May 12, 2020

President Trump’s Misguided Effort to Take Down the Affordable Care Act

Steven D. Schwinn Professor of Law, The John Marshall Law School

President Trump announced last week that his Administration would redouble its efforts to dismantle the entire Affordable Care Act at the Supreme Court next Term. The President’s statement was stunning, especially in the midst of a global health crisis. That’s because a win for the Administration would leave millions without affordable health care and other protections in the ACA, including protections that enjoy wide, bipartisan support.

The statement was stunning for another reason, too: the shockingly flimsy legal argument that supports it. The Administration’s bold move to undo the entire ACA is based on nothing more than a barefaced bait-and-switch that confuses the standard for congressional authority with the standard for severability. The Court should see right through this and uphold the bulk of the ACA, even if it strikes the single provision at issue.

The case, California v. Texas, tests the continuing constitutionality of the ACA’s “individual mandate,” the provision that requires us all to have health insurance. Recall that the Court upheld the mandate in NFIB v. Sebelius under Congress’s power to tax. The ruling noted that the ACA imposed a financial penalty on individuals who failed to obtain insurance, and that this penalty operated like a tax. The Court ruled that Congress therefore had authority to impose the mandate under its taxing power, as a tax penalty. 

In 2017, Congress “repealed” the mandate. But Congress didn’t strike the mandate from the books. Instead, it merely set the tax penalty for noncompliance at $0. This meant that individuals could go without health insurance with impunity. 

Several states and individuals then sued the government, arguing that after the 2017 change, the mandate was invalid, because Congress no longer had authority to enact it. The plaintiffs claimed that because Congress set the tax-penalty at $0, the mandate could no longer generate revenue for the government. And because it could no longer generate revenue, they said, it could no longer stand as an exercise of Congress’s power to tax. 

The plaintiffs then went a giant step further. They claimed that because the mandate was an essential part of the ACA, it could not be “severed” from the other provisions of the Act. According to the plaintiffs, this meant that the rest of the ACA must be invalid, too. The district court agreed. The government supported the district court’s ruling at the Fifth Circuit, and now, with President Trump’s statement, at the Supreme Court.

But the argument is spurious, and even dangerous. It’s spurious because it deliberately confuses the standard for congressional authority with the standard for severability. To see this, go back to one of the key Obama Administration arguments in support of the individual mandate. The Administration argued that the individual mandate was an essential part of the ACA—one leg of a three-legged stool. In particular, the Administration claimed that the guaranteed-issue and community-rating provisions—which prohibited insurers from denying coverage based on pre-existing conditions and from charging more to sick people, respectively—would drive insurance rates up. This, in turn, would mean that fewer healthy people would buy insurance. And this, in turn, would drive rates even higher, resulting in the infamous “death spiral.” The Administration claimed that requiring healthy people to buy-in to the insurance pool would keep rates affordable for everyone.

But this wasn’t just an economic argument; it was also a constitutional one. The Administration claimed that the individual mandate, as an essential part of the ACA, was justified under Congress’s Commerce Clause and Necessary and Proper Clause powers. According to the Obama Administration, that was because it was a necessary part of the congressional effort to regulate the interstate effects of the health insurance market. The Supreme Court rejected this reasoning in support of congressional authority to enact the individual mandate.

But now the Trump Administration has coopted this reasoning and mis-applied it in support of non-severability. The Trump Administration argues that the essential role that the individual mandate played in the original ACA is now the reason why the Court can’t sever it from the rest of the ACA—and why the entire ACA therefore must fail. In other words, the Trump Administration transparently baits the Court with the original justification for the individual mandate, but switches to use it for its severability argument. 

But this conflates the standard for congressional authority with the standard for severability. In contrast to congressional authority, severability asks whether Congress wants the rest of the ACA to stand, even if the Court strikes the individual mandate. All indications say yes. For one, Congress in 2017 only set the tax-penalty to $0; it did not write the mandate out of the ACA, and it certainly did not write out any other provision of the ACA. For another, insurance markets have demonstrated now that they can work (without a death spiral) with operative guaranteed-issue and community-rating provisions, even without an effective individual mandate. For a third, the guaranteed-issue and community-rating provisions enjoy widespread, bipartisan support. So do the many other provisions in the ACA.

And that’s where the Trump Administration position is outright dangerous. The argument threatens the many other provisions of the ACA that benefit nearly everyone. Examples run from the insurance exchanges, to tax credits, to requirements to cover dependent children, to restrictions on high-cost insurance plans, and more. The Trump Administration’s position threatens all of these. 

The Court should see right through the Trump Administration’s bait and switch when it hears the case next Term, and flatly rejected this mis-guided attempt to take down the entire ACA.

Healthcare, Importance of the Courts, Supreme Court