Litigation

Texas et al. v. United States of America et al.

Date Filed: February 26, 2018
Status: Pending
District Court: Northern District of Texas – No. 4:18-cv-00167
Appellate Court: 5th Circuit No. 19-10011; Supreme Court No. 19-1019, No. 19-840
Nature of Suit: Legislation Challenge
Defendant Type: Federal, State
Plaintiff Type: State
Case Info: https://sourceonhealthcare.org/obamacare-here-we-go-again/, https://sourceonhealthcare.org/litigation-and-enforcement-highlights-september-2018/, https://www.supremecourt.gov/search.aspx?filename=/docket/docketfiles/html/public/19-840.html
Court Document: https://oag.ca.gov/system/files/attachments/press-docs/211-texas-order-granting-plaintiffs-partial-summary-judgment.pdf

[Consolidated with California et al. v. Texas et al. for Supreme Court review]

This case arises out of the Supreme Court’s decision in NFIB v. Sebellius and the Tax Cuts and Jobs Act of 2017.  In NFIB v. Sebelius, the National Federation of Independent Business and 26 state attorneys general challenged Congress’ ability to require Americans to purchase health insurance, as doing so would regulate inaction, as opposed to action, in commerce. Finding justifications grounded in interstate commerce or the Necessary and Proper clause lacking, Chief Justice Roberts rested the constitutionality of the individual mandate on the fact that it functioned as a tax – citizens had to prove that they had qualifying health insurance or pay the shared responsibility payment, which was collected by the I.R.S. when people filed their tax returns. Robert’s opinion did not save the individual mandate from controversy for long, however.

Following the 2016 election of Donald Trump, the Republican attack on Obamacare continued with new fervor. After numerous failed attempts to repeal the law directly, Congress modified the ACA as part of its tax reform package, the Tax Cuts and Jobs Act of 2017, in December 2017.  The tax bill changed the penalty for failing to have health insurance from $695 for an adult to $0, eliminating the tax. Republicans did so for three reasons. First, the Congressional Budget Office predicted that eliminating the penalty would reduce the federal deficits by $338 million between 2018 and 2027, which Republicans needed to successfully pass their planned tax cuts.[1] Second, it allowed them to claim that they had delivered on their campaign promises of repealing at least some portion of the ACA. Third, it would allow them to once again challenge the constitutionality of the individual mandate, as it no longer functioned as a tax, and as a result, challenge the entirety of the ACA.

In February 2018, 20 state attorneys general filed suit in the Northern District of Texas against the Department of Health and Human Services and the Internal Revenue Service  (Texas v. U.S.) claiming that under the Supreme Court’s ruling in NFIB, the elimination of the tax penalty voids the constitutionality of the individual mandate and the entirety of the Patient Protection and Affordable Care Act (“ACA”). They argue that because the Supreme Court’s validation of the ACA’s constitutionality in 2012 “rested solely on the flimsy support of Congress’ authority to tax,” now that the tax penalty is eliminated, the entire law is unconstitutional and invalid. On April 9, 2018, another group of state attorneys general filed a motion to intervene in the case to protect the benefits promised to their citizens and more than $650 billion in federal money scheduled to come to the states under the ACA to provide health care.

U.S. District Judge Reed O’Connor heard oral arguments in a three-hour hearing on September 5, 2018. On December 14, 2018, he issued an opinion that struck down the entire ACA as unconstitutional. The judge ruled in favor of the plaintiffs by determining that the “individual mandate” is no longer a tax and is therefore an unconstitutional exercise of congressional authority. The judge also found that the individual mandate was inseverable from the rest of the ACA, which makes the entire ACA unconstitutional. The intervening states appealed the case to the 5th Circuit Court of Appeals and the U.S. House of Representatives joined the appeal.

On December 18, 2020, the three-judge panel of the 5th Circuit ruled two to one that the individual mandate was unconstitutional in the absence of a tax penalty, and remanded the case back to Judge O’Connor in the Texas District Court to determine whether the individual mandate can be severed from the rest of the ACA or the entire law must fall with the individual mandate.

Twenty democratic states and the House of Representatives immediately appealed the 5th Circuit decision to remand the case on severability (California et al. v. Texas et al.) to the Supreme Court for an expedited review in the 2019-2020 term, but the court declined the motion on January 21, 2020. The States and the House of Representatives also asked the 5th Circuit to review the decision en banc, meaning in front of the entire 5th Circuit, and the fourteen judge court decided along party lines (8-6) to decline the request to review the decision on January 29, 2020.

However, in March 2020, the Supreme Court granted review of the 5th Circuit’s decision for the 2020-2021 term and consolidated the two cases Texas v. United States and California v. Texas. The Supreme Court review would considerably fast-track the case by bypassing the lower court remand. The case is expected to be heard in Fall 2020 (oral arguments) and decided by June 2021.

 

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[1] CBO predicted that the savings would result from the nearly 13 million people that would lose health insurance coverage by 2027 from repeal of the penalty.


Associated Legislation:

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