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Obamacare Judges Mull Sending Next-Step Questions to Lower Court

July 9, 2019, 11:47 PM

The federal judge in Texas who declared President Barack Obama’s signature health-care law unconstitutional might have to take another look at his decision, judges reviewing the ruling hinted July 9.

During oral arguments in the U.S. Court of Appeals for the Fifth Circuit, the two Republican-appointed judges on the three-judge panel seemed sympathetic to Texas and the 18 other Republican-led states that sued to invalidate the Affordable Care Act. They argued the law’s mandate to buy insurance is now unlawful because Congress dropped the tax penalty to zero in 2017.

But the judges questioned what would happen if they affirm U.S. District Court for the Northern District of Texas Judge Reed O’Connor’s decision. Would Obamacare automatically die? Did O’Connor issue an injunction when he said the entire law is invalid? Should he answer those questions himself?

One judge on the panel strongly indicated that these are issues for a lower court to decide. Another judge suggested sending the case back to O’Connor. It’s not clear how the appeals court would remand the case to the district court, either by upholding the judge’s ruling or saying some of the ACA should remain intact. If a remand were to occur, it could also slow what court watchers say is an inevitable hearing before the U.S. Supreme Court.

Judge Carolyn Dineen King, appointed by President Jimmy Carter, didn’t speak during the hearing.

Is It an Injunction?

“Could you speak to whether or not we should be treating this as an injunction?” Judge Jennifer Elrod, a George W. Bush appointee, asked Texas Solicitor General Kyle Hawkins.

Hawkins said that’s what Texas and the other Republican-led states think O’Connor’s ruling is. But Elrod said O’Connor never said how his ruling would apply.

Judge Kurt Engelhardt, an appointee of President Donald Trump, said the Justice Department took the position that the ruling does not extend beyond the plaintiff states in this case. Following that logic, Obamacare would be invalidated only in the 19 states that brought the suit but remain in place in all the others.

‘If the Case Went Back...’

“Where would we go if we were to affirm Judge O’Connor?” Engelhardt asked Hawkins. “If the case went back to Judge O’Connor, what would you expect him to do if you’re seeking injunctive relief and the federal government is now saying, ‘No worries, this ruling only applies to the plaintiff states.’ Would this be satisfactory?”

Hawkins said he couldn’t speak to whether Texas and the other states would go back to the district court and seek the injunction they asked for at the beginning.

Elrod said they would have to. “The remedy in this case hasn’t been spoken of yet,” she said, later clarifying that she was not saying that Texas and other plaintiff states are entitled to an injunction. She meant that an injunction hasn’t yet been declared.

Elrod later pressed the DOJ’s attorney on the government’s position that the lower court decision only applies to Texas and the other red states, asking what the government would have done if the ruling that the ACA is unconstitutional hadn’t been put on hold.

“We think it’s great the stay is in place. It’s a complicated program. It’s multifaceted, obviously, and it’s a significant part of the economy,” said DOJ Attorney August Flentje. He added that the government is grateful for the stay so it doesn’t have to make these decisions until a final judgment is issued.

Only Some States?

“But the government believes or anticipates that it could find the act to be inseverable and do so only in certain states and strike it down only in certain states in its entirety?” Elrod asked.

“The government believes that’s a possibility?”

The DOJ’s attorney argued that the court’s ruling should be narrowed to the provisions that injure the plaintiff states. But Elrod said the government didn’t litigate that in the district court.

“Yes, we did raise it in our brief in this court for the first time,” Flentje said.

Elrod indicated the case should be sent back to the district court even if she and her colleagues side with California and other Democratic-led states defending the law and rule the insurance mandate can be severed from the rest of the law.

“If we held, hypothetically, that it was severable, we would say, ‘District court, take out your blue pencil,” she said. “In any other normal case, you would send it back to the district court to take its first stab at implementing the ruling we made.”

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloomberglaw.com; Peggy Aulino at maulino@bloomberglaw.com