Almost exactly one year after passing the tax-reform package that eliminated the individual mandate penalty in ObamaCare, Republicans got the ruling they wanted on Friday. A federal judge in Texas concluded that, without the tax penalty for violating the individual mandate, the tax-based rationale behind Chief Justice John Roberts’ majority opinion in NFIB v Sebelius was no longer sustainable [see update below]. And without that, Judge Reed O’Connor ruled, the entire Affordable Care Act is unconstitutional:
U.S. District Judge Reed O’Connor in Fort Worth agreed with a coalition of 20 states that a change in tax law last year eliminating a penalty for not having health insurance invalidated the entire Obamacare law. …
O’Connor ruled that under the logic of the landmark 2012 Supreme Court ruling that upheld the law, the individual mandate, which required that most Americans obtain health insurance or pay a tax, is now unconstitutional.
In the 2012 ruling, a majority of the justices concluded that the individual mandate unconstitutionally imposed a requirement that Americans buy insurance. However, a different majority held the mandate amounted to a constitutional tax penalty.
On Friday, O’Connor ruled that after Trump signed a $1.5 trillion tax bill passed by Congress last year that eliminated the penalties, the individual mandate could no longer be considered constitutional.
He said because the individual mandate was an “essential” part of Obamacare, the entire law, rather than just the individual mandate, was unconstitutional.
So Obamacare is dead, right? Not exactly. In fact, it might not even be mostly dead, let alone at the stage where we go through its pockets and look for loose change. Donald Trump celebrated as if the victory had been won, however:
President Donald Trump on Saturday hailed a court decision against Obamacare as “a great ruling for our country,” while a U.S. government official said the decision by a Texas judge would have no immediate impact on health coverage.
The Washington Post also notes all of the potential side effects of O’Connor’s ruling, if it takes effect:
The opinion, if upheld on appeal, would upend the health insurance industry, the way doctors and hospitals function, and the ability of millions of Americans to access treatments they need to combat serious diseases.
Parts of the law that would need to be unwound include no-charge preventive services for older Americans on Medicare, allowing parents to keep children on their plans through age 26, a variety of efforts to rein in prescription drug costs and even requirements that some restaurants post calorie counts
“It affects almost everyone in America,” said Tim Jost, a specialist in health law and a professor emeritus at Washington and Lee University.
One could argue that it was the original law that “upend[ed]” the health insurance industry, and that a return to status quo ante would be the logical step of undoing the upending. However, we’re not there with O’Connor’s ruling yet. Not only is much of the handwringing premature, much of it is also likely to be unnecessary.
For one thing, O’Connor didn’t enjoin the federal government from enforcing the provisions of the ACA. Nor did the White House rush to change any of its policies; in fact, they stated over the weekend that they would continue to operate the ACA as before. No one will be getting kicked off their insurance in the short run, or likely at all. Instead, the decision will proceed on appeal, and will almost certainly end up at the Supreme Court once again, this time without the tax fig leaf.
Somewhere along the process, O’Connor’s ruling on severability will get a very skeptical reading by the higher courts. In striking down the entire law, O’Connor declared that ending the individual mandate collapses the ACA like a game of Jenga:
“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,” O’Connor wrote. “The Individual Mandate is essential to and inseverable from the remainder of the ACA.”
Without the system being upheld by a wide pool of mandated participants, the ACA cannot stand, O’Connor ruled.
“Without it, Congress and the Supreme Court have stated, the architectural design fails,” according to O’Connor. “It is like watching a slow game of Jenga, each party poking at a different provision to see if the ACA falls.”
However, those are two different issues. The individual mandate is unconstitutional, but the other provisions are just expensive and bad policies. Unfortunately, expensive and bad policies are not the purview of the courts. Higher courts will be tempted to allow those policies to stand in place by allowing for severability within the ACA, even if the smarter policy would be to unwind all of it and send it back to the states. Certainly that will be Roberts’ impulse; he bent over backwards to bless the ACA as a tax rather than stick the court in the middle of a political fight the first time around. How likely is Roberts to throw out the pre-existing conditions bathwater with the mandate baby?
Finally, Republicans might not want to celebrate the ACA’s demise until we know for sure what will follow it. If the courts do strike it down in its entirety, it opens up the possibility for getting truly effective market-based reforms for the health care industry. Unfortunately, the anger it will stoke with consumers, especially in the short run, will open up the possibility of passing Medicare for All in the vacuum to come. Considerable momentum has formed behind that insanely expensive and bad policy, and without ObamaCare blocking its path, there might not be much to hold it back if a Democrat wins the White House in 2020.
Update: I originally cited the wrong Supreme Court decision. The case in which Chief Justice Roberts ruled the ObamaCare mandate a tax was NFIB v Sebelius, not King v Burwell. I have corrected it in the first paragraph, and I have now included a link back to that opinion. I apologize for the error.