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Thoughts on Today's Federal Court Decision Against Obamacare

The judge was right to conclude that the individual health insurance mandate is now unconstitutional, but wrong to rule that the rest of the ACA is now unlawful because it can't be severed from the largely toothless mandate left in place under the 2017 GOP tax bill.

Earlier today, Federal District Court Judge Reed O'Connor issued an important ruling in a case brought by twenty GOP-controlled state governments, arguing that the Obamacare individual health insurance mandate is now unconstitutional, because the tax reform bill Congress passed in December 2017 eliminates the monetary penalty for violation. Much more importantly, the states also claim that the rest of the Affordable Care Act must fall with the mandate because it cannot be "severed" from it. Judge O'Connor ruled in favor of the states on both counts. I think he was right on the first issue, but badly wrong on the second. Like co-blogger Jonathan Adler, I think it is highly likely that this part of the judge's ruling will be overturned on appeal (though, for reasons discussed below, I am a bit less confident on that score than he is).

On the plus side, Judge O'Connor correctly concluded that the post-2017 version of the mandate is now unconstitutional. The judge goes into a long and involved analysis of the issue. But the bottom line is simple. In NFIB v. Sebelius, the original Obamacare case, Chief Justice John Roberts' controlling opinion rejected claims that the individual health insurance mandate can be upheld under Congress' power to regulate interstate commerce, or under the Necessary and Proper Clause. He ultimately upheld it only because it could be reinterpreted as a tax. That theory no longer holds, for reasons I explained here:

Roberts listed several factors that led him to conclude that the mandate can be considered a tax. But a crucial one is that the violators were subject to a fine collected by the IRS. As Roberts put it, "the essential feature of any tax [is that] it produces at least some revenue for the Government."

In December 2017, the GOP Congress enacted a tax bill that.... abolished the fine previously imposed on people who disobeyed the ACA health insurance mandate. The mandate itself remains on the books. But violators are no longer subject to any penalty. For this reason, the state plaintiffs in the newly filed case argue that the mandate can no longer be considered a tax. In the absence of a financial penalty, it no longer "produces" any "revenue for the Government." Indeed, it no longer even tries to do so.....

The plaintiffs are absolutely right on this point. A tax that does not require anyone to pay anything is like a unicorn without a horn. It is pretty obviously not a tax at all.

As I explained in a post published back in June, I think this aspect of the case is important in and of itself, and not just because of the potential implications for the rest of the ACA. But almost everyone else following the current Obamacare litigation seems to care only about the severability issue. The fate of the ACA hinges on it, whereas few worry about the fate of the now-toothless mandate for its own sake.

And Judge O'Connor's analysis of the severability issue is badly flawed. When one part of a statute is ruled unconstitutional, courts are not supposed to strike down other parts of the same law unless they are inextricably connected and Congress would not have intended the latter to function without the former.

In today's opinion, O'Connor demonstrates at length that Congress considered the individual mandate to be an "essential" part of the Affordable Care Act when it was first enacted back in 2010. However, the mandate that reasoning applies to was the original version that included a penalty. Congress' 2010 legislative findings and other statements about the importance of the mandate simply do not apply to the post-2017 version, which no longer imposes any penalty for violation. It just doesn't make any sense to conclude that an essentially toothless mandate is "essential" to the ACA. And that is the version whose relevance the court must consider in the current case.

Judge O'Connor's analysis of the post-2017 version of the law is brief and cursory. He notes, correctly, that the 2017 Congress did not repeal the 2010 findings on the supposedly "essential" nature of the mandate, and that it did not make any new findings on this subject. But none of this changes the fact that the court's job is to evaluate the essentiality (or lack thereof) of the present version of the mandate, not the one that existed before December 2017. The 2010 findings do not apply to the former, and Congress did not need to make any new findings to demonstrate the fairly obvious point that a virtually toothless mandate is not essential to anything. Under the 2010 version of the ACA, it was plausible to argue that the mandate was a nail for want of which the battle (or, in this case, the ACA) would be lost. The current version is akin to a rusty nail that no longer holds up anything, and indeed no longer even has a sharp point.

For those interested, there is a more extensive discussion of the severability issue in the amicus brief I joined with several other legal scholars, including Jonathan Adler, Nicholas Bagley, Abbe Gluck, and Kevin Walsh. But, to my mind, at least, the issue really comes down to the simple common-sense point that a mandate without teeth cannot be considered essential to anything. For what it is worth, Adler and I believe that the original Obamacare mandate was unconstitutional, and he was one of several legal scholars who joined the amicus brief I wrote against it (we also later coauthored a book about the case). Bagley and Gluck were on the other side of that issue. But we are on the same page when it comes to the severability question.

As already noted, I do not expect this ruling to survive on appeal. But I am not quite as confident on that subject as most other commentators seem to be. The fact that one federal judge has endorsed the states' severability argument increases the odds that others might, as well. The history of ACA-related litigation is filled with surprises and failed predictions by experts. My own predictions about the original Obamacare case were right on some key points, but wrong on others. So it is certainly possible I could turn out to be wrong about a key aspect of this case, as well.

There is, however, one important distinction between the 2012 ACA case and the current one. Despite repeated claims to the contrary by the law's defenders, there was never a broad, cross-ideological consensus in favor of the constitutionality of the individual mandate. From early on, prominent conservative and libertarian legal scholars and commentators argued that the law was unconstitutional. The issue was one that divided experts largely along ideological lines. Thus, judges could (and did) write plausibly defensible opinions on either side of the issue.

By contrast, expert support for the states' severability argument in the present case is notable by its near-total absence. Those conservative and libertarian legal scholars who have opined on the subject have almost all argued that the states' position is badly wrong. That doesn't necessarily mean the states cannot win. Judges don't have to listen to expert commentators, and sometimes even go against their consensus views. But lack of intellectual respectability does make it much harder for a controversial new argument to prevail, especially in a high-profile case like this one.

UPDATE: I wrote this post before I had a chance to see Jonathan Adler's update to his own post about this ruling, where he offers a similar critique of the severability part of the decision.

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  • Roadblock Revelations||

    It looks like two wrongs can make a right after all....

  • Sarcastr0||

    The party of rule of law, folks!

  • KHP54||

    I think we need to abolish the concept of severability. Whatever legislation was passed, those voting for it did so for it in its entirety. Who knows if the bill-minus-the-overturned part would have passed if it had been presented that way.

    The only recourse for a law that's been overturned due to constitutionality should be to re-pass it in its now-truncated form, *if it can indeed gain passage* in that form. And if not, not.

  • Eddy||

    Remember when severability was merely an idea of Robespierre?

  • Brett Bellmore||

    Agreed: Any time the courts strike down only part of a law, they create a new law the legislature did not enact. And the courts are not the legislature, they're not entitled to do that sort of thing.

    Laws, if they're to be struck down, should be struck down entire, to restore a previous legislatively created status quo.

  • Ben of Houston||

    I have to disagree on one condition. If the law has an explicit severability clause, then we should allow it to separate. For example, if there are a long group of environmental law changes, but one subsection is overturned on a technicality, the other hundred+ pages should still apply.

    However, the individual mandate was a significant part of Obamacare. Without it, there is no possible way to balance the books. It's lack of a severability clause was a significant part of passage. Given how long and close passage it was, we can assume that if such an unusual step was not taken, they would not have had the votes to pass the law.

  • Smooth Like a Rhapsody||

    This.
    If the legislature is explicit, then the remainder should survive.
    Legislation is too complex a process to require individual, self-contained laws for every little thing.
    If some lawyer finds a technical flaw in a long bill such that, e.g, some subsection violates the sixth amendment, Congress should not, ipso facto, be forced back into session to rectify the mistake.

  • KHP54||

    I disagree with your disagreement.

    The whole concept should be abolished by amendment, so that legislatures *aren't* free to add severability. This might (might! not necessarily 'will') cause them to take a bit more care in thinking about the constitutionality of their bills in the first place.

  • Drewski||

    They're absolutely entitled to such a thing. Happens regularly, and is long-engrained into American jurisprudence. You mean to say you wish it were different, which is fine, but your preferences don't actually define reality, I'm happy to say.

  • aluchko||

    So should the court also strike down the GOP tax bill? Because that modified the ACA, and if you're now eliminating the ACA on the grounds that it removing the mandate modified it into something legislature never passed then you must also strike down the tax bill for the very same reason.

    In fact you should probably strike down every law passed since 2009, since in striking down the ACA you're vastly modifying the legislative landscape in which all subsequent legislation was passed. Much safer to return to a known legislative state.

    Now it might make sense to entirely strike a brand new law that hasn't gone into effect (or had a lasting impact), but killing an entire law because of a single portion would have a huge impact.

    On a fairly related note, it's never been made clear to me why the legislation in judicial crosshairs is the mandate and not the portion of the GOP tax bill that made it unconstitutional. But if the judge ruled the tax bill clause as unconstitutional and threw out the entire thing (based on your proposal) I can only imagine the howls of "activist judge".

    And I'm not actually sure the zero'ing out of the mandate is severable from the GOP tax bill. Killing the mandate meant fewer people on health care, which allowed them to put more money into tax cuts. Without the mandate change the GOP wouldn't have been able to pass the rest of the tax bill under reconciliation.

  • KHP54||

    "In fact you should probably strike down every law passed since 2009"

    Sounds like a good start. ;-)

  • Allutz||

    Indeed, as an originalist would say: Severability is a violation of the Presentment Clause.

  • bc15||

    "Congress did not need to make any new findings to demonstrate the fairly obvious point that a virtually toothless mandate is not essential to anything."

    Not obvious. So-called "nudges" are accepted policy tools now. Many people try to follow laws, without first asking about penalties for lawbreaking. So, if one just looks at the 2017 law's text, one concludes that Congress wanted to achieve two objectives: (1) mandate health insurance because of its 2010 findings that the mandate was essential to the rest of the ACA while (2) not imposing financial penalties on violators. Imposing penalties on violators is very politically unpopular, so it's understandable why Congress would want to achieve (2) in addition to (1). The 2017 law tries to achieve these two potentially conflicting goals through a nudge: impose a legal mandate, now unconstitutional, without a financial penalty.

    Unless there is evidence to the contrary, one can't just assume that Congress no longer believes that the mandate is essential to the rest of the ACA simply because it is trying to achieve (1) through a nudge. It's not the Court's job to substitute its own political judgement for Congress's about the wisdom or effectiveness of nudges.

  • ||

    It seems to me that Adler's argument (in his separate posting) as why the states may not have standing (no "injury in fact") applies as well to the part of the opinion striking down the individual mandate as unconstitutional since it no longer is a "tax." If, as Roberts said, the only consequence to not buying insurance was paying the "tax" (aka "penalty"), and that amount has now been set at zero, Congress isn't requiring anyone to do anything. And if it isn't doing anything, why has it exceeded its "enumerated powers"?

    Of course, at some level, it doesn't matter whether the individual mandate is unconstitutional now or not. If it is, it is gone. If it isn't, it stays in the statute--but does nothing. Same outcome--apart from whether the rest of the ACA is severable, on which I agree with the analysis here and in Adler's posting. (Of course, a system that requires pre-existing conditions to be covered at a community rating but does not have a mandate to purchase insurance has enormous problems of its own in terms of self-selection, but that the statute is now problematic does not mean a court should strike it down. After all, if I am right that the mandate, because it does nothing, is not beyond Congress' powers, it remains in the statute and the outcome is identical....)

  • Brett Bellmore||

    There may be no penalty now, but the mandate is still a command, not a suggestion.

    Setting aside for the moment that some people feel an obligation to follow the law even where there is no penalty, and others are under a professional obligation to not counsel violating the law... Are you really so certain that reducing the fine to zero deprives the mandate of all force, not only now, but going forward?

    Isn't it the case that a future Congress could not only restore the penalty, but levy consequences of a nominally non-punitive nature on past failure to comply?

    I'm reminded of the Lautenberg amendment, which, bizarrely, was ruled NOT to be a violation of the prohibition on ex post facto laws. Can you really say that nothing of a similar nature could eventually come around to bite those who don't comply with the mandate today?

  • Sarcastr0||

    Generally, one waits for the actual unconstitutional act to strike that down, and doesn't base judicial review on dark imaginings.

    It's like you're so bent on partisanship you'll gin up a tyranny to righteously struggle against anywhere a Democrat has said something.

  • Brett Bellmore||

    Actually, I just view the ACA as legislative over-reach on so many fronts at the same time that the idea that it survived review for even an instant fills me with disgust.

    We're in a largely post-constitutional era so far as jurisprudence is concerned, and just moving the tatters around.

  • Sarcastr0||

    Ah yes, the Constitution-in-exile used to justify reasoning you admit is against your personal constitutional views, but nothing matters.

    Enjoy your judicial nihilism.

  • captcrisis||

    "From early on, prominent conservative and libertarian legal scholars and commentators argued that the law was unconstitutional."

    Not true, and the link you provide does not support your contention.

    The truth is none of you guys had any problem with the mandate (a Republican idea) until July 2009 when it developed the fatal Constitutional flaw of being adopted by a Democratic President.

  • Allutz||

    I'm pretty sure almost nobody gave the individual mandate a second of thought until then.

  • captcrisis||

    It was the centerpiece of the law Mitt Romney (later the Republican nominee) signed into law in Massachusetts in 2006, it had been advocated by two dozen Republican senators as an alternative to "Hillarycare" in 1994, and it had been advocated both by Hillary Clinton and by John Edwards in their 2008 campaigns.

  • Toranth||

    The individual mandate was an idea floated by some Republicans in the early 90s. At the exact same time, there was plenty of opposition by Republicans to the idea as well. There was Democrat support for the idea at the time. There was Democrat opposition to the idea.

    Claiming that some Republicans once supported it, so a generation later all Republicans must also support it is as stupid as claiming Jim Crow was once supported by Democrats, so a generation later all Democrats must support it.

  • captcrisis||

    It was the main Republican response to "Hillarycare" in 1994, endorsed by two dozen Republican senators. If it wasn't mentioned after the demise of Hillarycare, that's only because no Republican gave a flying f**k about how to address the problem of so many Americans without health insurance. If Hillarycare had been resurrected in 2009, it would surely have been once again the Republican response.

  • ||

    No, that is not "surely" the case. America changed a lot from 1994 to 2009.

  • Sebastian Cremmington||

    Have you ever heard of a guy named Mitt Romney?? ;) lol.

  • Toranth||

    They guy that attempted to veto the bill in Mass., which Democrats passed and then overrode against his will?

    That Mitt Romney?

  • XM||

    I don't ever recalling forcing people to buy healthcare being a centerpiece of any serious republican agenda, and I frequent the right side of blogs, think tanks, social media, publications, etc. "You guys were OK before Obama did it" is not true."

    Mitt Romney was a target of conservative critics during the primary, and his state level Romneycare became a hot issue. Romney bowed to pressure and indicated that he would "repeal and replace" Obamacare. Some of his defenders rationalized that healthcare mandate at the state level wasn't as bad as ACA.

    Apparently the Heritage Foundation and GOP old timers floated proposal for an ACA equivalent back in the day. But government managed healthcare was never a popular notion among the right, even if they don't always vote that way.

  • Brett Bellmore||

    "Some of his defenders rationalized that healthcare mandate at the state level wasn't as bad as ACA."

    From a 10th amendment standpoint, it wasn't. Still lousy policy, but lousy policy isn't automatically unconstitutional.

  • mtb703||

    How can you require insurance companies to cover preexisting conditions without an individual mandate.

    Can you imagine if flood insurers had to cover preexisting conditions? Yeah, that wouldn't go to well.

    Legal merits aside, I don't see how this law can work economically, without the mandate.

  • Smooth Like a Rhapsody||

    Which is why the legislature did it this way.
    They get to take partial credit for the death of Obamacare without having to vote against it.
    OTOH: Insurance companies are big evil corporations, and, (so say some) "health insurance" means that some third party should pay for every pill I take....so there's that, too, I guess

  • Brett Bellmore||

    It can't. The ACA is a new entitlement program, but they didn't want to put it on budget. So they ordered health insurance companies to implement it for them.

    But it was obvious they couldn't afford to do so if their customers had a choice in the matter, so the mandate.

    The whole mess is a result of the effort to pretend they hadn't created a new entitlement program.

  • Brett Bellmore||

    It can't. The ACA is a new entitlement program, but they didn't want to put it on budget. So they ordered health insurance companies to implement it for them.

    But it was obvious they couldn't afford to do so if their customers had a choice in the matter, so the mandate.

    The whole mess is a result of the effort to pretend they hadn't created a new entitlement program.

  • loveconstitution1789||

    +100

  • Toranth||

    Requiring coverage for pre-existing conditions is acceptable under one circumstance - that the premiums be allowed to match the expected costs of the pre-existing condition.

    Anything else is government mandated charity. I honestly don't see how the government can require insurance companies to give money to individuals without getting something of equal value in return. Isn't that a taking?

  • mtb703||

    But then it's not functioning as insurance, but as a way to finance an individuals costs.

    And this is also politically unfeasible.

  • Smooth Like a Rhapsody||

    In the old days we called that "socializing costs", but the Dems can't use that language for various reasons related to the recent history of Russia, Cuber, Venezuela, etc., etc.

  • ||

    Exactly. I can get Geico to cover my car accident with $5,000 in damage that already occurred. But they're going to charge $5,000 plus whatever the risk profile is for the remainder of the term.

  • donojack||

    The insurance companies aren't bearing the cost ultimately. Why do you think your premiums have gone up so much? It's the same cost shift that the hospitals do to make up for having to treat indigents. Covering pre-existing conditions is popular but I don't think it's fair for the cost to be placed solely on people with existing insurance. That leaves out high income seniors and people without insurance, who will also be the beneficiaries of GI. If the country wants it then it should be a direct subsidy from taxes.

  • Brian Kennedy||

    The judge chosen by plaintiffs (thanks to the lower courts' misreading of the venue statute) seems to have struck down the entirety of the ACA, not just the parts commonly thought of as "Obamacare." This would seem to include not only community rating, the insurability of those with pre-existing conditions, and the insurance exchanges, but also the Medicaid expansion (which maybe the states were aiming at, who knows?); numerous changes to Medicare including relief for patients in the "donut hole," switching to bundled payments for some claims, and incentives to reduce hospital readmissions; and other changes as far flung as restaurant menus (good riddance perhaps?), the Indian Health Service, and black lung claims. That's a LOT of omelets to unscramble at this late date. Rewinding Medicare reimbursements as if the last eight years hadn't happened would be a nightmare of complexity even if (which is not clear) it had to be done only prospectively.

  • dwshelf||

    It seems Somin argues that the mandate was essential to the original ACA, but once the mandate was removed, it was no longer essential.

    There's something wrong with that logic.

  • Brett Bellmore||

    I think the logic is that Congress gets to decide if the mandate is essential, and can change their minds. By removing it, (Just the penalty, anyway.) they did so change their minds about it being essential.

  • dwshelf||

    By removing it, (Just the penalty, anyway.) they did so change their minds about it being essential.

    If congress had wanted to do that, they certainly could have, but they did no such thing.

    They defanged the mandate. No more, no less.

    Just follow the logic. If the mandate was essential, then it remains essential (and it remains to be seen what becomes of ACA without it).

    What Somin, and many others, hope happens is that the courts leave a badly crippled ACA as the law of the land. That cripple was no creation of congress.

  • Brett Bellmore||

    Well, I agree with you about what they want, but I do want the excuse accurately characterized. Even if it IS just an excuse.

  • Drewski||

    I'm a little hung up on the analogy. A unicorn without a horn would absolutely be a unicorn, if such a thing existed. Similarly, a rhino with no horn is still a rhino.

  • Purple Martin||

    I don't get your objection...is it serious? While a rhinoceros without a horn might have been originally called a rhino, it would never have been a rhinoceros:

    rhinoceros (n.) c. 1300, from Latin rhinoceros, from
    Greek rhinokeros, literally "nose-horned," from rhinos "
    nose" (a word of unknown origin) + keras (genitive keratos)
    "horn of an animal," from PIE root *ker- (1) "horn; head"

    Similarly "unicorn" literally is "one; horn." If it had two horns it might be a duocorn but it wouldn't be a unicorn. If no horns, it's probably a horse.

    unicorn (n.) c. 1300, Middle English via Old French from Latin unicornis,
    from uni- 'single' + cornu 'horn,' translating Greek monokerōs

    Here's how you might have said it (if this is actually what you meant):

    "Cut off the horn of a Rhinoceros and it doesn't suddenly become an ox. Similarly, cutting off a unicorn's horn (if such a thing existed) doesn't transform it into a horse."

    I mean, stating it as an analogy doesn't doesn't make it true, but at least it's an accurately applied analogy. But a better way of applying it the the actual situation might be "Gluing a horn [i.e. Individual Mandate] to a horse doesn't make it a unicorn, and removing the glued-on horn still leaves you with a horse."

    I hope you all enjoyed this pedantry break...we now return you to your regularly scheduled programming.

  • loveconstitution1789||

    ObamaCare has always been unconstitutional.

    There is nothing in the Constitution that gives government the power to force people to buy products and services. Nothing.

    Roberts saved ObamaCare a tax, which simply means that he refuses to do his job and interpret Constitutional disputes. Roberts created a health insurance tax when even ObamaCare supports never advocated it as a tax.

  • Sebastian Cremmington||

    Ryan got another $300 billion in tax cuts because Roberts made that ruling! I'm sorry but you people really are Deplorables.

  • captcrisis||

    Once again, the bratty children, unaware of and uninterested in what's good for everyone, set the house on fire, leaving it once again for the adults to do the hard work and heavy lifting of trying to mend things again.

  • ||

    And in your hypothetical, the party that wants to flood America with tens of millions of third-world migrants are the adults?

  • Longtobefree||

    "When one part of a statute is ruled unconstitutional, courts are not supposed to strike down other parts of the same law unless they are inextricably connected and Congress would not have intended the latter to function without the former."

    Based on all the other laws, if congress thinks the law is severable, they say so explicitly.
    They did not say so.
    So it is not.

    "So let it be written, so let it be done."
    Healthcare/health insurance fascism is dead.

  • KHP54||

    The problem I have with Congress "saying so" is that it's just as likely to be bullshit, in the same was as the "having moved in interstate commerce" is used to (unjustifiably) bring every single thing under the Commerce Clause.

    I realize I'm channeling Don Quixote here, but I want a Constitutional prohibition on the notion of severability. If nothing else, it might prompt Congress to consider long, hard, and carefully, as to whether the bill currently before them is indeed Constitutional--i.e. whether that document grants them the authority to legislate on the subject in the first place. In other words, to do their damn job for a change.

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