A federal appeals court has ruled the Affordable Care Act's individual mandate unconstitutional, in a win for Republican-led states attempting to kill the Obama-era law, but sent back the question of whether the mandate is severable from the law to the district court.
The ruling by the three-judge panel of two Republicans and one Democratic appointee came down along party lines.
"The individual mandate is unconstitutional because it can no longer be read as a tax," the majority wrote. But they added, "on the severability question we remand to the district court to provide additional analysis."
California Attorney General Xavier Becerra, who led the blue states defending the law, said Wednesday evening the state "will move swiftly to challenge this decision."
Before landing at the appeals court, Judge Reed O'Connor in December 2018 ruled the individual mandate was unconstitutional and "inseverable" from the law as a whole, striking down the ACA.
Texas and 17 other red states filed suit in 2018, alleging that the ACA is unconstitutional after the individual mandate was zeroed out in a subsequent federal tax law. The states also argued the mandate could not be untangled from the rest of the law, essentially arguing that if the individual mandate is unconstitutional so, too, is the law in its entirety.
The U.S. Department of Justice in March reversed its previous stance and also declared the law should be eliminated.
In one key question, the court ruled the plaintiffs did have standing to bring the case, because the mandate forces individual plaintiffs to buy insurance they do not want and requires the state plaintiffs to bear the costs of complying with the mandate's reporting requirements. They added that even if they did not have standing, "there remains a live case or controversy between the plaintiffs and the federal defendants."
The American Hospital Association said in a statement Wednesday evening it was disappointed in the ruling. "Sending the decision back to the federal district court that invalidated the entire law puts health coverage — and peace of mind — for millions of Americans at risk," the group wrote.
The case is nearly sure to wind up eventually at the Supreme Court with the potential to throw chaos into the insurance markets. Most at risk from the volatility of the ruling are managed care organizations with a major presence in the exchanges such as Anthem, Centene and Cigna.
The landmark act signed into law nearly a decade ago substantially changed the healthcare landscape. It added coverage protections for people with pre-existing conditions, instituted Medicaid expansion in many states and required coverage of certain essential benefits like maternal and preventive care.
More than 19 million Americans gained health coverage from 2010 to 2017 as the ACA went into effect, according to the Kaiser Family Foundation.
But over the years the law has been whittled away by Republicans in Congress and through the courts. The action that most directly precipitated the challenge ruled on Wednesday was the GOP tax overhaul that zeroed out the individual mandate penalty.
Despite Wednesday's ruling, the issue is still far from being decided once and for all, Katie Keith, a lawyer and health policy expert at Georgetown University, told Healthcare Dive.
"It does potentially create additional years of uncertainty," she said.
Still, she said she expected this outcome. "I'm not particularly surprised that this is how they ruled, seems pretty consistent with oral argument and what they were asking," she said.
Yet, some legal experts were very critical of the decision, with one characterizing the ruling as "ludicrous."
"The Fifth Circuit decision is a remarkable mix of hubris and cowardice," Nicholas Bagley, a health law expert and professor at the University of Michigan, wrote on Twitter. "It's hubris to say that the *unenforceable* individual mandate is an unconstitutional *command.* And it's cowardice to remand without grappling with what that means for the rest of the law."
Robert Henneke, lead counsel for the individual plaintiffs and general counsel for the Texas Public Policy Foundation, called the decision a victory for the American people.
"The court's opinion recognizes that Obamacare continues to injure millions of Americans like our clients who have lost their choice of doctor, suffered rationed care, and had their insurance costs skyrocket," he said in a statement. "This decision puts us one step closer to eventually freeing the American people from its unconstitutional mandates and regulations."
If the case does find its way to the Supreme Court, it won't be the first time. The high court in 2012 upheld the law after the first major challenge, which also centered on the individual mandate. That decision, however, declared that Medicaid expansion could not be mandatory for states.
In 2015, the court ruled ACA plan subsidies could be distributed through the federal Healthcare.gov site in states that did not set up their own exchange, another finding in favor of the law.
The ACA was once again directly challenged in the summer of 2017, but the setting was Capitol Hill. Republicans attempted to repeal the law, but a memorable thumbs down from Sen. John McCain of Arizona doomed those attempts.