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Another ACA Lawsuit

November 3, 2018

ANOTHER ACA LAWSUIT: PRE-EXISTING CONDITIONS, THE DOJ, AND SEVERABILITY IN TEXAS V. U.S.

By: Noah Steimel, Volume 103 Staff Member

I. INTRODUCTION

On June 7, 2018, the Department of Justice (DOJ) filed a brief arguing that the courts should strike down the Affordable Care Act (ACA)’s protections for those with pre-existing conditions.[1]The underlying lawsuit, Texas v. U.S., brought renewed urgency to the politics surrounding pre-existing conditions. As Democrats have drawn attention to it,[2] Republicans have attempted to reassure voters of their support for those with pre-existing conditions[3] just a year after intra-party disagreement over the issue disrupted efforts to repeal the ACA.[4] This fall, pre-existing conditions have surfaced in a Supreme Court confirmation hearing,[5] in numerous campaigns,[6] and in a Presidential tweet.[7]

Beyond the politics, the practical stakes of Texas v. U.S. are potentially immense. The plaintiffs, twenty states led by Texas and two individuals, argue that the Court must strike down the entire ACA and request immediate injunctive relief against implementation of the law.[8] Even the DOJ’s more moderate request—for the Courts to strike protections for those with pre-existing conditions, but not the entire ACA[9]—would scramble health insurance markets.[10]

Despite these far-reaching potential consequences, the DOJ’s position turns on a surprisingly simple question of statutory interpretation: if the Court strikes down one provision of the ACA, would Congress have wanted other parts of the remaining statutory scheme to also fall?

II. THE LAWSUIT

Plaintiffs’ argument extends reasoning in NFIB v. Sebelius, in which the U.S. Supreme Court upheld the constitutionality of the ACA’s individual mandate, but only as an exercise of Congress’ power to tax.[11] In late 2017, Congress zeroed-out the penalties associated with the individual mandate as part of the Tax Cut and Jobs Act.[12] As a result, while the individual mandate technically still exists, it will raise no revenue starting in 2019.[13] This leads plaintiffs to argue that Congress now lacks the constitutional authority to impose a newly-toothless individual mandate.[14] From there, plaintiffs explain that because the individual mandate cannot be severed from the rest of the ACA, the Court should invalidate the entire law.[15]

The DOJ’s support of plaintiffs’ argument meant that it essentially switched sides in the lawsuit. Plaintiffs had filed their initial complaint in the Western District of Texas on February 26, 2018.[16] The Court then allowed 17 states, led by California, to intervene as defendants on May 16, 2018.[17] When the DOJ responded in support of plaintiffs in June, Attorney General Jeff Sessions acknowledged the department’s “longstanding tradition of defending the constitutionality of duly enacted statutes,” but concluded that the DOJ would not defend the individual mandate.[18] The Obama administration made a similar choice in 2011, when it declined to defend the Defense of Marriage Act’s ban on same-sex marriage.[19]

But the DOJ has not completely endorsed plaintiffs’ position: along with the intervenor states, it opposes plaintiffs’ request for a preliminary injunction.[20] At oral arguments before Judge Reed O’Connor on September 5, 2017, the DOJ warned that an injunction issued during the ACA’s 2018 open enrollment period from November 1st to December 15th—when consumers can purchase new coverage for 2019[21]—would cause “chaos in the markets.”[22] With an eye toward the lawsuit’s political implications, some have noted that this requested delay pushes an injunction past election day on November 6, 2018.[23]

Following oral arguments, Judge O’Connor can grant an injunction at any point, the scope of which could range from blocking ACA implementation nationwide to invalidating only protections for those with pre-existing conditions in the twenty plaintiff states.[24] Any injunction will likely be immediately appealed, and the intervenor states have requested that the Court stay an injunction pending appeal.[25]

III. SEVERABILITY

Severability doctrine starts with the idea that Courts should avoid invalidating more of a statute than necessary.[26] Thus, Courts “‘sever” any ‘problematic portions while leaving the remainder intact.’”[27] Additional provisions are invalidated only if it is “evident that [Congress] would not have enacted those provisions which are within its power, independently of [those] which [are] not.”[28] As a result, when Courts strike down a provision, the fate of the rest of the statutory scheme depends on a hypothetical inquiry: if Congress had known the Court would invalidate this part of the statute, what would Congress have intended for the rest?[29]

The severability argument the DOJ makes in Texas v. U.S. stems from the relationship between the individual mandate and the ACA’s protections for those with pre-existing conditions. The ACA’s drafters feared that some of these protections—“guaranteed issue” (requiring health insurers to offer coverage to anyone who applies) and “community rating” (placing strict limits on underwriting by health insurers)[30]—could lead to adverse selection-driven “death spirals” in the price of coverage if healthier consumers to drop out of the market.[31] As the ACA’s legislative findings explain, the individual mandate counteracts this risk by incentivizing healthier consumers to purchase health insurance.[32] This is the first step of the DOJ’s argument: Congress says it does not want guaranteed issue and community rating without an individual mandate.[33] Thus, if the Court invalidates the individual mandate, Congress must no longer want guaranteed issue and community rating.[34]

But is this the best way to determine what Congress wants? When the DOJ infers that Congress would not want guaranteed issue and community rating without the individual mandate, it analyzes Congress’ intent as a hypothetical. As an amicus brief explains, this overlooks a critical detail: A Court did not unilaterally decide to remove the individual mandate from the statutory scheme—Congress made this choice.[35] Thus, the argument goes, hypothesizing about Congress’ intent is unnecessary.[36]

The 2017 Congress expressed its intent by enacting legislation that zeroed-out the ACA’s individual mandate, while leaving its guaranteed issue and community rating provisions unchanged.[37] In other words, Congress changed its mind between 2010 and 2017, and it may have done so in response to new information. A CBO report requested by members of Congress in November of 2017, just before the statute’s enactment, found that while repeal of the individual mandate would result in 4 million fewer people with health insurance in 10 years, it would also leave individual insurance markets “stable in almost all areas of the country.”[38]None of this looks good for the DOJ’s focus on what Congress thought in 2010. The amicus brief, which was written by a group of law professors with sharply contrasting ideological views,[39] concludes that the DOJ’s argument “disregard[s] the clearly expressed intent of Congress” and asks the Court to “violate black-letter principles of severability.”[40]

This criticism, combined with the shifting politics of pre-existing conditions, raises questions about the department’s decision-making in Texas v. U.S. During oral arguments in September, a DOJ attorney stated, “To be clear, the current administration supports protections for people with pre-existing health conditions.”[41] So, at least as of this fall, the DOJ’s legal position conflicts with a policy position of the administration. Meanwhile, an analysis of the DOJ’s severability argument suggests that this is not the only position the department could have taken. Alternatively, it could have agreed with plaintiffs that the individual mandate is now unconstitutional, but then argued that the individual mandate is severable from protections for those with pre-existing conditions. The DOJ and Attorney General Sessions must have known this option existed in June. They decided against it.

  1. Federal Defendants’ Memorandum in Response to Plaintiffs’ Application for Preliminary Injunction at 2, Texas v. United States, No. 4:18-cv-00167-O (N.D. Tex. 2018), https://www.justsecurity.org/wp-content/uploads/2018/06/ACA.Azar_.filing.pdf. ↑
  2. See Abby Goodnough, Legal Case to Smash Obamacare Hands the Democrats a Hammer, N.Y. Times (Sept. 5, 2018), https://www.nytimes.com/2018/09/05/health/obamacare-mandate-texas-case.html. ↑
  3. Many Republicans have criticized the lawsuit. E.g., Senator Lamar Alexander, Statement on Texas Obamacare Case, U.S. Senate Comm. on Health, Educ. Lab. & Pensions (June 12, 2018), https://www.help.senate.gov/chair/newsroom/press/alexander-statement-on-texas-obamacare-court-case. On August 14, 2018, Senate Republicans introduced legislation that attempts to guarantee coverage for those with pre-existing conditions, but does not incorporate all of the protections in current law. See Stephanie Armour, Senate Republicans Move to Defend Popular ACA Provision, Wall St. J. (Aug. 24, 2018), https://www.wsj.com/articles/senate-republicans-move-to-defend-popular-aca-provision-1535141754. ↑
  4. Thomas Kaplan & Robert Pear, House Passes Measure to Repeal and Replace the Affordable Care Act, N.Y. Times (May 4, 2017), https://www.nytimes.com/2017/05/04/us/politics/health-care-bill-vote.html (noting Senate Republicans’ concern that the proposed house bill did not adequately protect those with pre-existing conditions). ↑
  5. See Goodnough, supra note 4 (reporting that Senator Sheldon Whitehouse asked a question about pre-existing conditions during Justice Brett Kavanaugh’s confirmation hearings). ↑
  6. Id. ↑
  7. Donald J. Trump (@realDonaldTrump), Twitter (Oct. 18, 2018, 12:42 PM), https://twitter.com/realDonaldTrump/status/1053008701026693122. ↑
  8. Complaint for Declaratory and Injunctive Relief at 5, Texas v. United States, No. 4:18-cv-00167-O (N.D. Tex. 2018), https://www.courtlistener.com/recap/gov.uscourts.txnd.299449/gov.uscourts.txnd.299449.1.0.pdf.↑
  9. Federal Defendants’ Memorandum in Response to Plaintiffs’ Application for Preliminary Injunction, supra note 3. ↑
  10. Sabrina Corlette et al., Lawsuit Threatens Affordable Care Act Preexisting Condition Protections but Impact Will Depend on Where You Live, Commonwealth Fund: To the Point (Aug. 29, 2018), https://www.commonwealthfund.org/blog/2018/lawsuit-ACA-preexisting-condition-protections-where-you-live. ↑
  11. Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 574 (2012). ↑
  12. Tax Cut and Jobs Act of 2017, Pub. L. No. 115-97, § 11081, 131 Stat. 2054, 2092 (2017). ↑
  13. Id. ↑
  14. Complaint for Declaratory and Injunctive Relief, supra note 10. ↑
  15. Id. ↑
  16. Complaint for Declaratory and Injunctive Relief, supra note 10, at 1. ↑
  17. Order, Texas v. United States, No. 4:18-cv-00167-O (N.D. Tex. May 16, 2018), https://www.courtlistener.com/recap/gov.uscourts.txnd.299449/gov.uscourts.txnd.299449.74.0.pdf.↑
  18. Letter from Jefferson B. Sessions, Att’y Gen. to Rep. Paul Ryan, Speaker of the House, supra note 2, at 2. ↑
  19. Statement of the Attorney General on Litigation Involving the Defense of Marriage Act, Dep’t of Just. (Feb. 23, 2011), https://www.justice.gov/opa/pr/statement-attorney-general-litigation-involving-defense-marriage-act. ↑
  20. Federal Defendants’ Memorandum in Response to Plaintiffs’ Application for Preliminary Injunction, supra note 3. ↑
  21. Dates and Deadlines for 2019 Health Insurance, HealthCare.gov, https://www.healthcare.gov/quick-guide/dates-and-deadlines/ (last visited Oct. 23, 2018). ↑
  22. Katie Keith, Judge Hears Oral Arguments in Texas v. United States, Health Affairs (Sept. 10, 2018), https://www.healthaffairs.org/do/10.1377/hblog20180910.861789/full/. ↑
  23. E.g., Goodnough, supra note 4. ↑
  24. Keith, supra note 24. ↑
  25. Id. ↑
  26. See Ayotte v. Planned Parenthood of Northern New England, 546 U.S. 320, 329 (2006) (quoting Regan v. Time, Inc., 468 U.S. 641, 652 (1984) (plurality opinion)). ↑
  27. Free Enter. Fund v. Public Co. Accounting Oversight Bd., 561 U.S. 477, 509 (2010) (quoting Ayotte, 546 at 328-29). ↑
  28. Murphy v. Nat’l Collegiate Athletic Ass’n, 138 S. Ct. 1461, 1482 (2018) (quoting Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 684 (1987)). ↑
  29. Sessions v. Morales-Santana, 137 S. Ct. 1678, 1700 (2017). ↑
  30. Kenneth S. Abraham & Daniel Schwarcz, Insurance Law and Regulation 354 (6th ed. 2015). ↑
  31. 42 U.S.C. § 18091(2)(I). ↑
  32. Id. ↑
  33. Federal Defendants’ Memorandum in Response to Plaintiffs’ Application for Preliminary Injunction, supra note 3, at 13–16. ↑
  34. Id. ↑
  35. Brief for Jonathan Adler et al. as Amici Curiae Supporting Intervenors-Defendants at 7, Texas v. United States, No. 4:18-cv-00167-O (N.D. Tex. 2018), https://theincidentaleconomist.com/wordpress/wp-content/uploads/2018/06/Texas-v.-US-Law-Profs-Amicus-Br.pdf. ↑
  36. Id. ↑
  37. Id. at 6. ↑
  38. Repealing the Individual Health Insurance Mandate: An Updated Estimate, Cong. Budget Off. (Nov. 2017), https://www.cbo.gov/system/files?file=115th-congress-2017-2018/reports/53300-individualmandate.pdf. ↑
  39. While Adler’s work “provided the basis for plaintiffs’ argument” in King v. Burwell, Bagley and Gluck wrote an amicus brief opposing this argument. Brief for Jonathan Adler et al. as Amici Curiae Supporting Intervenors-Defendants at 7, Texas v. United States, supra note 37, at 1–2. ↑
  40. Brief for Jonathan Adler et al. as Amici Curiae Supporting Intervenors-Defendants at 7, Texas v. United States, supra note 37, at 4, 10. ↑
  41. Keith, supra note 24. ↑
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