Can Republican-Led States Succeed in Enjoining the Affordable Care Act?
May 4, 2018

Beginning January 1, 2019, the Tax Cuts and Jobs Act of 2017[1] reduces to zero dollars the Affordable Care Act (ACA)[2] tax penalty imposed on many individuals who fail to maintain minimum essential coverage (i.e., the individual mandate). The Tax Cuts and Jobs Act not only guts a critical pillar of ACA but has created a new path to invalidating ACA’s health insurance market reforms and Medicaid expansion.

In February of this year, Texas Attorney General Ken Paxton and Wisconsin Attorney General Brad Schimmel, lead a 20-state coalition in a federal lawsuit[3] against defendants, HHS and the IRS, to invalidate ACA on constitutional grounds since, beginning next year, the individual mandate will no longer serve as a mechanism to raise tax revenues. Sixteen states with Democratic Governors sought to intervene since the Trump Administration is unlikely to mount much of a defense to ACA’s continued enforceability.  More recently, on April 26, 2018, the coalition of plaintiffs filed a motion[4] in the U.S. District Court for the Northern District of Texas seeking to preliminarily enjoin HHS and the IRS from enforcing the individual mandate as well as ACA’s health insurance market reforms that are inextricably bound to the mandate’s enforceability (e.g., guaranteed issue coverage and community-rating) in advance of the sunset of the individual mandate’s tax penalty.

Interestingly, the U.S. Supreme Court’s decision in National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012) (hereinafter, NFIB), which upholds the constitutionality of the ACA, and the individual mandate, in particular, is the foundation of the plaintiff-states’ litigation and motion for preliminary injunction.  Although the Supreme Court, in a 5 to 4 decision, saved the individual mandate penalty as a “tax” since it maintained the essential feature of raising at least some tax revenues, plaintiffs contend that eliminating the tax under the Tax Cuts and Jobs Act renders the mandate unconstitutional, a least after the end of the year.  Furthermore, plaintiffs point to the NFIB dissenting opinion in which five justices, including Chief Justice Roberts, agreed that a legal requirement to purchase health insurance coverage – i.e., the individual mandate – in and of itself, exceeds Congressional power under the Commerce Clause.

The plaintiffs further rely on Congress’ own legislative findings, as codified in the ACA, which determined that the individual mandate is essential to, and intertwined with, the functioning of ACA’s other major features, including guaranteed issue coverage and community rating and other ACA reforms designed to achieve near-universal health insurance coverage, lower premiums and stimulate competitive health insurance markets.  The crux of the plaintiffs’ argument is that the individual mandate should fail under the very NFIB standard that upheld the mandate and nearly all of ACA’s other provisions.  It is asserted that, as a matter of constitutional law and public policy, the entirety of ACA, at least with respect to health insurance market reforms (which the plaintiffs fail to distinguish from other parts of ACA), cannot function without the individual mandate.

In the end, plaintiffs contend that the United States should have no cognizable interest in continuing to enforce the individual mandate and, by implication, the remainder of ACA, when it seems a legal certainty that the individual mandate becomes unconstitutional as of January 1, 2019.  By enjoining the ACA and its regulations, the U.S. District Court for the Northern District of Texas, could immediately wrest control of health insurance regulation from the federal government and place it back in the hands of States better able to design and regulate their unique health insurance markets, argues the plaintiffs. Furthermore, plaintiffs intimate that widespread and immediate relief would follow a preliminary injunction of ACA.   Consumers would be alleviated from purchasing high-cost ACA health insurance through the remainder of the year.  States could stop spending their own funds to prop up the weakened ACA exchanges and their plans.  And, the United States could eliminate increased federal spending on premium subsidies for higher-priced ACA exchange coverage.

We shall have to wait and see if the Northern District of Texas is sympathetic to plaintiff’s well-reasoned arguments.  A briefing schedule has been set and it may be late summer, at the earliest, before the Court weighs in on the motion for preliminary injunction or the merits of this matter.  It should be of interest to see how the Court responds to plaintiffs’ claim that immediate relief is warranted when the individual mandate tax penalty is not repealed until year-end.

One striking consideration seems to be missing from plaintiff’s brief, though.  What would happen to Americans covered by ACA exchange plans, who actually want or need to maintain coverage, if the federal government is compelled to immediately stop subsidizing such coverage?


[2]; and, in particular, the individual mandate is found at 26 U.S.C. § 5000A et seq.




Visit our Insurance & Reinsurance Blog for the latest news and developments.

Visit the blog