By Philip FitzGerald, Class of 2019; Colin H. Luke, Partner at Waller

In late 2018, federal District Court Judge Reed O’Connor held that the Patient Protection and Affordable Care Act (the “ACA”) was invalid. The lawsuit was filed by a coalition of Republican attorneys general and governors, and was based upon the Tax Cuts and Jobs Act of 2017, which reduced the tax penalty for failing to obtain an ACA-compliant plan (i.e. the “individual mandate”) to $0.

The individual mandate had previously been held constitutional by the Supreme Court based upon Congress’ taxing power. The plaintiffs’ argument in this case was that the individual mandate was no longer constitutional since the tax no longer existed. Furthermore, they argued that the mandate was an essential, inseverable piece of the ACA, and therefore, the entirety of the ACA was invalid.

Judge O’Connor agreed with the plaintiffs’ arguments, holding that the individual mandate was unconstitutional, and, since the mandate was an inseverable part of the ACA, also held the entire act to be invalid. In other words, not only was the individual mandate unconstitutional, but the hundreds of other provisions in the ACA, such as the 10 essential health benefits, Medicaid expansion and the prohibition on discrimination for pre-existing conditions, were also no longer enforceable.

The healthcare industry had a mixed response to this ruling. The American Medical Association warned that the decision could destabilize health insurance coverage. However, Seema Verma, the CMS Administrator, stated that 2019 ACA plans would not be affected by the ruling. She also stated that CMS has a plan to protect patients with pre-existing conditions if the ACA is struck down, but was not forthcoming with the details of the plan.

In early January 2019, Judge O’Connor’s ruling was appealed to the U.S. Court of Appeals for the Fifth Circuit by a coalition of Democratic state attorneys general. It should be noted that Judge O’Connor allowed the ACA to stand while his decision is under appeal “because many everyday Americans would otherwise face great uncertainty.” Therefore, for now, the ACA remains in full force and effect.

The federal appeals process can take anywhere from a few months to more than a year in order to obtain a decision. If the case is appealed all the way to the Supreme Court, the process could take even longer.

To make matters worse, the Fifth Circuit stayed its review of this case during the federal government shutdown, and only resumed consideration of this appeal on January 29. Many legal experts are confident that Judge O’Connor’s ruling will be reversed by the Fifth Circuit. However, the Fifth Circuit could uphold the decision, could overturn only part of the decision, or could rule to sever the individual mandate from the ACA, leaving all other portions of the ACA intact. We will continue to monitor this case as we await the decision of the Fifth Circuit and, regardless of the Fifth Circuit’s decision, we expect that the case will ultimately be appealed to the Supreme Court.