The Constitutionality of the ACA: California v. Texas

Joseph Ho, MPH

Associate Editor

Loyola University Chicago School of Law, JD 2022

Signed by President Obama on March 23, 2010, The Affordable Care Act (“ACA”) provided a monumental change to healthcare. The ACA created access, added provisions to improve quality, and created cost containment measures. However, the ACA created a quintessential question of Federalism. As it exists today, the Supreme Court will listen to oral arguments in November on the constitutionality of the ACA, in California v. Texas. If the Court decides that the ACA is unconstitutional, millions of Americans who are insured under the Act will lose coverage. Additionally, aside from access, the ACA includes regulatory laws such as Section 1557’s nondiscriminatory provisions, and amendments to the False Claims Act & HIPAA.

NFIB v. Sebelius

The Supreme Court in 2012, considered the constitutionality of the ACA in National Federation of Independent Business v. Sebelius. In a 5-4 decision, written by the Chief Justice, the Anti-Injunction Act did not bar the challenge to the mandate, and the individual mandate is constitutional under the taxing power. Additionally, Chief Justice Roberts opined that the Commerce Clause did not cover the individual mandate. Finally, Congress exceeded its authority under the spending power, as Congress did not have the authority to require states to implement Medicaid expansion under the threat of losing their existing federal Medicaid funding.

The Tax Cuts and Job Act

However, the ACA’s constitutionality came into question as President Trump signed the Tax Cuts and Job Acts (“TCJA”) into law in 2017. The Act essentially repealed (amended) the individual mandate (Section 5000A), in part, by “zeroing” out the penalties imposed by the mandate. The consequences of this Act are numerous, but essentially, because no penalty exists, the individual mandate’s constitutionality — along with the entire ACA — is now questionable.

Procedural background of California v. Texas

This change brought legal action in federal court. Procedurally, the U.S. District Court for the Northern District of Texas agreed that the mandate is unconstitutional and inseverable — ultimately holding the ACA cannot stand. Subsequently, California and the remaining defendants appealed to the U.S. Court of Appeals for the 5th Circuit. In a 2-1 decision, the Fifth Circuit remanded the issue of severability to the lower court, but held the plaintiff states had judicial standing, and Section 5000A’s mandate was unconstitutional.

California v. Texas (consolidated with: Texas v. California)

The Supreme Court took the appeal (writ of certiorari) to decide whether 1) the individual and state plaintiffs in this case established Article III standing; 2) whether the amendment to Section 5000A(c) rendered the mandate unconstitutional; and 3) if so, whether that provision is severable.

California and the House of Representatives — which are intervenor-defendants in this case (hereinafter “California”) — essentially argue four main points. First, Section 5000A, as amended in 2017, offers a constitutional choice and is not a mandate; thereby, respondents-cross petitioner Texas & the two individual plaintiffs, (hereinafter “Texas”) incorrectly interpret precedent and Congress’s intent. Second, plaintiffs lack Article III standing because “self-inflicted harm,” based on purchasing insurance, is erroneous. Similarly, California argues state plaintiffs do not have judicial standing because the imposition of indirect cost rest on speculation. Third, if the case does present standing, “choice” without consequence remains within Congress’ authority and is constitutional. Essentially California states Section 5000A, as amended, did not exceed its authority. Moreover, a decision to set the amount of tax to zero eliminates coercion, does not expand the sphere of federal regulation, and under the Necessary and Proper Clause, retains the option to reinstate a higher payment in the future. Finally, California argues that severing Section 5000A results in a statute “materially identical” to the law Congress passed. Since the provision, no practical effect has resulted.

Texas essentially also argues four points. First, states have standing because of the costs on the states and the impingement on their rights to enforce their laws. Additionally, the two plaintiffs argue standing due to the mandate stating they “shall” buy health insurance, which is a mandatory command requiring them to spend money. Second, the Supreme Court held the most natural reading is a command (which the Supreme Court has since stated the Federal Government cannot force), and because this raises no revenue, it is no longer a tax. Therefore the TCJA eliminated Sebelius’s saving construction and must utilize some other enumerated power. Further, California cannot argue that because Congress chose “zero,” instead of deleting it entirely, it still stands as a tax. Additionally, along the same lines, California would extend the Necessary and Proper Clause past its meaning into a freestanding exercise of power. Third, because the mandate cannot survive, the ACA cannot operate in the manner Congress intended. Finally, the states argue that the District Court correctly applied a nationwide injunction.

‘I dissent’

The Circuit Court judge’s dissent may be instructive. First, Judge King opined judicial overreach. Next, she argued that because the amendment caused the Section 5000A to require zero dollars, “[n]obody has standing to challenge a law that does nothing.” Additionally, she argued the state plaintiffs lack standing because they failed to show, in part, that anyone enrolled in their Medicaid program solely on the basis of the “unenforceable coverage requirement.” Third, she also found that the coverage requirement to be dispensable due to Congress’ amendment, which left the entire Act remaining. Finally, because Congress turned the mandate to zero, it has no effect.

At oral arguments, California will need to show no injury occurred by arguing that the plaintiffs incurred no harm by a mandate that does nothing. Additionally, California will also need to refute that Section 5000A caused the particular states harm and is not redressable. Next — while California will allude to the constitutionality of Congress’ action — it will face a challenge to rebut Texas’ argument. California will either rely on the mandate “doing nothing” or the Necessary and Proper clause authorizing Congress to zero out but still impliedly constituting a tax precedentially. Last, both parties will argue over Congress’ intent in writing the amendment for severability purposes. All arguments aside, the future of Americans’ health care hangs in the balance.