BREAKING: District Court Judge in Texas Holds ACA Is Unlawful

A federal district court judge in Texas has accepted a strained and implausible argument that the Affordable Care Act must be struck down because Congress eliminated the tax penalty for failing to purchase qualifying health insurance.

This evening, as the Affordable Care Act's enrollment period ended, Judge Reed O'Connor of the U.S. District Court for Northern District of Texas issued his much-awaited opinion in Texas v. United States, concluding that the individual mandate is unconstitutional and that, as a consequence, the entire Affordable Care Act is invalid. This is a surprising result, and one that is hard to justify.

I provided background on the implausible claims behind this suit here and here. Among other things, it's not clear why the states had standing to file their claim, and the argument that the entire ACA must fall because of the individual mandate's alleged infirmity is strained, to say the least, for reasons I outlined with Abbe Gluck in this NYT piece and this amicus brief. I also debated the merits of the case in this FedSoc podcast.

As the foregoing makes clear, I've been highly skeptical of the claims in this case from the beginning. Thus the result in the opinion is surprising—and surprisingly weak. It is, in many respects, the conservative equivalent of so-called #Resistance judicial opinions that have embraced questionable legal arguments deployed to subvert objectionable Trump Administration policies. I would be quite surprised if this opinion survives the inevitable appeal to the U.S. Court of Appeals for the Fifth Circuit, and even more surprised if this result garners the support of more than two justices on the Supreme Court (if the case even gets that far).

The problems with Judge O'Connor's opinion are evident at the outset where he summarizes his conclusion:

Resolution of these claims rests at the intersection of the ACA, the Supreme Court's decision in NFIB, and the TCJA. In NFIB, the Supreme Court held the Individual Mandate was unconstitutional under the Interstate Commerce Clause but could fairly be read as an exercise of Congress's Tax Power because it triggered a tax. The TCJA eliminated that tax. The Supreme Court's reasoning in NFIB—buttressed by other binding precedent and plain text—thus compels the conclusion that the Individual Mandate may no longer be upheld under the Tax Power. And because the Individual Mandate continues to mandate the purchase of health insurance, it remains unsustainable under the Interstate Commerce Clause—as the Supreme Court already held

The problem with this analysis is that it's central claim—that "the Individual Mandate continues to mandate the purchase of health insurance"—is false, both in law and in fact. As Chief Judge Roberts explicitly noted in his NFIB opinion, the "only consequence" of failing to obtain qualifying health insurance is paying a tax – a tax which is now set at zero. As Roberts wrote: "Neither the Act nor any other law attaches negative legal consequences to not buying health insurance, beyond requiring a payment to the IRS." In other words, there is nothing left in the ACA that mandates that people obtain health insurance.

Judge O'Connor is not content to claim the mandate must be invalidated, he goes on to claim that this justifies declaring the whole law invalid because Congress, in 2010, claimed the mandate was essential to the operation of the Act. Yet Congress in 2017 reached a different conclusion when it enacted legislation zeroing out the mandate penalty. The ACA today—the ACA as amended by Congress in 2017—no longer relies upon an enforceable individual mandate to operate because there is none.

Despite this fact, Judge O'Connor concludes that the 2017 Congress's decisions to leave the ACA without an enforceable mandate requires invalidation of the entire law because the 2010 Congress said so. In effect, Judge O'Connor concludes that the 2010 Congress precluded subsequent Congress's from selectively amending the ACA. This would be crazy even if Congress had sought to do this in 2010—it's even more crazy as the 2010 Congress did no such thing.

The weakness of Judge O'Connor's severability analysis becomes even more plain when one unpacks the actions of the two Congresses. Insofar as the 2010 Congress claimed the mandate played an essential role in the operation of the ACA, it was referring to a mandate that was enforced by a penalty. That is, the 2010 Congress believed that imposing a financial penalty on the failure to obtain qualifying health insurance would reduce the number of individuals who failed to comply. As there is no such penalty anymore, it is simply nonsensical to rely upon the 2010 Congress's findings to make judgments about the law as subsequently amended in 2017. The 2010 findings concern a law that, for all practical purposes, ceases to exist. What matters is what Congress did—and what Congress did is create a law that regulates health insurance markets and lacks an enforceable mandate to purchase insurance. This may or may not be good policy, but it is what Congress did, and there's no basis for a district court to undo it.

And did I mention standing? The Justice Department somehow neglected to raise standing in its briefing, but Judge O'Connor addressed it nonetheless (as he should have, as Article III standing is jurisdictional). Despite recognizing the need to address standing, Judge O'Connor completely botched the relevant analysis, concluding the plaintiffs have standing to challenge a provision of a law that has no legal effect. Because the law imposes no penalty or legal sanction on failing to comply, there is no injury as required by Article III, let alone an actual and concrete injury-in-fact that is caused by the relevant provisions of the ACA and that can be redressed by this opinion. Judge O'Connor concludes otherwise only by ignoring the actual operation of the law and Chief Justice Roberts' NFIB opinion (quoted above) that makes clear that the ACA's mandate imposed no consequence whatsoever beyond the tax liability that Congress has since erased. Standing requires an actual injury. An unenforced and unenforceable horatory admonition doesn't cut it.

Judge O'Connor's opinion declares the individual mandate to be unconstitutional, and declares the rest of the ACA to be inseverable and invalid—all of it, including those provisions that have nothing to do with health insurance markets. Yet Judge O'Connor has not (as yet) issued an injunction barring enforcement of the law. Rather, his opinion merely purports to provide declaratory relief to the plaintiff states, meaning its immediate practical effect has yet to be determined, though a stay (either from Judge O'Connor or the U.S. Court of Appeals for the Fifth Circuit) seems likely.

As noted above, I do not believe this opinion is long for this world. However superficially plausible the plaintiff states' claims initially appear, they melt upon inspection. The more one digs into them, the less substantial they appear. I expect this to be clear to the Fifth Circuit, and do not believe the states' arguments have much of a chance before the Supreme Court. Indeed, I would not be surprised were this decision to be overturned on standing on appeal, in which case certiorari would almost certainly be denied. Stay tuned.

UPDATE: For more on the opinion, here's a piece I have with Abbe Gluck in the NYT.

SECOND UPDATE: Here's a piece by Nicholas Bagley on the ruling in the Post. He largely agrees with the analysis above.