ACA on trial again as US Supreme Court justices hear oral arguments

Ingrid Stiver Senior Manager, Health Research Institute, PwC US November 12, 2020

The US Supreme Court heard oral arguments in the California v. Texas case challenging the constitutionality of the Affordable Care Act (ACA) last week (here is the transcript of the oral arguments). Its decision, expected in the spring, could have vast ramifications for the US health industry. In 2017, HRI estimated that a full repeal of the 2010 law would lead to 32 million more uninsured Americans by 2025 (see HRI’s report modeling 2017 repeal-and-replace scenarios here, but note that, of course, the pandemic adds a significant layer of complexity to any modeling scenario).

The case, which has been winding its way through the courts since it was filed in 2018, revolves around the ACA’s individual mandate penalty, which was reduced to $0 on Jan. 1, 2019, by the Tax Cuts and Jobs Act of 2017.

In their suit, a group of Republican-led states (later joined by the US Department of Justice) argued that the $0 individual mandate penalty meant the mandate no longer amounted to a tax, the crux of the Supreme Court opinion that saved the ACA in 2012. Now, as Texas Solicitor General Kyle Hawkins told the court Tuesday, the mandate was no more than “a naked command” from Congress to buy health insurance and “falls outside Congress’ enumerated powers.” The mandate is a linchpin to the law, Hawkins argued, and without it, the entire law is unconstitutional.

A group of Democratic-led states and the US House defended the ACA, arguing that the mandate still exists because Congress left it in place when it passed the 2017 tax law and that even if the mandate is found to be unconstitutional, the rest of the ACA should remain in effect.

HRI impact analysis

A caveat: It is always risky to predict how justices may rule based on questions posed during oral arguments. However, HRI’s reading of the questioning concluded that Chief Justice John Roberts and Justices Stephen Breyer, Elena Kagan and Sonia Sotomayor sounded skeptical of arguments for striking down the law. The latter three justices had joined Roberts’ 2012 opinion that the individual mandate was constitutional in National Federation of Independent Business v. Sebelius, an earlier challenge to the ACA (in that case, Justices Samuel Alito and Clarence Thomas joined a dissent arguing the mandate was unconstitutional).

Roberts pressed Hawkins, representing the Republican-led states, to explain why the entire law must fall if the mandate is struck down. The chief justice said it is hard to argue that Congress intended for the entire ACA to be overturned when it left the law intact in 2017, simply lowering the penalty to $0. He also appeared to indicate that he thought one part of the law could be severed from the rest of the ACA.

The opinions on the ACA of Justices Amy Coney Barrett (confirmed by the US Senate to the court in October), Neil Gorsuch and Brett Kavanaugh are unknown; none were on the court in 2012. Like Roberts, Kavanaugh also focused on severability, stating flatly as he addressed attorney Donald Verrilli Jr., who represented the US House, “I tend to agree with you that it’s a very straightforward case for severability under our precedents, meaning that we would excise the mandate and leave the rest of the act in place.” Kavanaugh said that inseverability clauses are usually clear, that Congress knows how to write them and that he did not see specific inseverability language in the ACA. He asked Hawkins to make the case that the language in the ACA supports inseverability. Gorsuch and Barrett focused on the standing of the states in this case and whether they had the right to challenge the ACA.

If the ACA is struck down, President-elect Joe Biden and his administration are likely to try to move to restore consumer protections around preexisting conditions and other parts of the vast law. How hard this would be may depend on the composition of the Senate, which hangs on the outcomes of two runoff elections in Georgia in January. No matter how those elections go, neither party will command enough votes—60—to pass most legislation without support from senators of the opposing party.

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Trine K. Tsouderos

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Ingrid Stiver

Senior Manager, Health Research Institute, PwC US

Erin McCallister

Senior Manager, Health Research Institute, PwC US

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