California vs. Texas: Will The Affordable Care Act Survive Supreme Court Scrutiny? Probably.

Information provided by our Risk Management Division

The word “probably” is not a particularly helpful one, especially when it represents the legal community’s “best guess” as to what will become of the most comprehensive system of health care legislation this country has yet known. But it is the best forecast we have so far.  Will Joe Biden be the next President of the United States?  Probably.  Will the Republican Party keep its Senate majority?  Probably. Will the Democratic Party keep its majority in the House?  Probably.  Par for the course, perhaps, in these uncertain times.

When the Patient Protection and Affordable Care Act (ACA) was passed in 2010, the 900-page bill had just barely managed to squeak through a Democratic-majority in both houses of Congress and was signed into law by a Democratic President.  Individuals, employers, and insurers have been planning and budgeting for years under the assumption that the ACA – with its requirement that all employers with greater than fifty employees must offer health insurance to them – would still be the law of the land.  If the Petitioners in the case of California v. Texas are successful and the U.S. Supreme Court strikes down the ACA in its entirety it is unlikely that a “replacement” system could be put into place any time soon, absent a bipartisan bolt out of the blue. With a divided Congress, not even Franklin Delano Roosevelt had been able to pass comprehensive healthcare reform, and he was elected President four times!

The Individual Mandate Issue

So, the fate of the ACA is once again in the hands of the United States Supreme Court.  The issue presented is whether the elimination of the “individual mandate” penalty (the “tax” for failing to obtain health insurance) had dealt a mortal blow to the ACA, or whether it was merely a flesh wound.  If the individual mandate is unconstitutional, does that mean that the entire ACA is also unconstitutional?  This is the question that sends both sides running to their particular partisan proverbs; is it: “One bad apple spoils the bushel,” or “Don’t throw the baby out with the bathwater?”  The individual mandate penalty was meant to drive the uninsured to the insurance market in order to equalize the community rating and the number of individuals in the insurance pool overall. That penalty, along with the “guaranteed-issue requirement” and the “community rating requirement”, were intended, it is argued, to all work together to “nudge” the nation into universal health care coverage.  Therefore, the “part” (individual mandate) cannot be removed without “grounding the airplane” (the ACA).

But the counterargument is similarly persuasive.  The ACA bears with it a clause that may or may not support an argument that the individual mandate is “severable” – that it can be done away with without doing away with the remainder of the ACA.

The Potential Outcome

The Petitioners need at least a 5-4 majority decision in their favor in order to overturn the ACA.  Based on their records so far, Justices Breyer, Sotomayor, and Kagan are almost certain to vote against invalidating the ACA.  And, at the oral argument held on November 10, 2020, the questions asked by the remaining justices seemed to suggest that two or three more votes will likely be added to those three, making a decision overturning the ACA unlikely.  Chief Justice Roberts grilled Petitioners’ counsel on whether the Petitioners were “injured” enough by the law to bring the lawsuit to begin with.  Justice Kavanaugh appeared to telegraph a preference for upholding the presumption of “severability”, that the individual mandate could be severed from the ACA without invalidating the entire law, and Justice Alito chimed in with an interesting “common-sense” observation:

At the time of the first case [in 2012], there was strong reason to believe that the individual mandate was like a part in an airplane that was essential to keep the plane flying so that if that part was taken out, the plane would crash.  But now the part has been taken out and the plane has not crashed.

Taking the Justices’ comments during oral argument, there is every indication that the ACA will survive, with only the individual mandate “severed.” Keystone’s Risk Management Division will keep you updated on this development.