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Understanding the New Obamacare Decision, Texas v. United States: Part I

[A guest-post by Prof. Josh Blackman (South Texas College of Law), a noted expert on Obamacare-related litigation. -EV]

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Recently a federal district court found that the Affordable Care Act was unconstitutional. The reaction was swift and brutal. One prominent law professor at Harvard described the case as "a political objection in legal garb," and concluded that "there is every reason to believe that a strong, nonpartisan majority of justices will do their constitutional duty, set aside how they might have voted had they been members of Congress," and uphold the law.

Another Yale law professor likened the decision to the anti-canonical Dred Scott decision, which "distorted the Constitution, disregarded precedent, disrespected Congress and proclaimed that the basic platform of one of America's two major political parties was unconstitutional." A Slate columnist wrote that the decision should "force us to reconsider the role of the courts." She added, "perhaps it's an apt moment to re-examine first principles and think about why we believe in the judicial branch in the first place."

That decision, of course, was Florida v. HHS, decided in February 2011. Judge Roger Vinson of the Northern District of Florida found that Congress lacked the power to enact the Affordable Care Act's individual mandate. Further, he found that protections for people with preexisting conditions—known as guaranteed issue and community rating (GI and CR)—could not be severed from the unconstitutional mandate. And, of course, we know that in 2012, the Supreme Court narrowly upheld the ACA.

At times, covering the Affordable Care Act reminds me of the film Groundhog Day: the same script repeats itself over and over again, in slightly differently contexts. I wrote about the history of NFIB v. Sebelius in my first book, Unprecedented. And, in my second book, I wrote about the second attempt to Unravel the Affordable Care Act with King v. Burwell. Now, two years into the Trump Presidency, we are in the third phase of the never-ending efforts to undo Obamacare.

In Texas v. United States, the Northern District of Texas found that the Affordable Care Act (ACA) is unconstitutional. The opinion had two main components. First, because the Tax Cuts and Jobs Act of 2017 (TCJA) reduced the ACA's shared responsibility payment to $0, the mandate to purchase insurance could no longer be saved as a constitutional fundraising tax. Second, he found that the remainder of the ACA could not stand without the "essential" mandate. Therefore, the entire law was set aside.

I agree with the first part of the ruling. Judge O'Connor was correct to find that the individual mandate can no longer be saved. However, I part company on the second part. The court should have only set aside the mandate, as well as the GI and CR ratings. The remainder of the ACA can be severed. I detailed these views in a four-part series on this case (I, II, III, and IV), and in draft article forthcoming in the Texas Review of Law & Politics. (Judge O'Connor cited the latter in FN 34.)

Eugene was kind enough to let me write several posts about this important ruling. This first installment will place Texas v. United States in the context of the past eight years of Obamacare litigation. In many regards, Judge O'Connor's ruling resembles that of Judge Vinson. In both cases, a coalition of conservative Attorneys General filed suit in a favorable division in a favorable district—Pensacola and Ft. Worth, rather than Tallahassee and Austin. And, both judges found that the individual mandate and core provisions of the ACA were unconstitutional. Moreover, both courts declined to issue a nationwide injunction, such that the case could be appealed in the normal course without immediate disruption to the federal government.

However, there are also critical differences. First, Judge Vinson rendered a major constitutional law decision on a question of first impression: could a mandate to purchase insurance be supported by Congress's powers under the Commerce and Necessary and Proper Clauses. The Florida court went out on a limb to find that Congress lacked such a power. This decision was without precedent. Ultimately, his opinion was vindicated by a majority of the Court, but at the time, Professors Tribe and Amar (referenced above) savaged the decision. Indeed, the activity/inactivity distinction remains controversial in constitutional discourse.

In contrast, Judge O'Connor's decision is far less audacious. His constitutional analysis concerning the mandate was supported by a majority of the Supreme Court. Critics can disagree with the factual predicate of his ruling—that the individual mandate survived the TCJA—but his constitutional analysis stands on a firm foundation. Moreover, Judge O'Connor's ultimate conclusion on severability—that the entire ACA must fall if the mandate is unconstitutional—was supported by the NFIB joint dissenters. Assuming the intent of Congress in 2010 controls the severability analysis—I think it does, but the question is closer than many have recognized—Judge O'Connor's sweeping ruling has the foundation of four votes on the Supreme Court.

There is a second critical difference: timing. When Judge Vinson issued his ruling, the Affordable Care Act had not yet gone into full effect. At that juncture, there were some preliminary programs that had been rolled out, and the Administration was preparing to implement the remainder of the law. Seven years later, the ACA has been fully woven into the fabric of the American health care system. Pulling the emergency brake on the entirety of the law would be logistically impossible. For this reason, and many others, Judge O'Connor was prudent not to issue a nationwide injunction, as the states had requested.

Third, the political dynamics are fundamentally different. In 2010, Obamacare's unpopularity, fueled by the surging Tea Party, led to the Republicans winning the House of Representatives, and taking more seats in the Senate. The Republican party quickly coalesced around the legal arguments advanced by Randy Barnett and other members of this blog. In the words of Jack Balkin, the arguments concerning the mandate went from Off the Wall to On the Wall. 2018 is very different. The popularity of the ACA, in particular the GI and CR provisions, is well established. Republican politicians who voted to repeal the ACA struggled to defend their votes during the midterm elections. Many of these members lost their seats, in part at least, due to the efforts to unravel Obamacare. The Republican opposition to the law has faded significantly.

Fourth, we have very different executive branches. The Obama Administration was singularly focused on defending the ACA at every juncture. First under the leadership of Deputy SG Neal Katyal (then-SG Elena Kagan wanted nothing to do with the case), and later with Donald Verrilli at the helm, the administration mounted a coordinated effort to save the law. Now the situation is quite different. Then AG Sessions declined to defend the constitutionality of the mandate, and concluded that GI and CR cannot be severed.

Fifth, we have very, very different Presidents. President Obama viewed the ACA as the cornerstone of his domestic legacy. President Trump, in contrast, has targeted the repeal of Obamacare since he was on the campaign trail—but not really. He still favors protection for pre-existing conditions and other popular aspects of the law, but he opposes the unpopular aspects. Shortly after the decision, President Trump issued two celebratory tweets that maintain this ambiguous posture.

Obamacare bad. Pre-existing conditions good.

The sixth difference may be the most important. Had the Supreme Court set aside the ACA in June 2012, there would have been zero political appetite to restore the law in any regard. Republicans would have claimed the decision as a political victory, and moved on. Perhaps Mitt Romney would have won the election—we may never know.

2019 is every different. If the Supreme Court were to hold that the law's GI and CR provisions were unconstitutional, I suspect that Congress would re-enact those provisions with broad bipartisan support. There is no constitutional problem with Congress enacting these standalone insurance reforms, without the mandate. Indeed, to avoid any disruption, the Supreme Court could delay its ruling by a single tax year to give Congress a chance to act. (Justice Alito floated this option during oral arguments in King v. Burwell.)

Moreover, states can enact their own GI and CR provisions as a fall back in the event that Texas is victorious. Many states already have restrictions that are more protective of those under the ACA. Finally, unlike with King v. Burwell, where states were at risk of losing millions in federal funding, here the states can be proactive and ensure no gaps in coverage. In other words, now that Congress zeroed out the penalty, the political fallout from a decision declaring that GI and CR were also unconstitutional would likely be short-lived.

Seventh, in 2012, we had no idea what the Roberts Court would do with the ACA. However, NFIB told us what the Justices thought of the constitutionality of the mandate. And, recent reporting about the case suggests that Chief Justice Roberts was willing to set aside the mandate, as well as the GI and CR, but could not persuade Justice Kennedy to follow along with this narrower path. Now, Justice Kennedy is gone, and he is replaced by Justice Kavanaugh, who—based on the earliest of lights—may have a stronger respect for stare decisis than did his predecessor.

It is not unthinkable for a majority of the Court to hold that the predicate of the saving construction no longer holds—the exaction does not raise revenue. Therefore, the GI and CR provisions cannot be salvaged. This sort of decision would reaffirm the Commerce and Necessary and Proper analysis in NFIB—an important rule I agree with. Moreover, that ruling would demonstrate the saving construction was a proper application of the judicial role, rather than an ad hoc exception to avoid a politically unpopular ruling. (Six years later, I have come to grips with the bulk of the saving construction, but still cannot accept the Chief's analysis of direct taxes.)

In future posts, I will break down the technical details of Judge O'Connor's 55-page opinion. Here, my sole aim was to place this decision in the broader context of the ACA litigation, which I have been carefully covering for nearly 8 years.