Understanding Texas v. USA and California (ND Texas)

Understanding Texas v. USA and California (ND Texas)

12/14/18 Opinion


Judge Reed O’Connor of the Northern District of Texas has ruled that the Affordable Care Act is unconstitutional. https://www.courtlistener.com/recap/gov.uscourts.txnd.299449/gov.uscourts.txnd.299449.211.0.pdf He is best known previously for opinions holding President Obama’s efforts to allow DACA (Dreamers) children to remain in this country and work and pursue their studies were unconstitutional; he also authored conservative judicial opinions on voting rights of Hispanics and transgender rights. He is a very conservative judge, and his opinion is likely to be reversed on appeal, but it has to be understood. If it is upheld in the Supreme Court, over 20 million Americans could lose coverage and over 100 million Americans with pre-existing conditions could have their coverage reduced or eliminated or their premiums increased; there are also adverse impacts in store for Medicare beneficiaries and privately insured employees who had their coverage improved under the ACA. In the meantime, the best advice is hold tight and keep enrolling people and implementing the ACA’s coverage expansions for Medi-Cal and Covered California.


Texas and several other states and a few Republican Governors sued saying the ACA was unconstitutional since Congress in 2017 repealed the ACA’s tax penalties for individuals who do not enroll in coverage beginning in 2019. The Trump Administration jumped in and said “we agree with you in part and maintained that the individual market insurance reforms (namely no pre-existing conclusion, guaranteed issue and restrictions on underwriting based on an individual’s medical condition plus the individual mandate) are unconstitutional”, but the rest of the ACA, provisions like the Medicaid expansion for the low income and premium assistance to moderate and middle income Americans, are constitutional and must stand. California and a number of other states then intervened and said the entire ACA is constitutional, and the Supreme Court already decided this in NFIB v. Sebelius 567 U.S. 519 (2012) and King v. Burwell 135 S. Ct. 475 (2014).


What Judge O’Connor said was the following. Congress repealed the tax penalty in 2017 for those who can afford to but don’t enroll in coverage. Therefore the shared responsibility (Individual Mandate) component of the ACA is now unconstitutional because there is no tax penalty. Congress would not have passed the ACA in the first place without shared responsibility and the tax penalty; the ACA’s health reforms are all interwoven and interdependent and thus the whole Act is therefore unconstitutional. He issued summary judgment holding the Act unconstitutional but not an injunction. The case will now go to the 5th Circuit Court of Appeals and then will likely be appealed to the Supreme Court.


He neglected to mention that President Trump and the Republican leadership of the House and the Senate tried to repeal the ACA in 2017, but were stymied by the votes of Senators Collins, Murkowski and McCain. He also neglected to mention that Democrats won the House in 2018 so that repeal of the ACA on the legislative front is now off the table. He also neglected to mention the ballot box victories in Utah, Idaho and Nebraska implementing the ACA’s Medicaid expansion.


It’s worth having a better understanding of Judge O’Connor’s reasoning since President Trump has just appointed two new justices to the Supreme Court and a large number of new judges to the Courts of Appeal; so who knows what Justices Kavanagh and Gorsuch will do when the case reaches the highest court. Judge O’Connor said “shared responsibility” is unconstitutional because five members (Chief Justice Roberts and the four dissenters) of the Supreme Court said it could not be sustained under the Commerce Clause in NFIB v. Sebelius. However, the five majority justices sustained it under the Tax Clause of the Constitution. The 2017 Tax Act among its many other provisions repealed the tax penalties of the ACA, ergo the Tax Clause argument for sustaining “shared responsibility” is no longer in place to save it. Next he says that “pre-existing condition” protections and guaranteed issue in the individual market depend on having shared responsibility or individuals will buy coverage only when they are sick; this is known as adverse selection, and a death spiral of unaffordable premiums will result if there is no individual mandate. That was indeed a serious concern of federal policy makers and Congress. However for 2019 without the ACA’s tax penalties, insurer premiums are down in the individual market, and insurer participation is up; so it appears the premium assistance and cost sharing reductions have so far shown themselves to be far more important than the rather small tax penalties in assuring the ongoing viability of the individual market and the Exchanges. So for no good or even articulable reason, Judge O’Connor then proceeds to strike down the premium assistance and cost sharing reductions (tax credits) for moderate and middle-income individuals and families buying individual insurance through the Exchanges. Next he decides that the Medicaid expansions, Medicare improvements, minimum essential benefits and the ACA taxes to pay for improved coverage are all unconstitutional as well. His reasoning here is simply “I can’t rewrite the bill; its policies are all too intertwined”. So he moves from the thoroughly unremarkable 2017 repeal of the minor $695 annual tax penalty for not having coverage to unraveling care and coverage for 20 million previously uninsured Americans and hundreds of millions with pre-existing coverage, with Medicare coverage, with private insurance and with Medicaid.


This is what is commonly known as “judicial activism” run amok. I don't think his decision will stand after all the appeals, as I don’t think a majority of the Court of Appeals or the Supreme Court wants that much blood on their hands. There is also a longstanding rule of “judicial deference” to the Acts of Congress and “judicial restraint” which holds that you sever only the particular provision you have found unconstitutional.


Having just lost the 2018 elections in part based on their efforts to repeal the ACA, it’s not clear to me that the more mainstream Republicans in Washington welcome this over-reaching judicial decision on their favorite issue. It should be noted parenthetically that Wisconsin is one of the states in partnership with Texas in this case and that the lame duck Wisconsin legislature and Governor have just passed and signed legislation, which purports to prevent the incoming Governor and Attorney General from withdrawing from this poorly conceived political/judicial attack on the ACA.


Prepared by: Lucien Wulsin

Dated: 12/17/18


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