arguments seemed to “hit a thud with the judges.” Mr. Henneke represents two individual plaintiffs from Texas in the lawsuit.

“Obamacare is still unconstitutional, and the three-judge panel seemed to agree with the trial court that the entirety of the law should be struck down,” Mr. Henneke said in a press conference after oral arguments. “The court really seemed skeptical with the arguments of the other side. We had the chance to tell the story of my clients and how they continue to be hurt by the Affordable Care Act.

Whichever way the Court of Appeals rules, the losing party is expected to appeal to the U.S. Supreme Court, Ms. Keith said. If justices accept the case, a decision could arrive in the summer of 2020, which would coincide with the presidential election. Another options is for the appellate court to send the case back to the lower court for further review, particularly to clear up the DOJ’s murky position, Ms. Keith said.

“They might send it back to [the lower court] and say there’s some questions here about what’s severable,” she said. “The DOJ sort of struggled to explain what they’re talking about. So they could remand the case back to Judge [Reed Charles] O’Connor to say, ‘Figure this out. Work with the parties.’ That’s an option.”

A decision by the Court of Appeals is expected in the next two months.

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