The Clever Red State Lawsuit Against the Individual Mandate, and the Justice Department's Disappointing Response

The latest state challenge to the ACA is clever. The Justice Department's response is not.

The latest state lawsuit challenging portions of the Affordable Care Act is unlikely to get very far. Like my co-blogger Ilya Somin, I don't think there's much to the suit. After it was first announced, I debated one of the lawsuit's proponents, Wisconsin Solicitor General Misha Tseytlin, in this Federalist Society teleforum.

The basic idea – that the ACA's minimum coverage provision, aka the "individual mandate," is unconstitutional now that Congress has eliminated the tax on failing to obtain qualifying health insurance coverage – is clever. After all, the penalty for failing to obtain health insurance was only upheld by the Supreme Court because Chief Justice Roberts concluded it could be understood as a tax. Now, however, there is no tax, so there is no way to uphold the constitutionality of the mandate.

If that were all there was to the suit, it would be rather inconsequential. By eliminating the tax, Congress has made the mandate unenforceable. Failing to comply has no effect, so the mandate is no more than a hortatory statement buried in the U.S. Code. So who cares? (And how do states or anyone else have standing to challenge an unenforced and unenforceable statutory provision anyway?)

The reason the suit matters is because the states claim that the individual mandate – even now that it is unenforced and unenforceable – is inseverable from the rest of the ACA, so if the mandate is unconstitutional, the rest of the law must go with it. This is a brazen and audacious claim.

Even more audacious than the states' claim, however, may be the Justice Department's response, which effectively concedes the states' claims, and gives the states a pass on standing. As Ilya noted here, DOJ concedes that the mandate is unconstitutional and – quite remarkably – argues that the mandate is inseverable from the ACA's central insurance market reforms, guaranteed issue and community rating. On this basis, DOJ has told the court that it should enter "a declaratory judgment that the ACA's provisions establishing the individual mandate as well as the guaranteedissue and community-rating requirements will all be invalid as of January 1, 2019."

It is common for the Justice Department to make strained arguments in defense of questionable federal laws. After all, we expect the Justice Department to defend the laws Congress enacts. Here, however, the Justice Department is doing the opposite. It is straining not to defend a law Congress enacted -- and doing so terribly.

To be clear, I have no real objection to the Justice Department conceding that Congress lacks the power to tell individuals that they are required to purchase qualifying health insurance. NFIB v. Sebelius already held as much (and I supported that result). My objection is to the Justice Department's cynical decision to embrace an ungrounded application of severability doctrine in an effort to undo other aspects of the ACA. The ends do not justify the means.

The non-severability claim is particularly problematic here because the plaintiff states are seeking to use an alleged constitutional infirmity created by amendments to the statute as a basis for invalidating previously enacted parts of the statute. Moreover, the non-severability claim is based upon Congressional findings made about the original statute, not the subsequent revisions. Severability does not work this way.

The current approach to severability was outlined, most recently, in Murphy v. NCAA. Writing for the Court, Justice Alito explained:

In order for other [provisions of the statute] to fall, it must be "evident that [Congress] would not have enacted those provisions which are within its power, independently of [those] which [are] not." Alaska Airlines, Inc. v. Brock, 480 U. S. 678, 684 (1987) (internal quotation marks omitted). In conducting that inquiry, we ask whether the law remains "fully operative" without the invalid provisions, Free Enterprise Fund v. Public Company Accounting Oversight Bd., 561 U. S. 477, 509 (2010) (internal quotation marks omitted), but "we cannot rewrite a statute and give it an effect altogether different from that sought by the measure viewed as a whole," Railroad Retirement Bd. v. Alton R. Co., 295 U. S. 330, 362 (1935).

However this inquiry is conceived, there is no basis whatsoever for the states' argument or Justice Department's concession on severability.

For starters, it is simply impossible to claim that Congress would not have allowed for the imposition of guaranteed issue and community rating without imposing a functional individual mandate (i.e. a mandate backed by a penalty or tax sufficient to prevent significant adverse selection in private insurance markets). Why? Because that is exactly what Congress did with the 2017 reforms. By zeroing out the tax for failing to purchase qualifying health insurance, Congress rendered the mandate unenforceable while leaving the insurance reforms in place. So Congress unquestionably did what the Justice Department is claiming Congress would not do.

Considering whether remaining parts of the law would be "fully operative" without the offending provisions only makes the Justice Department's position even weaker. The individual mandate, as it stands now, is completely unenforced and unenforceable. As a consequence, the ACA's insurance market reforms will largely operate the same whether or not it remains on the books. As Chief Justice Roberts explained in NFIB, the "only consequence" of failing to obtain qualifying health insurance is paying a tax – a tax which is now set at zero. "Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS," Roberts wrote. Further, as the CBO noted in 2017, the practical consequence of eliminating the tax penalty is substantially the same as erasing the mandate altogether. In either case, individuals face no consequence from failing to comply with the mandate. So the ACA will operate the same way whether or not courts declare the minimum coverage opinion to be unconstitutional, and there is no basis for invalidating the insurance market reforms.

The Justice Department tries to get around this problem by pointing to the Congressional findings enacted as part of the ACA in 2010. This is a cute move, as it enables Justice Department attorneys to claim they are simply adopting the legal position of the prior administration, but it doesn't work either.

Findings are just that – findings. They are not binding operative provisions of federal law. They may be evidence of legislative purpose or intent, but they do not have independent legal force. They are not law.

Even if one thinks the findings carry some weight, the Justice Department's position is still wrong. The specific findings at issue here addressed the ACA of 2010, not anything that has happened since – and quite a bit has happened. Not only has Congress eliminated the tax penalty for the individual mandate, it has taken other steps to alter the ACA's functioning as well, such as refusing to appropriate funds for cost-sharing reduction payments and eliminating the Independent Payment Advisory Board (IPAB). So even if one believed the findings made the insurance reforms inseverable from the mandate in 2010, the findings provide no basis for applying that presumption to the law as it stands in 2017.

Consulting the text of the legislative findings reinforces the point. The 2010 findings addressed specific features of the 2010 law that no longer exist. Specifically, the findings refer to an individual mandate that will "minimize adverse selection" by "significantly increasing health insurance coverage." This was a plausible claim when made about the 2010 mandate – a minimum coverage requirement backed by a tax penalty – but it is completely inapplicable to the naked, unenforced and unenforceable minimum coverage provision we have today. The mandate as it now exists is not capable of "significantly increasing health insurance coverage" because it has no operative force.

To recap, at time period A, Congress enacted the statute. At time period B, Congress revised the statute in a way that plaintiffs claim render the relevant provision unconstitutional. Because Congress A claimed this provision (as originally enacted) was an essential component to the broader scheme, plaintiffs and DOJ claim this still applies to the subsequent revision (even though Congress B didn't say so), and thereby want other parts of the statute to go down. That's just absurd. There is no legal basis for applying severability doctrine in this way, and no precedent for the Justice Department to accept such an argument.

I understand that the Trump Administration has no desire to be seen defending the ACA. Many political appointees within the administration opposed the ACA and supported the legal challenges in NFIB v. Sebelius. I have no doubt that many in the Administration genuinely believe the individual mandate exceeds the scope of the federal government's enumerated powers (as I do), and the President pledged to replace ObamaCare. For this reason, I would have had no objection to the Administration conceding the constitutional point and supporting the entry of a declaratory judgment that the mandate is unconstitutional.

Longtime readers know I have no love for the ACA. Among other things, I supported the constitutional challenge to the individual mandate in NFIB v. Sebelius. I was also severely critical of the Obama Administration's unlawful implementation of many ACA provisions and helped develop the arguments that formed the basis for the claims in King v. Burwell. I would readily support other challenges to the law or its implementation that I thought had merit.

My objection, then, is not to the Administration's take on the mandate but the cynical (and doctrinally unfounded) manipulation of severability doctrine. It is an argument unworthy of the Department, and one I am confident the courts will ultimately reject.

For more on the DOJ post, see these posts by Nicolas Bagley and Marty Lederman.

[Note: I cleaned up some of the language after initial publication and inserted additional links.]