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US Supreme Court leaves ACA in place, dismisses latest constitutional challenge on procedural ground

For the third time, the U.S. Supreme Court (Court) has maintained the status of the Affordable Care Act (ACA) as the law of the land.1 Holding that the parties bringing the latest case did not have standing under Article III of the US Constitution to challenge the ACA, the Court reversed and remanded the ruling of the lower courts and order the dismissal of the suit originally brought by Texas, which sought to have the ACA declared unconstitutional.

Background: In National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012), the Court first upheld a challenge to the constitutionality of the ACA, holding that Congress could penalize individuals for failing to obtain health insurance coverage (the individual mandate penalty) under its taxing authority. The Tax Cuts and Jobs Act of 2017, however, dropped the individual mandate penalty in IRC § 5000A to $0, beginning in 2019. With zero tax associated with the individual mandate, the plaintiffs (18 states and 2 individuals) sued to have the ACA declared unconstitutional. The defendants were several states that sought to have the ACA upheld.

In December 2019, the Fifth Circuit held in favor of the plaintiff states that the ACA's individual mandate was unconstitutional because it was no longer a tax and no other provision justified the exercise of congressional power.

Specifically, in the opinion that was appealed to the Court, the Fifth Circuit found:

  1. A live case or controversy exists because the states have standing to appeal. Even if they did not, a live case or controversy remains between the plaintiffs and the federal government.

  2. The plaintiffs have Article III standing to challenge the ACA — the individual mandate injures both the individual plaintiffs, by requiring them to buy insurance they do not want, and the state plaintiffs, by increasing their costs of complying with the reporting requirements that accompany the individual mandate.

  3. The individual mandate is unconstitutional because it can no longer be read as a tax, and no other constitutional provision justifies this exercise of congressional power.

The Fifth Circuit remanded the question of severability to the district court to provide additional analysis of the current ACA provisions.

Supreme Court ruling: In its June 17, 2021 opinion, the Court held that both the individual and state plaintiffs lacked standing to challenge the constitutionality of the ACA. To bring a suit, a party must have "standing," meaning the party must show that it has suffered or would likely suffer an injury. The Court held, in a 7-2 decision, that none of the parties showed any injury traceable to an individual mandate with a $0 penalty.

The Court reasoned that the individual plaintiffs could not show injury because the federal government was not attempting to enforce an individual mandate under IRC § 5000A after the penalty was dropped to $0. "Without a penalty for noncompliance, [IRC Section] 5000A(a) is unenforceable. The individuals have not shown that any kind of [federal]Government action or conduct has caused or will cause the injury they attribute to [IRC Section] 5000A(a)," the Court explained.

The Court found that the state plaintiffs, which claimed injury due to (1) the increased use of and cost of state-operated medical insurance programs such as Medicaid and (2) the burdens of employer reporting, lacked standing because the perceived burdens could not be traced to the unenforceable individual mandate. For state-operated programs, the Court found individuals sought coverage for its benefits, not because of an individual mandate with $0 penalty. Regarding the states' burdens of employer reporting, the Court found those provisions stood apart from the individual mandate. The Court found that the state plaintiffs had not suffered injury traceable to the individual mandate provision of IRC § 5000A.

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