Rachel Kemel
Associate Editor
Loyola University Chicago School of Law, JD 2020

Before the Affordable Care Act (“ACA”) was passed, critics exclaimed that the government had no right to interfere in a citizen’s healthcare. When it was passed, the requirement that every American purchase health insurance caused America to scramble to comply. However, in a year all the critics might be silenced. Recently, Congress repealed the individual mandate’s tax penalty. How will Americans comply with the new act?

What Did Congress Do?

In December 2017, Congress repealed the taxation element of the individual mandate through the Tax Cuts and Jobs Act. It is important to note that the mandate itself was not repealed, rather, the penalty for non-compliance was simply set to $0 for 2019 onward. While the public is still required to participate in the health insurance marketplace, individuals will not be taxed if they do not join the market.

Why Should We Care About the Individual Mandate?

In 2012, in the National Federation of Independent Business v. Sebelius case, the Supreme Court ruled in a 5-4 decision that requiring all Americans to purchase health insurance through the Affordable Care Act was constitutional under Congress’s taxing power. After the repeal of the tax penalty, critics claimed that the ACA was no longer constitutional because the Supreme Court’s ruling was based on Congress’s taxing power. And since Congress is no longer taxing those who do not comply with the individual mandate, Congress does not have the authority to enforce the ACA.

Why Does this Matter?

After Congress eliminated the tax penalty, there was an uproar as to how the entirety of the ACA would be enforced. The ACA was built to be a “three-legged stool”, meaning one element of the act cannot be removed. The three elements were: the individual mandate, guaranteed issue, and subsidies. Prior to the ACA being passed, proponents of the act emphasized that every element was key to the ACA being successful, and specifically that the mandate was necessary for a functional market. Without the tax penalty of the individual mandate, the question arises how the ACA will be enforced and how effective it will be when there is no tax to induce compliance.

Do People Still Need to Buy Insurance?

Americans are rightfully confused with this new development. How would consumers comply with the ACA, and why should consumers comply when there will be no (apparent) consequences to them? Essentially, Americans will not be required to purchase healthcare with fear of a penalty come 2019. But, while the national tax penalty has been eliminated, there are still states that will implement their own penalties. Massachusetts, for example, created its own individual mandate back in 2006, which will continue to be in effect even after the repeal taxes effect in 2019. Vermont, Washington D.C., and New Jersey also have state-mandated penalties in place that will take effect following the 2019 repeal. It is possible that other states may follow suit in the future, but currently only citizens of those states will be required to pay a penalty.

Will the ACA be Repealed?

There is still one question remaining: how can the ACA stand on its own when a key element of the act does not require compliance? In February 2018, Texas led a suit to the Department of Justice with 19 other states arguing the ACA was no longer constitutional without the tax penalty. Other states, led by California, are fighting against the suit. Proponents of the ACA became worried when the case was brought before US District Judge Reed O’Connor, due to Judge O’Connor’s history with the ACA. Critics of the ACA found that the repeal of the individual mandate forces the conclusion that the entirety of the act is unconstitutional. However, many argue that the repeal of the individual mandate does not imply that the ACA will be repealed in 2019. Proponents of the ACA emphasize that Congress did not repeal the entirety of the individual mandate –just the penalty. Congress must have believed that the ACA could continue to be enforced without this penalty. If the entire ACA is found to be unconstitutional, then the country will be left floundering. The ACA has created a new landscape in health insurance, and it would be incredibly difficult to simply bounce back to the way things were prior to its passage. Repealing the ACA would send the state marketplaces for individual insurance worse off. Insurers would have little incentive to continue offering coverage in the marketplace, since many of the marketplaces would disappear. Healthy consumers would not have much incentive to continue purchasing insurance, this means that the consumers that would stay on the market would be those who have high premiums. The ACA was designed to be imbedded in the healthcare field so that these issues would not return.