BREAKING: Fifth Circuit Declares Individual Mandate Unconstitutional, Punts on Whether Rest of ACA Must Fall (Updated)

As if there wasn't enough going on this week, a federal appellate court issues a significant (and significantly flawed) ruling in the latest Obamacare challenge

Those wondering when the U.S. Court of Appeals for the Fifth Circuit would decide Texas v. United States, the latest challenge to the Affordable Care Act (ACA) need wonder no longer, as the opinion was released this afternoon. In short, a divided panel decided that the courts have jurisdiction to hear the case and the appeal, the individual mandate is unconstitutional because Congress' decision to zero out the penalty means that it may no longer be construed as a tax, and that the question of severability is complex and difficult and must be reconsidered by the district court.

Judge Elrod wrote for the panel, joined by Judge Englehardt. Judge King dissented.

Judge Elrod's opinion for the court begins:

The Patient Protection and Affordable Care Act (the Act or ACA) is a monumental piece of healthcare legislation that regulates a huge swath of the nation's economy and affects the healthcare decisions of millions of Americans. The law has been a focal point of our country's political debate since it was passed nearly a decade ago. Some say that the Act is a much-needed solution to the problem of increasing healthcare costs and lack of healthcare availability. Many of the amici in this case, for example, argue that the law has extensively benefitted everyone from children to senior citizens to local governments to small businesses. Others say that the Act is a costly exercise in burdensome governmental regulation that deprives people of economic liberty. Amici of this perspective argue, for example, that the Act "has deprived patients nationwide of a competitive market for affordable high-deductible health insurance," leaving "patients with no alternative to . . . skyrocketing premiums." Association of American Physicians & Surgeons Amicus Br. at 15.

None of these policy issues are before the court. And for good reason—the courts are not institutionally equipped to address them. These issues are far better left to the other two branches of government. The questions before the court are far narrower: questions of law, not of policy. Those questions are: First, is there a live case or controversy before us even though the federal defendants have conceded many aspects of the dispute; and, relatedly, do the intervenor-defendant states and the U.S. House of Representatives have standing to appeal? Second, do the plaintiffs have standing? Third, if they do, is the individual mandate unconstitutional? Fourth, if it is, how much of the rest of the Act is inseverable from the individual mandate?

We answer those questions as follows: First, there is a live case or controversy because the intervenor-defendant states have standing to appeal and, even if they did not, there remains a live case or controversy between the plaintiffs and the federal defendants. Second, the plaintiffs have Article III standing to bring this challenge to the ACA; the individual mandate injures both the individual plaintiffs, by requiring them to buy insurance that they do not want, and the state plaintiffs, by increasing their costs of complying with the reporting requirements that accompany the individual mandate. Third, the individual mandate is unconstitutional because it can no longer be read as
a tax, and there is no other constitutional provision that justifies this exercise of congressional power. Fourth, on the severability question, we remand to the district court to provide additional analysis of the provisions of the ACA as they currently exist.

Judge King's dissent begins:

Any American can choose not to purchase health insurance without legal consequence. Before January 1, 2018, individuals had to choose between complying with the Affordable Care Act's coverage requirement or making a payment to the IRS. For better or worse, Congress has now set that payment at $0. Without any enforcement mechanism to speak of, questions about the legality of the individual "mandate" are purely academic, and people can purchase insurance—or not—as they please. No more need be said; it has long been settled that the federal courts deal in cases and controversies, not academic curiosities.

The majority sees things differently and today holds that an unenforceable law is also unconstitutional. If the majority had stopped there, I would be confident its extrajurisdictional musings would ultimately prove harmless. What does it matter if the coverage requirement is unenforceable by congressional design or constitutional demand? Either way, that law does not do anything or bind anyone.

But again, the majority disagrees. It feels bound to ask whether Congress would want the rest of the Affordable Care Act to remain in force now that the coverage requirement is unenforceable. Answering that question should be easy, since Congress removed the coverage requirement's only enforcement mechanism but left the rest of the Affordable Care Act in place. It is difficult to imagine a plainer indication that Congress considered the coverage requirement entirely dispensable and, hence, severable. And yet, the majority is unwilling to resolve the severability issue. Instead, it merely identifies serious flaws in the district court's analysis and remands for a do-over, which will unnecessarily prolong this litigation and the concomitant uncertainty over the future of the healthcare sector.

I would vacate the district court's order because none of the plaintiffs have standing to challenge the coverage requirement. And although I would not reach the merits or remedial issues, if I did, I would conclude that the coverage requirement is constitutional, albeit unenforceable, and entirely severable from the remainder of the Affordable Care Act.

As regular readers will expect, I think this opinion is quite wrong. (My prior posts on this case, including links to the amicus briefs to which I contributed, are indexed at the end of this post.) Here are a few initial thoughts, with more to come later.

Starting at the threshold issue of jurisdiction, this is a remarkably un-conservative opinion for a conservative panel on a conservative court. The individual mandate, as it now stands. has no effect. It is unforced and unenforceable. Now that Congress has zeroed out the penalty, the consequences of failing to comply with the mandate are non-existent, and the Supreme Court held as much in NFIB when it explained there were no consequences to failing to purchase insurance other than the requirement to pay a penalty—a finding essential to the Court's conclusion that the mandate's penalty could be understood as a tax—and now that penalty is zero. No consequences means no injury so no standing. Yet the Fifth Circuit panel here concluded otherwise.

Already the headline about this case in the news is that the court declared the mandate to be unconstitutional, but that's actually the least significant and least important part of the decision. The mandate was left unenforced and unenforceable by Congress. Whether or not it is constitutional is not particularly important, as its constitutionality has no effect on anyone. Whether Congress can issue a command that it does not seek to enforce is an interesting theoretical question, but it has no practical consequence if Congress does not seek to have the command enforced.

In this case, the only reason this question matters is because finding the mandate to be unconstitutional allows the court to reach the real question of whether the mandate's legal infirmity requires invalidating any other portions of the fact. As I've argued at length in blog posts, op–eds and amicus briefs, the answer to this question should be "no." Congress decided that the ACA can operate with an unenforced and unenforceable mandate, so declaring the mandate to be unconstitutional does not require invalidating anything else. Moreover, insofar as the mandate is the source of the plaintiffs' injury for Article III standing purposes, declaring the mandate to be invalid should be sufficient to redress all of the plaintiffs' injuries.

The Fifth Circuit did not really decide the severability question, perhaps in part because (as the court notes) the federal government's position in this case seemed to, er, evolve over time, and the federal government's latest arguments on severability were never considered by the district court. This is one reason the Fifth Circuit identified for remanding the case. The other is that the Fifth Circuit concluded that the district court needed to "explain with more precision what provisions of the post-2017 ACA are indeed inseverable from the individual mandate," leaving open the possibility that all or none of the ACA, or something in-between, could be inseverable.

This seems to be a bit of a punt, in that it forestalls a final judgment on the key issue—whether a post-enactment legislative revision can result in the effective repeal of a larger statute—but it also represents remedial restraint. As a practical matter, however, it also means this case will hang around for awhile.

It is possible that the intervening states will petition for en banc rehearing and/or certiorari with the Supreme Court. Given that the remedial question has been remanded, I think either petition would be a reach. But unless one or both courts decides to review this decision, this litigation will continue through 2020, and likely past the election.

I will have additional posts analyzing specific aspects of the opinion.

UPDATE: Lawrence Hurley of Reuters is reporting that California (one of the intervening states) will file a petition for certiorari with the Supreme Court. The next question is whether the plaintiffs (Texas, et al.) file a cross-petition in order to ensure the Supreme Court considers all of the issues in the case.

I think a grant of certiorari in this case is unlikely, but possible. If Chief Justice Roberts is looking for a good case to corral the state standing doctrine unleashed by Massachsuetts v. EPA, this would be a good vehicle.