States Lack Standing – ACA Remains Standing | Insights

On June 17, 2021, the Supreme Court in a 7-2 decision rejected a challenge to the individual mandate and the overall constitutionality of the Patient Protection and Affordable Care Act (the “ACA”) in the third major challenge to the law to reach the high court. The decision in California et. al. v. Texas et. al., 593 U. S. ___ (2021), was somewhat anticlimactic as the basis for the decision was that the plaintiffs did not have standing to bring the action. Accordingly, the Court did not address or provide guidance on the substantive constitutionality or severability issues raised in the lower courts. The decision does, however, signal that even a conservative Court is unlikely to overturn the ACA any time soon and so compliance with the various provisions of the ACA will be required. The decision has also been heralded as a victory for patients who are able to keep their health coverage as the country exits a year and half long pandemic. In addition, Democrats have expressed an intent to try to expand the ACA’s reach by adding provisions designed to make health care more affordable and accessible to the American people.

The primary issue in California v. Texas was whether the individual mandate was severable from the rest of the ACA or whether the entire ACA would stand or fall on the constitutionality of the individual mandate. The ACA individual mandate requires individuals to purchase health insurance (or be covered by group insurance) or pay a penalty. This penalty was effectively eliminated in 2017 when Congress set the penalty to $0 effective for tax years beginning in 2019.

In 2012, the Supreme Court addressed the first major challenge to the ACA, holding in National Federation of Independent Business v. Sebelius, 567 U. S. 519 (2012), that the individual mandate was constitutional. The Court reasoned that because the penalty associated with the mandate was effectively a tax on non-complying individuals, the mandate was within Congress’ taxing powers. In 2017, however, when Congress set the penalty at $0, it opened the door to the challenge addressed in California v. Texas. The original case, Texas v. United States, 352 F. Supp. 3d 665 (ND Tex. 2018), was brought by the attorneys general of Texas and 17 other Republican-led states, and two men who did not want to buy health insurance. With the penalty at zero, the plaintiffs argued that the individual mandate was not a tax (because no tax would be collected) but rather a requirement for individuals to have health insurance—a requirement that was not within Congress’ power to impose. Further, the plaintiffs argued that if the individual mandate was unconstitutional, the entire ACA was unconstitutional. The District Court held that the individual mandate was unconstitutional and not severable from the rest of the ACA. On appeal in 2019, the Fifth Circuit found that the parties had standing to bring the action and upheld the lower court’s decision regarding the unconstitutionality of the individual mandate, but determined that the District Court’s severability analysis did not provide sufficient justification for declaring the entire ACA unconstitutional. Accordingly, the Fifth Circuit remanded to the lower court to further consider which provisions of the ACA could survive without the individual mandate. Texas v. United States, 945 F. 3d 355 (5th Cir. 2019). California’s attorney general, together with a group of Democratic attorneys general from other states and the House of Representatives, intervened to defend the ACA and requested that the Supreme Court review the lower court decision. The Supreme Court granted certiorari, resulting in the current case.

The plaintiffs in California v. Texas argued that since the individual mandate was such an integral part of the ACA, the individual mandate could not be severed and that the entire ACA must necessarily fail. The Court, however, never reached that issue, instead holding that none of the plaintiffs had suffered injuries that would give them standing to bring the action and reversed the Fifth Circuit decision as to standing. Because the Court determined that the plaintiffs lacked standing, the substantive constitutionality and severability issues relating to the individual mandate were not addressed in the case.

In his dissent, Justice Alito (joined by Justice Gorsuch) indicated that, in his view, the plaintiffs did have standing to bring the action and addressed the substantive issues about constitutionality and severability (stating that individual mandate with a $0 penalty was unlawful and that the individual mandate could not be severed from the rest of the provisions of the ACA that burden the plaintiff states). He was critical of the majority, stating that “[n]o one can fail to be impressed by the lengths to which this Court has been willing to go to defend the ACA against all threats.”

Of the three Supreme Court decisions that declined to invalidate the ACA, California v. Texas commanded the largest majority of Justices. It seems that the ACA is here to stay—at least for the immediate future.

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