By: Brady Bizarro, Esq.

We have been covering Texas v. United States since the case was filed in February of this year. The suit, brought by 18 state attorneys general and 2 Republican governors, represented the most serious threat to the Affordable Care Act (“ACA”) since the GOP’s efforts to repeal the healthcare law failed last summer. On Friday, Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas ruled that the entire ACA is unconstitutional since Congress eliminated the individual mandate in a 2017 tax bill. His decision has rattled the markets, Democratic political leaders, advocacy groups, and the broader healthcare industry. After taking a closer look at this ruling, however, we agree with the many legal experts who have concluded that this ruling is not as earth shattering as the headlines make it appear.

First, Judge O’Connor’s ruling did not block enforcement of the ACA. All of the existing provisions of the ACA with which employers, fully insured plans, and self-funded plans must comply are still in effect. This decision has no effect whatsoever on plan design, on cost containment, on employee incentives, or on regulatory compliance. A quick check of Healthcare.gov reveals that federal officials have even added this reassuring message: “Court’s decision does not affect 2019 enrollment coverage.”

Second, a spokeswoman for the California attorney general has already confirmed that the 16 states (and D.C.) that defended the law will appeal this ruling to the Fifth Circuit Court of Appeals in New Orleans. That means there is a chance that this decision could be overturned before the case reaches the Supreme Court. That possibility brings us to our third point; that legal scholars across the ideological spectrum have found the legal arguments made by the plaintiffs in this case to be remarkably unpersuasive. To understand why, let us break down the court’s opinion (which sided with those arguments).

Judge O’Connor’s opinion had two major elements. First, he contended that since Congress reduced the ACA’s individual mandate penalty to $0, the mandate to purchase insurance must be invalidated. Then, he argued that since the individual mandate is essential to and inseverable from the remainder of the ACA, the entire healthcare law must be struck down. This issue of “severability,” or whether one provision of a law can be severed without invalidating the entire law, is key.

When the ACA was passed in 2010, the bill contained a requirement that all Americans purchase health insurance or pay a penalty. The Supreme Court ruled in 2012 that this requirement, known as the individual mandate, was a legitimate exercise of Congress’s constitutional authority to tax. Nothing in the original 2010 bill spoke to the severability of the individual mandate. Importantly, however, Congress did in 2017 when it eliminated the individual mandate in the Tax Cuts and Jobs Act (“TCJA”) of 2017 and preserved the rest of the ACA. Judge O’Connor’s explanation for this fact is that the 2017 Congress was unable to repeal the individual mandate because of budget rules and it therefore had no intent with respect to the individual mandate’s severability. In fact, Judge O’Connor spends most of his 55-page opinion attempting to discern the intent of the 2010 Congress instead of interpreting this later legislative act.

The political response to this ruling has been rather expressive. One prominent Democratic senator remarked, “This is a five alarm fire – Republicans just blew up our healthcare system.” Indeed, we could go on at length about the consequences if this ruling were to stand; the impact on employer-sponsored plans, the effect on those with pre-existing conditions, the potential loss of health insurance coverage for millions of individuals, and the end of the Medicaid expansion. Yet, based on the response from the legal community and our own legal analysis, our position is that this decision rests on shaky ground. This decision also goes much further than even the Trump administration had wanted. In short, we should all hold our collective horses and conduct business as usual for the time being.