Appeals court rules Obamacare's individual mandate is unconstitutional

The Fifth Circuit Court of Appeals issued a ruling today that found Obamacare’s individual mandate to be unconstitutional as it exists today. The court did not reach a conclusion on whether or not the mandate was severable from the rest of the Obamacare law. Instead, the court sent the case back to a lower court to answer that question.

The court’s ruling can be found here. The decision about the mandate is based upon its convoluted history, especially the Supreme Court opinion which previous found the mandate could be considered a tax.

Chief Justice Roberts reasoned that the individual mandate could be read in conjunction with the shared responsibility payment in order to save the individual mandate from unconstitutionality. Read together with the shared responsibility payment, the entire statutory provision could be read as a legitimate exercise of Congress’ taxing power for four reasons.

First and most fundamentally, the shared-responsibility payment “yield[ed] the essential feature of any tax: It produce[d] at least some revenue for the Government.” Id. at 564. Second, the shared-responsibility payment was “paid into the Treasury by taxpayers when they file their tax returns.” Id. at 563 (alternations and internal quotation marks omitted). Third, the amount owed under the ACA was “determined by such familiar factors as taxable income, number of dependents, and joint filing status.” Id. Fourth and finally, “[t]he requirement to pay [was] found in the Internal Revenue Code and enforced by the IRS, which . . . collect[ed] it in the same manner as taxes.” Id. at 563–64 (internal quotation marks omitted).

So Chief Justice Roberts and the liberal wing concluded the mandate was an optional tax and thereby preserved it. However, in December 2017 Congress eliminated the mandate by setting the amount of the “responsibility payment” to zero. As a result, the Fifth Circuit Court concludes the things which previously rendered it a tax no longer exist:

Now that the shared responsibility payment amount is set at zero, the provision’s saving construction is no longer available. The four central attributes that once saved the statute because it could be read as a tax no longer exist. Most fundamentally, the provision no longer yields the “essential feature of any tax” because it does not produce “at least some revenue for the Government.”

As a result, the court concludes the mandate now only exists as a command and is therefore unconstitutional:

In NFIB, the individual mandate—most naturally read as a command to purchase insurance—was saved from unconstitutionality because it could be read together with the shared responsibility payment as an option to purchase insurance or pay a tax. It could be read this way because the shared responsibility payment produced revenue. It no longer does so. Therefore, the most straightforward reading applies: the mandate is a command. Using that meaning, the individual mandate is unconstitutional.

The big remaining question is whether or not the collapse of the mandate also invalidates the rest of Obamacare. On that point, the Fifth Circuit Court chooses to punt:

Having concluded that the individual mandate is unconstitutional, we must next determine whether, or how much of, the rest of the ACA is severable from that constitutional defect. On this question, we remand to the district court to undertake two tasks: to explain with more precision what provisions of the post-2017 ACA are indeed inseverable from the individual mandate…

Obamacare has often been explained as a three-legged stool. Here’s how the Center for American Progress explained it back in 2010:

At the health law’s core is a “three-legged stool” approach to reforming these markets: new rules that prevent insurers from denying coverage or raising premiums based on preexisting conditions, requirements that everyone buy insurance, and subsidies to make that insurance affordable. But some confusion exists about how the stool’s three parts fit together—confusion that’s compounded by claims that some parts will work without others and by efforts to repeal key elements of the new law.

The truth is that all three legs of the stool are necessary to assure affordable coverage.

Defenders of Obamacare may not argue that it can continue with just two legs of the stool but that’s not how it was designed to operate.

Finally, Politico suggests the big takeaway here is that this decision to return the issue to a lower court means this probably will not wind up at the Supreme Court for a final decision prior to the next election.