Supreme Court

The New Challenge to Obamacare

Is this a chance for the Supreme Court to correct its constitutional mistake?


Readers may be familiar with a new constitutional challenge by 20 state attorneys general to the Affordable Care Act, which Ilya blogged about here. Their argument, in a nutshell, is that with the amount of the penalty for failing to have health insurance now set to zero, the individual insurance "requirement"–AKA the "individual mandate"–can no longer be justified as a tax. This is so because one of the essential characteristics of a tax is that it raises at least some revenue for the government. For this reason, the "saving construction" employed by Chief Justice Roberts no longer applies, as it is no longer even a "reasonably possible" reading of the insurance requirement, which now raises no revenue.

On this claim, the AG's are on very strong ground. To the extent they are correct, the NFIB v. Sebelius was a bigger victory than we realized when it was decided, as it left the insurance mandate susceptible to being killed off in this way via reconciliation.

Because this constitutional claim makes sense, the attention will turn to the issue of standing and, perhaps, mainly to severability. If the insurance requirement is invalidated, does that bring down the rest of the Affordable Care Act? While we argued that the entire ACA was inseverable from the mandate, the Obama administration contended that–based on the Congressional findings–only the guaranteed issue and community rating provisions are inseverable:

Congress's findings establish that the guaranteed-issue and community-rating provisions are inseverable from the minimum coverage provision. Congress specifically found that in a market with guaranteed issue and community rating, but without a minimum coverage provision, "many individuals would wait to purchase health insurance until they needed care." 42 U.S.C.A. 18091(a)(2)(I). . . . Congress therefore expressly found that the minimum coverage provision is "essential to creating effective health insurance markets in which improved health insurance products that are guaranteed issue and do not exclude coverage of pre-existing conditions can be sold." . . . . It is evident that Congress would not have intended the guaranteed-issue and community-rating reforms to stand if the minimum coverage provision that it twice described as "essential" to their success, 42 U.S.C.A. 18091(a)(2)(I) and (J), were held unconstitutional. (pp. 45-47)

Notice there is no mention here of the penalty, only the requirement. The big question, then, is whether the fact that the current Congress zeroed out the penalty without repealing either the insurance requirement or the findings of the enacting Congress, affects the severability analysis. In his post, Ilya explains why he thinks it does. In his view, "Congress has already effectively neutered the individual mandate, while leaving the rest of the ACA in place. It was Congress that removed the monetary penalty imposed on violators of the individual mandate, thus rendering it ineffective." Possibly, but I am not sure this is how severability works. Congress could have repealed the insurance requirement, but didn't. Congress could have repealed its findings, but didn't. It did not have the votes to do either. So its "will," as expressed in the original ACA, still stands. I am not sure that a court may override this by its own independent assessment of "effectiveness." But as Ilya points out, the judicial doctrine governing severability is murky.

In contrast with Ilya, Josh Blackman thinks the inseverability claim may be viable. In this blog post, which is well work reading in its entirety, he concludes:

Even though the penalty is set to $0, the individual mandate still plays an important social function to reduce adverse selection, and plays a role in the operation of employer-based coverage. Far from toothless, the mandate still has some bite.

He quotes a December 2008, CBO report explaining how social dynamics, beyond monetary fines, support compliance with the law:

Compliance, then, is probably affected by an individual's personal values and by social norms. Many individuals and employers would comply with a mandate, even in the absence of penalties, because they believe in abiding by the nation's laws. However, such compliance may also be moderated by perceptions of fairness; individuals may comply more readily if they believe that a mandate is fair and is consistently enforced. If enforcement efforts appear to be unevenly applied, compliance may diminish. Social psychologists find that compliance could be affected not only by personal values but also by individuals' perceptions of how others will act. Such studies find that many people want to take the popular—as well as the moral—course of action. (pp. 53-54)

And, he notes, the IRS still requires people to report whether or not they have insurance.

There will be more analysis to come. But it is significant that both Ilya and Josh agree that the insurance "requirement" is now clearly unconstitutional under Chief Justice Roberts' "saving construction" approach. If a court so holds, the entire statute would then be in the same posture as it would have been if he had sided with the dissenting justices in the first place. In that eventuality, four justices thought the whole law was inseverable, and the Obama administration conceded the mandate would be inseverable from at least two key provisions of the Act. So the key issue in the new litigation is likely to be whether the fact that Congress zeroed out the penalty somehow changed this analysis such that the mandate is now severable from the rest of the ACA when it was not before. I look forward to reading much more on this question.

[typos corrected, and some revisions made.]

NEXT: "Dressmakers, Bakers, and the Equality of Rights"

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  1. Part of me (WINAL) is disgusted with a legal system which can quibble over such convoluted nonsense.

    All of me giggles at the entertainment value. I’m going to stock up on popcorn watching the deferentialists squirm into an ever tighter corner with ever more fantastical paint.

  2. I continue to think the suit lacks merit. It ignores the rule articulated in Sebillius – that courts look to substance and function, not form and label.

    Congress functionally severed the individual mandate from the rest of Obamacare. That’s what repealing it without repealing the rest does. The idea that they did so without having first determined that the mandate is effectively severable is ludicrous. So is the idea that because a previous congress may have said the individual mandate wasn’t severable, its later act of severance somehow didn’t change its intent.

    The previous argument had been that the individual mandate was a penalty. Penalties are things that are exacted when laws are enforced. By repealing enforcement, Congress didn’t somehow convert a tax back into a penalty. It did the opposite. It extinguished any justiciable claim a penalty exists.

    1. Great comment. So in 2012 Obama and Republicans slightly modified the Bush Tax Cuts…how is that any different than a “repeal” of the top rate? So was the top rate “severable”?

      Ironically if the court goes by Trump’s words then the individual mandate is not severable because Trump believes it to effectively repeal Obamacare.

      1. Can you show me a single quote of any politician or judge ever claiming tax cuts by tiers were non severable?

        I can show you many times Obama and other legislatures claiming the mandate was a central pillar of the law.

        1. You are so precious?please, get your hopes up that the KenyaCare is going to be struck down!

    2. ” The idea that they did so without having first determined that the mandate is effectively severable is ludicrous.”

      I don’t find the idea that Congress did something without deliberation and consideration to be ludicrous at all. In fact, quite the contrary. (Note, please, that I am expressly NOT limiting this to the present batch, nor to either brand of elected officials.)

    3. Since we’re on to substance and function, the substance and function of the lawsuit is to strike down Obamacare, or at least the guaranteed issue and community rating provisions of it (the bit that the Obama administration said was not severable.) So it matters not whether the argument is :

      (a) now Congress has got rid of the tax basis for the mandate, the mandate is unconstitutional and must die; and since they are not severable guaranteed issue and community rating must die too, or

      (b) now Congress has got rid of the tax basis for the mandate, the mandate is already dead; and since they are not severable guaranteed issue and community rating must die too.

      The idea that they did so without having first determined that the mandate is effectively severable is ludicrous.

      That depends on what burden you are placing on “effectively.” They may have determined that sawing off one leg of a three legged stool would, highly effectively, cause the stool to topple over.

      1. Removing the Constitutional aspect does nothing to improve the remainder. His entire argument privileges tha actions of Congress. A fools errand if there ever was.

    4. IIUC; if Congress had removed the mandate then it would be severed however they did not remove the mandate, only the penalty. I would note that a future Congress could easily vote to insert the penalty again; IOW it is not severed from the law.

  3. Obama and the liberals always opposed the individual mandate so Trump has given us true Obamacare by repealing the individual mandate.

    Btw, Ryancare actually spent significantly more than Obamacare because it repealed the individual mandate which the CBO scores as a “cost”. Paul Ryan accidentally passed the Democrats’ dream health care bill and they voted against it!?! Just total incompetence all around.

    1. “Obama and the liberals always opposed the individual mandate” Yet they all voted for it (or signed it) without a single GOP vote. Seems like they could have removed it if they wanted to.

      What a silly assertion.

      1. Sometimes ignorant people find facts silly.

        1. And sometimes non-ignorant people find blatant falsehoods silly. If you’re going to make stuff up, Sebastion, at least try to be plausible in your fairy tales.

          1. Something tells me you have a McCain/Palin shirt in the back of your closet and you have no clue what transpired in the 2008 Democrat Primary. How’s that “hopey, changey” stuff working out for you??

    2. I see – a very sneaky way of blaming this mess on the Democrats …

    3. “Obama and the liberals” opposed the individual mandate only insofar as it still allowed people to make a choice — buy insurance or pay a tax/pentaly/whatever. What they really wanted was for there to be no choice at all — government takes money from you before you collect it from your employer, and you’re automatically enrolled in Government-care.

  4. The real argument here is political, not legal. It is that without an enforced individual mandate the rest of Obamacare stops making sense and becomes bad policy. Many people voted for Obamacare believed it to be true. It was argued to justify the individual mandate before the courts. It may be true. But it’s a political argument, not a legal one.

    This whole argument fundamentally misunderstands what rational basis analysis is about. Justice Roberts held that the argument that the individual mandate is essential to the success of the overall scheme is rational and hence can support it as rational tax legislation. When upholding legislation under relaxed review, it’s common for judges to cite the policy arguments in its favor.

    But that doesn’t make these arguments permanent law or bar Congress from later changing its mind about them. In disputed policies, contrary arguments are usually equally rational.

    I claim various controversial laws have a rational basis all the time. Do you think that means I think the arguments against are irrational?

    1. “The real argument here is political, not legal. ”

      So? Federal courts are political institutions first now, courts second.

    2. Actually with respect to “politics” the individual mandate lost in the 2008 Democrat Primary. So the issue was thoroughly litigated with Obama opposing the individual mandate and Hillary supporting the individual mandate. So Obama won the nomination which means the individual mandate was deemed unnecessary by Democrats.

      The irony is the Democrats thought the individual mandate was necessary to get Republican support because they believed it was about personal responsibility which is something Republicans value.

      1. I’m a bit unclear about why they’d think a legal mandate to buy an over-priced product was about personal responsibility.

        That’s like thinking that taxing somebody to pay for welfare is about charity.

        1. I don’t think that red state Democrats thought that because the individual mandate was an aspect of previous Republican reform proposals.

          1. Previous Republican reform proposals which had been rejected by actual Republicans.

            1. Irrelevant, the only issue is what Landreui, Pryor, and Nelson believed would help them with their voters. Liberals like Kos and Dean consistently opposed the individual mandate while Hillary supported it and in 2008 Hillary won the future Trump counties.

              1. It’s pretty darned relevant unless you think the Democratic party ought to be obligated to support anything any Democrat has at any time in the past proposed. (Think hard, that includes some remarkably ugly proposals.)

                Republicans are as entitled to brain farts as Democrats. No sane person would have thought the individual mandate was going to win Republican votes. Even if it had actually been popular with Republicans, it would have been a cherry on a shit sandwich.

                1. Like I said that part is irrelevant. Red state Democrat senators THOUGHT it would be popular. Are you familiar with Donald Trump? Obviously the conservative think tank agenda wasn’t that popular with the Republican base or the Republican Party wouldn’t have nominated a candidate that ran against George W Bush’s record as president.

                  Right now Trump is proposing tariffs which are popular with Bernie supporters!! Socialists support the Trump tariffs and like Trump liberals opposed the individual mandate and only agreed to it as part of a compromise with moderate Democrats.

        2. The product would not be quite so “over priced” in a true marketplace, where I could buy a genuine insurance policy, instead of subsidizing those who didn’t buy in until they were sick.

      2. “The irony is the Democrats thought the individual mandate was necessary to get Republican support because they believed it was about personal responsibility which is something Republicans value.”

        That is one amazing bald assertion meant to push all the negative polling parts of the law onto Republicans. You are an amazing spinster.

        1. Taxes are unpopular while deficit spending in all its forms is popular?see Republican tax cuts. Democrats are responsible for including the unpopular provisions in Obamacare and the red state Democrats ended up losing so they obviously weren’t the best politicians.

          1. Sebastian, please tell me you arge getting paid to do this.

            Because otherwise? Well, damn son.

        2. What the Democrats wanted (and many still want) is single-payer, which would push private insurance companies out of the center of the market. The calculus was that taking all that business away from those profitable companies would have zero Republican support, so they went with the less-Big-Brothery approach of leaving the private companies, and their profits, in place. Both approaches have problems, as does the “let’s just let poor people get sick and stay sick until they die” which has emerged as the choice Republicans thought was “better”, but the problems are different and fall on some different kinds of people.

          But yes, for whatever reason, leaving private insurers in place, and imposing a mandate to buy their products/services, was put into federal law in a failed attempt to win Republican support.

  5. ” But it is significant that both Ilya and Josh agree that the insurance “requirement” is now clearly unconstitutional under Chief Justice Roberts’ “saving construction” approach. ”

    Roberts is still on the Court. Is there any particular reason to believe he wouldn’t just find a new “saving construction”, given his inexplicable determination to save the law?

    1. I doubt it.

      Maybe he will vote to reject this claim on grounds of general silliness.

  6. Perhaps I missed this in another post, but what is the injury-in-fact that permits the AGs to establish standing to bring this suit?

    1. Some of them may have grandmothers, cousins or mothers-in-law who may be embarrassed by allegations that they are not doing something that the law says they ought to do.

    2. Wasn’t the first suit, where SCOTUS decided that ithe act was legal because and only because the penalty was effectively a tax, brought by the state AGs?

      1. But now there is no tax. And therefore no harm.

        1. Could the argument be no tax means less enrollment which means less funds than anticipated to facilitate the whole thing thereby leaving states in the lurch?

          I’m not a legal scholar so I could be waaay off. Just thinking out loud. But I have stayed at a Holiday Inn years ago.

  7. NFIB v. Sebelius was a bigger victory than we realized when it was decided, as it left the insurance mandate susceptible to being killed off in this way via reconciliation.

    OK. You killed the mandate.

    Oh. Wait! You don’t think so at all. It is still there, a zombie serving no purpose but to give you yet another case to bring.

    The argument you are making is ridiculous. Unbelievably ridiculous.

    1. Randy and Ilya are just going to keep fucking this chicken. It’s shameful, but it’s par for the course, especially for Randy.

  8. Have you considered the possibility that one interpretation of the current Congress’ action of zeroing out the tax without repealing any other aspect of the legislation might be that it is intended as a temporary action?

    If it IS interpreted as a temporary action, then it’s still a tax, a tax that is variable (as Congress whims) and currently set to 0%. No need to bother with an severability analysis, because there’s nothing to sever (unless and until Congress chooses to repeal and replace the ACA with something better, as will happen on Day 1 when Mr. Trump actually takes over as deal-maker in chief. Day 1. Guaranteed.)

    1. Won’t happen until Trump has a Republican Republican Congress.

      I suspect I disagree with Trump about the details of a good replacement for the ACA, but you can’t fault him for failing to do anything that requires actual legislation, when he’s dealing with McConnell.

      1. One of the alleged reasons to support Mr. Trump’s candidacy was his “superior” deal-making abilities. Pointing out that he has thus far completed 1/4 of his time without showing any signs of ANY deal-making abilities reflects on Mr. Trump.

        When Obama was elected, he was actually naive enough to believe that Republicans would work with him. It took him a while to work out the reality that the Republican voters back home absolutely did not want their representatives working with him in any way, even towards improving their lives and livelihoods, and the representatives listened to them.

        Mr. Trump was wailing that everyone was against him before the election even happened.

        1. If there was naivete it was shared by the electorate and helped Obama specifically to be elected.

          This isn’t too surprising — myths (which tend to have some truth) tend to be a major aspect of elections.

        2. When Obama sat down to “work with Republicans on health care, he said, “Elections have consequences. I won.” Obama NEVER tried to work with Republicans. He just demanded their unconditional surrender.

          1. “Obama NEVER tried to work with Republicans.”

            Over here, in objective reality, he did. He even put some in his cabinet. He kept reaching out, and got soundly snubbed every time. Eventually, he figured out the snubbing would continue, and stopped trying. But that “Obama NEVER tried to work with Republicans” nonsense is, well, nonsense.

            He won because A) he was not GWB, B) he was not GWB, and C) he was not GWB. The fact that he had a fairly scant political history limited attempts to tar him with other peoples’ stuff. Only the nutcases bought into the rich fantasies of executive excess attributed to him. Unfortunately, there were (and are) a lot of you. (Fair enough, there are a fair number of people ready to believe every imagined thing about the current guy, too. I’m not sure the two are quite comparable, though. I guess we’ll see. I suspect the dynamics will change around mid-November. The party that holds the Presidency usually loses ground in mid-terms… will Donnie J lose enough to cost his party control of the Congress?)

  9. There has been a logstanding dispute about whether legislative intent should be inferred from statutory text or legislative history. I think case – where a later Congress does something that an earlier Congress said it didn’t want to do – is a good illustration of why statutory text needs to Trump.

    It is far more respectful of Congress, and democracy, to acknowledge it changed its mind and the new statute represents a different policy from the earlier one, than to try to convolute all policy statements into a single legislative history and then to try to use the fact that later pieces of that history contradict earlier pieces to claim the law is divided against itself and cannot stand.

    In a democracy, pieces of legislative history contradict each other all the time. People have different ideas about what laws are for and which parts are most essential. Elections, and sometimes just further discussion, result in policy changes.

    There is nothing the slightest bit unusual about any of this. The old law passed rational basis review. The new law passes rational basis review. The new law disagrees with the old because the two congressional majorities disagreed. This is politics as usual. In attempting to assert otherwise, the plaintiffs are straining democracy, the rule of law, and constitutional legitimacy too hard in order to reach their desired result.

    1. This case will be decided by what my lawyer father used to call a writ of Slapadatus, which he said was used to make you win and your opponents lose, with no legal reasoning required.

      The original Roberts decision essentially said that what one transitory veto proof Democrat majority decided can’t be undone just because it was so poorly drafted that it was unconstitutional on its face. Rather than forcing Congress to redraft the law into something Constitutional, Roberts helpfully rewrote it for Congress. This decision meant that the voters in the special Senate election in Massachusetts and the Congressional elections of 2010 were disenfranchised. Their votes against Obamacare didn’t count because Roberts didn’t send the law back to Congress to be rewritten. The ruling was supremely against the consent of the governed and a usurpation of Congressional legislative prerogative. The only real justification for it was political. Obama was the first black president, so he had to win.

      Having issued one bad ruling on Obamacare, the Supreme Court isn’t about to back down now. They will find some excuse, any excuse, to compound their error. Just like the Ninth Circuit, the Supreme Court has no shame. The will not tacitly admit that they made a mistake, nor will they admit that Congress has any power to change what the left did without a veto proof majority in the Senate.

    2. The solution to the Obamacare problem will not come from the Supreme Court. They caused the problem in the first place by rewriting the Obamacare bill to make it pseudo Constitutional, rather than sending it back to Congress for a rewrite. Until there is a wholesale change in personnel in the Supreme Court, and also the lower courts, what the Constitution says obviously doesn’t make an difference.

      The Obamacare solution has to come from Congress. The only way that’s going to work is if the filibuster is eliminated. This is also true for our entitlements problem in general. Congressional Republicans have to choose between the filibuster and preserving the US as a financially solvent republic.

  10. SCOTUS will either deny standing for lack of harm, or they will say the mandate is still a tax, even if the current rate is $0. A future congress can change the rate based upon the economics of the time.

    This reminds me that lawyers are not economists.

  11. A Democratic Congress in 2019 will easily be able to set up a new program and cajole Trump into supporting it. Of course, it won’t be efficient, but we’ll have to wait until a Democratic POTUS gets installed in 2021.

    1. Why on earth would having a Democratic President make this any more efficient? Efficient is the last adjective I’d ever use to describe this process.

  12. I look forward to SCOTUS making the worst possible ruling on this issue, as they have done in the past.

  13. This seems to be missing an important part. That is whether the the law is constitutional under the Commerce or N&P power. It is assuming that it is not following Chief Justice Roberts’ decision and the dissent. This carries 2 issues that need to be addressed.

    1. There is a legitimate argument that Roberts’ decision on those two clauses is dicta and not reflective of a holding and having no precedential . If that is the case it is really only 4-4.

    2. There is division in the lower courts about the Marks rule and whether a dissent can be considered. Some say yes, others no. If the answer is no then the 4 dissenters aren’t counted for Marks and the question hasn’t been answered by a majority of The Court. I believe the DC Circuit takes this view. So has professor Adler just to bring some VC flair to this.

    I happen to have agreed with the dissent on those two issues (and the taxing issue for what it’s worth) but it would be improper to ignore these issues and possibly rule a statute unconstitutional without having actually offered a legally precedential reasoning.

    1. There is a legitimate argument that Roberts’ decision on those two clauses is dicta

      That’s a pretty strong contradiction. Dicta is all the things that are not the decision.

      1. I don’t think that is true. The whole thing represents the decision. Dicta doesn’t represent a holding or have precedential value.

    2. I think you misunderstand the outcome in the Sebellius case. On the commerce clause question, Roberts voted with the court’s 4 conservatives, creating a 5-4 majority that the law wasn’t sustainable as commerce regulation. On the tax question, Roberts voted with the court’s 4 liberals, creating a 5-4 majority that the individual mandate is valid as a tax law. Each side represented the majority for the question Roberts voted with it on.

      You could perhaps argue that since the law was constitutional as a tax, the court needn’t have decided whether it was also constitutional as commerce regulation, making the commerce question dicta. I don’t think it works that way. The commerce question was one of the questions presented. And when the court squarely decides a question presented to it, its decision is generally considered a holding, even if it could be argued that it could have avoided the question if it had wanted to.

      1. Understand the ruling perfectly. See point number 2. There are strong arguments that dissents (and that is what the 4 conservative justices were) shouldn’t be counted.

  14. The complaint at one point cites the CBO analysis that the mandate is not truly toothless. It in fact says that it helps push some people on to Medicaid and CHIP, resulting in financial harm to the states. One analysis of the new policy also noted that the CBO (perhaps because some people would feel compelled to follow the law even without a tax penalty bite) analysis assumed a small percentage of people would still be affected by the mandate. If the mandate STILL has some sort of effect that affects Medicaid etc., I think it can be constitutional beyond some Commerce Clause claim (which the original judgment was wrong to reject). Medicaid and CHIP, I assume, are constitutional under the tax and spend power.

    If the mandate truly had not effect, I’m unsure what the injury is to grant standing. It really relies on severability, which is a weak argument — the particular details of the law that is deemed “necessary” can be a policy decision. It need not be “absolutely” necessary & there can be strong differences on the point, depending on who controls Congress and how it determines the facts on the ground given current needs. McCulloch v. Maryland.

  15. This was no constitutional mistake, my assumptions have always been, to have the insurance industry blow up and be too big to fail, and the government come in and own them, not just be historically “involved” ala AIG.

  16. Bah humbug. Maybe we need a constitutional amendment specifying that tax money cannot ever be used to subsidize any kind of for-profit business, so any medical care tax would have to be used strictly to cover the actual costs of successful care already provided.

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