Yes, federal judges just struck down part of the ACA. Here's why stakeholders shouldn't panic—yet.

Topics: Health Care Reform, Insurance, Exchanges, Health Plans/Insurance Companies, Medicaid, Politics and Policy, Federal Government, Health Care Legislation, Regulatory, Finance, Payments and Reimbursement, Payment Reform, State Government, Providers, Legal Issues

By Ashley Fuoco Antonelli, senior editor

A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit in a 2-1 ruling issued Wednesday struck down the Affordable Care Act's (ACA) individual mandate as unconstitutional, but left the rest of the law intact—at least for now.

About the lawsuit

The panel issued the ruling in a lawsuit filed in February 2018 by attorneys general (AGs) from more than a dozen Republican-led states. The lawsuit argues that a 2017 tax reform law rendered the ACA's individual mandate unconstitutional by zeroing out the mandate's tax penalty for remaining uninsured. That's because the Supreme Court in 2012 ruled that the mandate would be unconstitutional without a tax penalty.

The GOP AGs also argue that the ACA cannot be separated from the individual mandate because the law does not include a severability clause stating that some parts of the law may stand if other parts are struck down. Therefore, the entire law must be invalidated if the individual mandate is struck down as unconstitutional, the Republican AGs claim.

Click here and here for deeper dives on the lawsuit >>>

U.S. District Judge Reed O'Connor in December 2018 agreed with the Republican AGs, but Democratic AGs who are defending the ACA in the case appealed O'Connor's ruling to the U.S. Court of Appeals for the Fifth Circuit. House lawmakers also have joined in the lawsuit to defend the ACA.

The Department of Justice (DOJ) under the Trump administration has declined to defend the ACA in the suit, and in a brief filed in June 2018 largely agreed with the GOP AGs, saying the individual mandate is no longer constitutional because lawmakers eliminated its tax penalty. But unlike the GOP AGs, DOJ said such a ruling should not invalidate the entire law.

However, DOJ in March changed tactics and said it agrees with O'Connor's ruling that the entire ACA should be struck down—a reversal that surprised some policymakers and legal experts.

Appeals-court panel strikes down individual mandate—but sends key question back to lower court

The appeals-court panel in its ruling issued Wednesday also agreed that the individual mandate is unconstitutional without its tax penalty, and therefore struck down the mandate. The panel wrote in the ruling, "The individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power."

But the appeals-court panel did not weigh in on the question of severabilityor whether the rest of the ACA can stand without the individual mandate. Instead, the panel sent that question back to the lower court.

The appeals-court panel in its ruling wrote, "On the severability question, we remand to the district court to provide additional analysis of the provisions of the ACA as they currently exist"meaning the lower court now has to consider whether the rest of the ACA can stand without the individual mandate.

The panel noted that the lower court's ruling "does not address the ACA's provisions with specificity, nor does it discuss how the individual mandate fits within the post-2017 regulatory scheme of the ACA." They added, "The rule of law demands a careful, precise explanation of whether the provisions of the ACA are affected by the unconstitutionality of the individual mandate as it exists today."
The appeals-court panel's decision to send the severability question back to the lower court means the ACA
sans the individual mandateremains intact and in effect, pending further court proceedings.

What happens next?

There are a few different things that could happen next:

  1. All parties of the lawsuit adhere to the ruling and wait for the lower court to issue its opinion on the severability question.
  2. Parties of the lawsuit can request an en banc review, which means the entire U.S. Court of Appeals for the Fifth Circuit would rehear the case and issue a new ruling.
  3. Parties of the lawsuit could appeal the latest ruling directly to the Supreme Court, and the Supreme Court then would have to decide whether to hear the case.

Some experts have long believed the case eventually will end up before the Supreme Court, and it looks like we're heading in that direction. California AG Xavier Becerra (D), who is leading Democratic AGs in their effort to defend the ACA in the case, on Wednesday said he will "move swiftly" to appeal the appeals-court panel's ruling to the Supreme Court. "The best way to get certainty is to go to the Supreme Court," he said.

What all of this means right now

As the Washington Post's Amy Goldstein writes, the appeals-court's ruling "has little immediate practical effect because Congress already has removed the penalty for the insurance requirement."

That means for the time being:

  • U.S. residents will not lose health coverage they receive through the ACA's exchanges or otherwise under the law;
  • All of the ACA's protections for individuals with pre-existing medical conditions or its standards for the services that health plans must cover remain in place;
  • States' Medicaid expansions under the ACA remain in place;
  • The Center for Medicare and Medicaid Innovation (CMMI), and all of the provider payment initiatives—such as value-based payment programs—launched under CMMI, remain in place; and
  • All of the ACA's other current standards, requirements, and initiatives remain in place.

President Trump on Wednesday said, "This decision will not alter the current health care system. My administration continues to work to provide access to high-quality health care at a price you can afford, while strongly protecting those with pre-existing conditions."

But all of that could change if the entire ACA or part of the law ultimately is struck down. For more details on what a final ruling striking down the ACA could mean, click here.

However, it's not likely this case will be settled any time soon. If the Supreme Court agrees to hear the case, it's unlikely the Court would issue a ruling before the November 2020 general election, Politico's Paul Demko writes.

Still, as Goldstein notes, the appeals-court panel's decision to send the severability question does leave the ACA "in limbo, catapulting questions of insurance coverage and consumer health-care protections to the forefront of the 2020 presidential and congressional campaigns."

You can expect the ACA will be a key topic of discussion as we near the 2020 elections, with increased focus on whether and how lawmakers, the Trump administration, and congressional and presidential candidates would replace the ACA if the whole law ultimately is invalidated and can no longer stand.