Fifth Circuit Declines to Rehear Obamacare Severability Case en banc

The ruling by a closely divided court leaves in place a December panel decision in this important case - at least for now.

(Zimmytws/Dreamstime.com)

It has largely gone unnoticed thanks to the impeachment news. But, on Wednesday, a closely divided US Court of Appeals for the Firth Circuit voted against en banc review of the December panel decision in the Obamacare severability case. The court voted against en banc reconsideration by a closely divided 8-6 margin. The official order is here. Had the vote gone the other way, the case would have been reconsidered by the full Fifth Circuit.

The case involves a lawsuit filed by twenty Republican "red" state governments arguing that the Obamacare individual health insurance mandate (which requires most Americans to buy government-approved health insurance) is now unconstitutional because the December 2017 tax reform law enacted by the then-GOP controlled Congress zeroed out the monetary fine imposed on violators, thereby making it impossible for the mandate to be considered a tax any longer (the theory that it could be so considered was the only basis on which the Supreme Court upheld the mandate in NFIB v. Sebelius (2012)). More controversially - and with much greater practical significance - the plaintiff states argue that the rest of the Affordable Care Act must fall along with the now-largely neutered mandate, because the remainder of the Act cannot be "severed" from the unconstitutional part.

In December 2018, Federal District Judge Reed O'Connor issued a ruling agreeing with the plaintiffs on both issues. Last month, a divided three-judge panel of the Fifth Circuit upheld his ruling on the issue of the constitutionality of the mandate, but remanded the severability issue back to the trial court for further consideration - in the process expressing considerable dissatisfaction with with O'Connor's ruling. I assessed O'Connor's ruling here, and the Fifth Circuit panel decision here. For reasons explained in those posts, I agree with the plaintiffs on the issue of the unconstitutionality of the penalty-less mandate (which is a more important issue than most people seem to think), but differ with them on the question of severability.

To me, it makes no sense to conclude that a largely-toothless mandate is so essential to the overall structure of Obamacare that Congress could not have intended the broader law to continue functioning without it. Along with a cross-ideological group of other legal scholars, co-blogger Jonathan Adler and I developed this argument in greater detail in two amicus briefs we have filed in this case (see here and here).

This position is not driven by any great love for Obamacare.  I authored an amicus brief against the Obamacare individual mandate in the initial 2011-12 challenge to its constitutionality, and also wrote a coauthored book and various articles arguing that it and some other parts of the law are unconstitutional. I would be  more than happy to see the ACA repealed.

The Fifth Circuit's decision to deny en banc consideration is not all that surprising. Neither the majority nor the dissenting judges provided any explanation for their votes (which is not unusual in such cases). But it would be unusual to take a case en banc when the three-judge panel has not even conclusively resolved the biggest issue involved (in this case, severability).

Still, the close division suggests something more may be going on. It's possible the judges differ because some believe it is important to provide a quick resolution to this case (thereby eliminating uncertainty about the future of the ACA), while others are more inclined to follow normal procedures. Obviously, those supporting en banc rehearing may also take a dimmer view of the substance of the panel decision than those opposing it.

It is also notable that all eight judges voting against en banc review were Republican appointees. By contrast, five of the six judges voting in favor were appointed by Democratic presidents.

The one GOP-appointed judge who voted for en banc review was Judge Jerry E. Smith, who was appointed by Ronald Reagan. It so happens I clerked for Judge Smith in 2001-02. But, in case any members of the media happen to read this post, I hasten to add that I have not discussed this case with Judge Smith (it would have been inappropriate to do so), nor do I have any inside information on why he voted the way he did. I do not even know whether he has read any of my writings about the case, and - if so - whether he agrees with anything I said.

Thus, I cannot say whether Judge Smith supported en banc review because he 1) differs with the panel majority on the constitutionality of the mandate, 2) differs on severability, 3) just thinks it important to resolve the case as fast as possible, or 4) some combination of more than one of these reasons. It's even possible it could be some reason I have not thought of. If I had to guess, I would say that scenarios 2 and 3 (or some combination thereof) are probably more likely than 1, but that is no more than speculation.

The views of the Fifth Circuit judges who voted on the en banc issue could turn out to be important when this case returns to the appellate level, which could easily happen later this year. At that time, there may again be attempts to force en banc review of whatever decision the panel makes.

In the meantime, a group of blue states that have intervened to defend the ACA when the Trump administration declined to do so, have tried to get the Supreme Court to take the case as soon as possible, without waiting for further lower court decisions. But that effort has not fared well so far, and it is unlikely the Court will consider the case before the end of the year. The blue states clearly want a quick Supreme Court decision, and they sought to go directly there. The vote on en banc review was at the behest of one of the Fifth Circuit's own judges, not any of the parties to the case.

For the moment, it looks like the wheels of justice will keep grinding in this case for some time to come. But it is entirely possible we will have additional rulings before the November election, so the issue may not be out of the public eye for long.

 

Comments

[Kazinski]

I hope Robert's has learned his lesson on this, his very "clever" saving construction just muddled things and guaranteed years more of litigation. I get why judges sometimes want to rule as narrowly as possible, and use a series of cases to move the law incrementally while they see what the real world affect is. But his decision should have unambiguously struck the mandate then and there and dealt with the fallout then.

[Sebastian Cremmington]

Considering the individual mandate has already passed constitutional muster it is the zeroing out of the tax that is unconstitutional. So the question in this matter is—is this particular tax provision severable from the Trump Tax Cut?? So if the Trump Tax Cut does not contain a severability clause then the entire law must be declared unconstitutional.

[jst1]

"it is the zeroing out of the tax that is unconstitutional"
Is it really unconstitutional to place a value of zero on a tax? Congress lacks that power?

[Sebastian Cremmington]

The individual mandate has already passed constitutional muster...so the constitutionality of the ACA is not the issue here.

[jst1]

You didn't answer my questions.

[Sebastian Cremmington]

The ACA Medicaid expansion was unconstitutional but the Court never considered declaring the entire Medicaid program unconstitutional. So the proper recourse is to declare the Trump Tax Cut unconstitutional if it contains an unconstitutional provision.

[jst1]

If Congress has the power to tax then how is it possible that repealing or zeroing out a tax is unconstitutional?
What part of the tax cut is unconstitutional?
I am having trouble following your logic.

[Sebastian Cremmington]

Ask the judge in this case.

[Kazinski]

That's ridiculous, but you already know it. Roberts decision said a mandate would not pass constitutional muster, so he'd construe it as a tax, so then bizarrely he didn't reach a decision on the mandate because there wasn't one.

But no court is going to conclude Congress can't zero out a tax, and of course they didn't. But they could decide the mandate was unconstitutional, and they did.

[Sarcastr0]

The GOP's mania for lawsuits isn't some inevitable result of Roberts' ruling. Neither is it extending to nakedly partisan rulings from the judiciary.

The fallout here is on conservatives. And it will not be the last.

[Rossami]

The problem with your analysis, Prof Somin, is that the "largely toothless mandate" was the only thing that got the law past the Commerce Clause analysis. Whether or not that mandate was essential to the function of the law, it was critical to the claim that the law was a proper exercise of congressional authority.

[jjrzw72]

What are you talking about? No one has ever suggested that Congress lacks the constitutional authority to regulate the insurance industry, offer subsidies to purchase insurance, or provide funding for states to expand Medicaid (i.e., the primary non-mandate parts of the law). The first is plainly within Congress’s power to regulate interstate commerce, and the latter two within its power to tax and spend to promote the general welfare.

The issue was that the mandate might make the law unconstitutional, not that the law would be unconstitutional without the mandate.

[Sebastian Cremmington]

From a Democrat perspective the individual mandate was extremely stupid once Gruber found out the CBO scored it as a cost. So Democrats essentially left $300 billion in extra subsidies on the table by including the individual mandate in the ACA. So Obamacare would have been more popular early on if people over 300% FPL were receiving more robust subsidies. Bill Clinton even called the subsidies phasing out so quickly “crazy”.

[Rossami]

Two things wrong with that analysis, jjrzw72.

First, Congress explicitly chose to leave out a severability clause from the ACA despite clearly knowing how to do so and including it in the vast majority of their other bills. Coupled with the legislative history, this indicates intentionality which means that the unconstitutionality of a single clause becomes fatal to the entire law. There are some weaknesses to that argument but whatever they are, the argument itself is the clear result of Congress' intentional choice to leave out the severability clause.

Second, you have the burden of proof wrong. Please point to the place in the Constitution which authorizes regulation of the insurance industry. Insurance is regulated at the state level. The assertion of "interstate commerce" has in fact been challenged by lots of folks in good faith.

[nonzenze]

That's not how severability analyses works. An "intentional choice" would have been for Congress to include a non-severability clause.

When Congress includes neither a severability clause nor a non-separability clause, the court will analyze the specific provisions found to be unconstitutional "to determine what Congress would have intended in light of the Court's constitutional holding". See e.g. US v Booker (2005).

[jjrzw72]

First, you're moving the goal posts, from severing the mandate makes the law unconstitutional to the mandate makes the law unconstitutional because it can't be severed.

Second, you're argument about the Commerce Clause makes no sense. If Congress lacks the power to regulate to regulate insurance, it can't obtain the power to do so by taxing people who don't buy insurance.

[bernard11]

Congress explicitly chose to leave out a severability clause from the ACA despite clearly knowing how to do so and including it in the vast majority of their other bills. Coupled with the legislative history, this indicates intentionality which means that the unconstitutionality of a single clause becomes fatal to the entire law.

I don't think this is right. When Congress repealed the tax/penalty it plainly could have repealed the entire law instead. If you want to talk about "intentionality" you have to conclude that Congress regarded the mandate as severable.