At most, it is no longer valid in the Northern District of Texas. On December 14, 2018, a federal District Judge in Fort Worth, Texas, ruled that the Affordable Care Act’s (ACA or Obamacare) “Individual Mandate,” requiring individual taxpayers to either purchase health plan coverage containing minimum essential benefits or pay a penalty tax, was unconstitutional and invalid.
On December 30, 2018, Judge Reed O’Connor issued a stay “because many everyday Americans would otherwise face great uncertainty” during an appeal. His ruling granted the intervenor states’ request for: 1) final judgment based on his December 14 decision; and 2) a stay of that judgment. The December 30 ruling allows for an immediate appeal to the Fifth Circuit. It also means the ACA will remain in effect during the course of the appeal.
The December 14 ruling poses a significant threat to the ACA which contains popular and sweeping health coverage reforms. Judge O’Connor’s decision is also an “interim” ruling. He ruled on just one of the five claims in plaintiffs’ complaint. Four claims remain. While Judge O’Connor granted “partial summary judgment” on plaintiffs’ declaratory relief claim, he denied the plaintiffs’ request for a nationwide injunction.
The Back Story: Texas v. United States
In December 2017, Congress passed a new tax law that lowered the ACA’s individual mandate tax to zero.
On February 26, 2018, eighteen Republican states attorney generals and two governors filed a lawsuit in Fort Worth, Texas challenging the constitutionality of the individual mandate under the ACA because it will generate no tax revenue beginning in 2019. Plaintiffs argued that because the individual mandate generates no revenue it does not operate as a tax. They contend that because the individual mandate “tax” was the foundation for the constitutionality of the ACA, without it, the rest of the ACA is invalid.
The US Department of Justice argues that some — but not all — of the ACA should be struck down. The primary defenders of the ACA are Democratic state attorneys general from sixteen states and D.C., who were allowed to intervene in a case. The intervenors argue that the individual mandate remains constitutional, and even if it is not, it can be legally separated from the rest of the ACA.
On September 5, 2018, oral argument was taken on whether Texas should issue an injunction striking down the law. Texas argued that an injunction is necessary to preserve its sovereignty and relieve the burden on its residents forced to purchase insurance coverage. The State of California argued that temporarily blocking or ending the ACA would cause more harm to millions of people insured under it. In particular, California highlighted that 135 million people enjoy protection from pre-existing condition exclusions under the ACA. The DOJ argued that parts of the ACA could and should be saved. It also stated that an immediate injunction was unnecessary and would throw the US healthcare system into chaos.
Notably, O’Connor already ruled against Obamacare earlier this year, albeit on narrower grounds. In March, he ruled that an ACA tax on medical providers, but paid by the states pursuant to a HHS regulation, is unconstitutional.
The ruling has no immediate impact on healthcare coverage for Americans. The ACA remains in effect. After the four issues that remain in front of Judge O’Connor are decided, the case will then move to the Fifth Circuit Court of Appeals. In the meantime, consumers can continue to enroll and employers should continue to comply with ACA’s mandates.
However, depending on what happens with an appeal (which could take months or even years), the impact on employers may be significant:
- Insurance companies could deny coverage or charge higher premiums to older people or to people with pre-existing conditions;
- Young people would no longer be guaranteed the right to stay on their parents’ plans until they turn 26 years of age;
- People would no longer be guaranteed access to essential health benefits, such as prescription drug coverage, maternity care, mental health, and other critical services; and
- Health plans could once again implement lifetime and annual limits on how much money they would pay each year for individual and family medical coverage.
For more, please reach out to your Baker McKenzie employment and compensation attorney.