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Sweeping Obamacare Challenges Are Over After High Court Rebuke

June 18, 2021, 9:00 AM

The road to a broad-stroke constitutional challenge to Obamacare is more or less closed, but smaller pokes at the law are still expected after the Supreme Court’s 7-2 ruling Thursday to uphold it.

“There will not be a big omnibus challenge to the entire statute, but there will continue to be ongoing litigation about the administration and enforcement of the law, and that will go on for some time,” said Jonathan Adler, a law professor at Case Western Reserve University School of Law.

In a move that surprised most court watchers, the Supreme Court resolved on procedural grounds the latest attack on the Affordable Care Act. The court held that Republican-controlled states and two individuals who brought the lawsuit couldn’t prove they were injured by the provision in the law that requires everyone to buy insurance because it’s not enforceable.

The ruling means some 20 million people get to keep their health insurance, and legal scholars say it marks the last chances at a constitutional challenge to President Barack Obama’s signature statute.

President Joe Biden and Health and Human Services Secretary Xavier Becerra want to use the ACA as the cornerstone vehicle to get more people insured, whether it’s through expansion of the low-income Medicaid program or enticements for more people to sign up for Obamacare through monetary aid.

“We can do all those things now, because now we know we’re working from a platform that’s not just legal, but has survived three legal tests,” Becerra told health industry participants in a call Thursday.

Adler said that means there’s room for new litigation, but it will likely focus on how the administration uses with the law to propel its goals. “Like any big regulatory statute, it’s got tons of provisions, it’s got tons of moving parts, there are tons of things in the law which can create legal conflicts and questions, and those provisions will be the subject of litigation,” he said.

Overturn Efforts Unlikely

But with seven high court justices agreeing that the zero-penalty order to buy insurance carries no harm, opponents will have a hard time making the case that the individual mandate is unconstitutional and so too is the rest of the law.

“This is a pretty resounding ruling on standing,” said Katie Keith, a health law professor at Georgetown University.

Keith earlier worried a decision on legal standing might give Texas, the lead plaintiff in the case, an opportunity to try again. If the state could show better evidence that the toothless individual mandate really did boost enrollment in state-run insurance plans like Medicaid and the Children’s Health Insurance Program (CHIP), it would bolster the argument that the state is harmed by increased costs.

But she thinks the court closed the door on that possibility.

“If I was the Texas Attorney General’s office or someone else, I would really think twice, three times, seven times before I try to bring back the same challenge,” she said.

No Penalty

Neither the individual plaintiffs in the case nor the states were able to show that they were harmed by the individual mandate because there’s no penalty if someone doesn’t enroll in coverage, the court said. Congress dropped the tax penalty for those who fail to buy insurance down to $0 in the 2017 Tax Cuts and Jobs Act, and the Internal Revenue Service made it clear people no longer had to report whether they have insurance.

It was that change that sparked this lawsuit. Republican-controlled states argued the mandate must be struck down as unconstitutional because it’s no longer a valid exercise of Congress’s taxing power. Because that mandate is essential to law, the rest of the ACA can’t live without, they said.

But the court didn’t have to rule on the constitutionality of the individual mandate or whether it can be cut from the other provisions because it stopped at standing. Some legal scholars think that leaves the door open for another constitutional challenge in the future.

“This doesn’t resolve the validity of the ACA,” said Joshua Blackman, a law professor at the South Texas College of Law Houston. “It just sort of kicks it down the road.”

If the federal government tries to enforce another provision of Obamacare, theoretically that person could try to argue the law’s individual mandate is unconstitutional and the entire statute must fall, he argued.

“This is a very short-term punt,” he said. “It doesn’t get rid of the challenge.”

Long Shot

The only way that argument could be raised is if the federal government tries to enforce the individual mandate, Adler said. “The government will not do that. I don’t think that’s a risk.”

The fact that one provision of a law may be unconstitutional doesn’t mean the law can be challenged if another provision is enforced, Adler said.

“We have massive federal statutes that may have one provision here or there that may be unconstitutional, and no one has thought that if the government seeks to enforce a different provision of the act against you, you somehow get to defend yourself against that by identifying some other provision of the law that is unconstitutional,” he said.

Where’s the Harm?

The Texas-led states could potentially try to come back to the court and show better evidence that more people will enroll in state-run health plans because the mandate requires coverage, but legal scholars doubt they’d be successful.

“I think the court here would even be skeptical about that,” Keith said. “I think it’s a very low risk that that happens, but you never say never.”

In the court’s majority ruling, Justice Stephen Breyer knocked down the state’s attempt to link the individual mandate to increased enrollment in state-run programs like Medicaid by listing all the benefits they offer, including no-cost care for children and pregnant women, emergency services, hospice care, and Covid-19 testing.

“Given these benefits, neither logic nor intuition suggests that the presence of the minimum essential coverage requirement would lead an individual to enroll in one of those programs that its absence would lead them to ignore,” he said. “A penalty might have led some inertia-bound individuals to enroll. But without a penalty, what incentive could the provision provide?”

In theory, a plaintiff with standing could refile the case and have better luck, said Nicholas Bagley, a professor at the University of Michigan Law School.

“In practice, I think that’s virtually certain not to occur,” he said. “The gist of the Supreme Court’s decision is the plaintiffs in this case weren’t harmed by a supposed mandate that didn’t actually do anything, and that kind of argument is going to affect pretty much any plaintiff you might imagine.”

Bagley noted there were both states and individuals in this lawsuit. “I don’t exactly know where they’re going to look for other prospective plaintiffs that could plausibly be affected by this $0 mandate,” he said.

Blackman, however, noted that Justice Samuel Alito’s dissenting opinion, which Justice Neil Gorsuch joined, leaves that door open for the states to try again. Alito wrote that if the court decides to dismiss this action for lack of standing, “the states may file a new action.”

The case is California v. Texas, U.S., No. 19-840, 6/17/21.

—With assistance from Tony Pugh

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

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com

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