On Friday, December 14, 2018, a federal district court in Texas invalidated the entire Affordable Care Act (“ACA”). The decision in the case, Texas v. United States, was issued on the day before the end of the 2019 open enrollment period for ACA individual market coverage. The primary plaintiffs in the case were Texas and the attorneys general (all Republicans) of 18 other states (and the Governor of Maine) which alleged that (1) ACA’s individual mandate requiring individuals to be covered by ACA compliant health benefits was unconstitutional, and (2) the remainder of ACA could not be severed from the individual mandate and therefore was invalid in its entirety The primary defendants were the United States and the attorneys general (all Democrats) of 17 states which had intervened in the case.

The court agreed with plaintiffs. The court’s opinion that the ACA individual mandate was unconstitutional was based on the interaction of the U.S. Supreme Court’s 2012 decision in National Federation of Independent Businesses v. Sebelius (“NFIB”) in which the Court held that although the individual mandate was unconstitutional under Interstate Commerce Clause of the U.S. Constitution, the mandate was a constitutional use of Congress’s taxing power, and the Tax Cuts and Jobs Act of 2017 (“TCJA”) which eliminated ACA’s tax on individuals who failed to obtain ACA compliant health benefits coverage. The court concluded that when Congress, in the TCJA, eliminated the tax penalty for failure to comply with the individual mandate, ACA could no longer be considered constitutional under Congress’s power to tax. As a result, the court concluded there was no constitutional basis for mandating individuals obtain health benefits coverage and the court overturned ACA’s individual mandate.

The court reviewed the history of ACA and the TCJA and prior majority and dissenting Supreme Court decisions on ACA and concluded that the individual mandate was essential to ACA. It said that the absence of the individual mandate would change the effect of ACA as a whole and was so interwoven with ACA’s regulations that they cannot be separated. As a result the court declared the remainder of ACA invalid. This includes the employer shared responsibility rules, Medicaid expansion provisions, pre-existing condition protections, and the popular market reforms such as no cost wellness and contraceptive coverage, dependent coverage to age 26, elimination of annual and lifetime limits, etc.

The court’s decision will certainly be appealed and will likely end up back at the Supreme Court. In the meantime, the court did not grant plaintiff’s request to enjoin enforcement of the law – therefore, ACA will remain in effect during the appeal process. This was confirmed by the White House and the Administrator for the Centers for Medicare and Medicaid Services said the ruling would have no impact on current or 2019 coverage. Employers, employees, individuals with coverage in the individual market and your Dickinson Wright attorneys will be following the case on appeal with interest.

If you have questions about this information, please contact Jordan Schreier in the Ann Arbor, Michigan office at 734-623-1945 (jschreier@dickinsonwright.com).