US Supreme Court Ruling Leaves ACA Intact

On June 17, the United States Supreme Court ruled in a 7-2 majority that plaintiffs did not have standing to challenge the individual mandate in California v. Texas, a challenge to the Affordable Care Act (ACA) that has been in litigation since 2017.  Justice Stephen Breyer wrote for the majority, with Justices Samuel Alito and Neil Gorsuch dissenting.  The ruling leaves the ACA intact.

The plaintiffs, led by Texas, argued that the individual mandate was unconstitutional and not severable from the ACA, and thus the entire law must be struck down. The defendants, led by California, argued that the mandate was still constitutional, and even if the court found it was not, it was still severable from the rest of the law. After several appeals, the case ultimately landed before the Supreme Court for oral argument on November 10, 2020.

The court did not have to reach the substantive issues of the ACA, because it found that the parties challenging the ACA did not have a legally protected interest and injury. This leaves the ACA in place  with a $0 individual mandate penalty. However, this does not preclude future legal challenges on the same issues, because the Court did not take up issues of constitutionality and severability.

In 2010, when the ACA first became law, it included incentives for states to expand Medicaid and for individuals to purchase health insurance coverage known as “the individual mandate.” While the Medicaid expansion incentives were ruled unconstitutional in 2012 in NFIB v. Sebelius, the Supreme Court in that same case found the individual mandate penalty -- which was paid as a tax -- to be constitutional. In 2017, however, the Tax Cuts and Jobs Act (TCJA) reduced the tax penalty for the individual mandate to $0. Following the passage of the TCJA, the State of Texas sued the US Department of Health and Human Services. Texas argued that zeroing-out the penalty made the individual mandate unlawful, because by eliminating the additional revenue the penalty previously provided, it no longer could be considered an exercise of Congress’ power to tax.