The 2017 Tax Cuts and Jobs Act eliminated the individual health insurance mandate penalties contained in the Affordable Care Act. Twenty state attorneys general filed suit in the U.S. District Court of Northern Texas claiming that by eliminating the penalties, Obamacare was now entirely unconstitutional. Judge Reed O’Connor agreed. An appeal is pending in the 5th U.S. Circuit Court of Appeals in New Orleans. President Trump has called on the court to “erase” Obamacare.
Here is the judgement’s reasoning: The Supreme Court had previously found that the individual mandate with its financial penalty was constitutional only on the basis that it’s a tax under Congress’ power to tax. If there is no longer a financial penalty, there is no tax, and thus the individual mandate is now unconstitutional. Further, the judge ruled that since the mandate is essential to the function of the entire law and thus inseparable, the entirety of the ACA is unconstitutional. Whew, I’m glad I am not a constitutional lawyer.
It appears that most legal experts, both liberal and conservative, do not believe this line of reasoning is valid, and the decision will likely be reversed on appeal on a number of legal points. Most significantly, the judge overstepped in ruling the entire ACA invalid. The Supreme Court’s precedent on severability directs courts to limit harm to an entire statute when ruling on one part, making every effort to demonstrate “judicial constraint”. Courts should rather focus on the intent of Congress; Congress only terminated the mandate penalties, but retained the mandate, showing clear intent.
Further, it is difficult to imagine that the mandate is essential to many parts of Obamacare. The mandate is certainly important for spreading the risk and making health insurance affordable regardless of health or financial status. But it is not absolutely indispensable as Obamacare, although imperfect and maimed, continues to function without it.
If this ruling stands and Obamacare is shuttered, it would throw the health care system into destabilized chaos with both human and financial ramifications. According to the Urban Institute, an additional 17 million Americans would lose their health care coverage above the reduction already associated with removal of the mandate penalties (30 million total). According to the Economic Policy Institute, 566,000 individuals in Indiana would lose their health insurance. Eighteen-thousand people would lose their jobs, and our state would lose $1.6 billion in federal health care funding. Insurance premiums would further increase. Medicare Part A deductibles and co-payments and Part B premiums, deductibles, and cost-sharing would increase for most, although Part D and Medicare Advantage program premiums might moderate.
The government would, however, save money in ending the premium subsidies to low-income individuals, reducing spending on preventative services and prescription benefit costs. Overall, federal Medicare spending would increase by restoring higher payments to health care providers and Advantage programs. The insolvency of the Medicare Part A trust fund would accelerate from increased costs and loss of Medicare taxes.
Further, desperately needed health care protections would end: Guaranteed issue of insurance, ban on the preexisting condition exclusions (52 million people), uniform premiums regardless of health status, prohibition on annual and lifetime benefit limitations, the guaranteed minimum benefits package, coverage for preventative services without copays, tax credits for small businesses offering employee insurance, Medicaid expansion, premium subsidies for low-income people, dependent coverage on parent policies to age 26, and suspension of the Medicare Part D “donut hole” closure.
And what “beautiful” plan would effectively replace Obamacare? Let’s hope that this court decision is reversed.