Alert / Employee Benefits
Supreme Court again saves the Affordable Care Act

The Supreme Court today dealt a death blow to a long-running lawsuit challenging the Affordable Care Act’s (ACA) individual mandate, and ultimately the entirety of the law. The high court ruled that the doors to the federal courts are shut to the parties who brought the lawsuit, because none of the plaintiffs had suffered or might suffer an injury of the sort that must exist to gain access to a federal courtroom.

The ruling reverses a federal appeals court decision that the individual mandate is unconstitutional and effectively reverses an earlier ruling by a federal trial court that previously said not only is the individual mandate unconstitutional, but the entire ACA must be struck down.

Background

After Congress zeroed out the tax penalty for the ACA’s individual coverage mandate in 2017, several parties – including two individuals and 18 states (via their attorneys general) – sued in federal court to have the individual mandate declared unconstitutional. Their reasoning was simple: back in 2012, the Supreme Court had ruled the individual mandate was constitutional only because it carried a tax penalty for noncompliance. With that penalty reduced to zero dollars by Congress, the constitutional foundation for the individual mandate no longer existed.

Lockton comment: These plaintiffs then also argued that if the individual mandate is no longer valid, it is so central to the rest of the ACA – i.e., Congress would never have enacted the remainder of the ACA without the individual mandate – that the rest of the law must also fall.

In late 2018, a federal trial judge in Texas agreed with the plaintiffs on both counts. That judge struck the individual mandate as unconstitutional and tossed out the entirety of the ACA for good measure. The judge suspended the latter ruling pending an appeal to a federal appeals court. The appeals court agreed the individual mandate was unconstitutional but thought the question of the survival of the remainder of the ACA deserved additional consideration. The case ultimately landed in the lap of the Supreme Court.

The Supreme Court tips its hand

In oral arguments before the Supreme Court shortly after last November’s elections, it became clear that a majority of the justices, including Chief Justice John Roberts, a George W. Bush appointee, and recently appointed Justice Brett Kavanaugh, a Donald Trump appointee, were troubled by the question of “standing.” “Standing” is a wonky legal term that refers to the notion that before a plaintiff can bring a complaint to court, the plaintiff must have suffered some injury, or is under the threat of injury, due to unlawful action.

No surprise in today’s decision

In today’s decision it was the “standing” question that decided the matter, as the Court had hinted last November would be the case. Seven justices concluded that with the individual mandate reduced to zero dollars, and no actual or even threat of federal enforcement of the mandate, nobody was suffering, would suffer, or had suffered an injury on account of the mandate due to unlawful action. The Court sent the case back to the appeals court with instructions to dismiss the plaintiffs’ challenges outright.

Lockton comment: The Court's decision on standing means it never had to consider the merits of the case. However, this decision combined with the prior comments by the justices during oral arguments suggest the ACA would have remained intact even if the Court found that the plaintiffs did have standing.

And so the ACA yet again survives a challenge in the nation’s highest court.

 

Not legal advice: Nothing in this alert should be construed as legal advice. Lockton may not be considered your legal counsel, and communications with Lockton's Compliance Services group are not privileged under the attorney-client privilege.

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