The Fifth Circuit Court of Appeals has ruled that the ACA individual mandate is unconstitutional.  The opinion was issued December 18, 2019, a copy of which is here. In referencing the US Supreme Court’s well-known opinion in NFIB v. Sebelius (US 2012) the Fifth Circuit Court reasoned:

In NFIB, the individual mandate—most naturally read as a command to purchase insurance—was saved from unconstitutionality because it could be read together with the shared responsibility payment as an option to purchase insurance or pay a tax. It could be read this way because the shared responsibility payment produced revenue. It no longer does so. Therefore, the most straightforward reading applies: the mandate is a command. Using that meaning, the individual mandate is unconstitutional.

Texas v. USA (5th Cir. Dec. 18, 2019) at 44

By way of brief background to this case, the ACA  originally required buyers of individual health insurance policies to purchase “minimum essential coverage” benefits. This is commonly known as the ACA individual mandate.

The ACA further required a “shared responsibility” payment for individual taxpayers who did not maintain minimum essential coverage benefits. The US Supreme Court ruled in a 5-4 decision in NFIB v. Sebelius (US 2012) that the ACA individual mandate violated the Commerce Clause of the Constitution. The Court, however, upheld the shared responsibility payment as a “tax.”

But under the Tax Cut and Jobs Act of 2017 the ACA’s shared responsibility penalty was reduced to $0 as of January 1, 2019. The Fifth Circuit Court ruled that the shared responsibility payment now lacks any earmark of a “tax,” and so Constitutional underpinnings for the Individual Mandate no longer exist. The Fifth Circuit Court explained:

Now that the shared responsibility payment amount is set at zero, the provision’s saving construction is no longer available… The four central attributes that once saved the statute because it could be read as a tax no longer exist. Most fundamentally, the provision no longer yields the “essential feature of any tax” because it does not produce “at least some revenue for the Government.

Because these four critical attributes are now missing from the shared responsibility payment, it is, in the words of the state plaintiffs, “no longer ‘fairly possible’ to save the mandate’s constitutionality under Congress’ taxing power.”

It seems a certainty that the appellants in Texas v. USA (the states advocating for the ACA individual mandate) will appeal to the US Supreme Court. But if the Court’s opinion in NFIB v. Sebelius is an accurate predictor, the ACA Individual Mandate is unlikely to survive in any form.

But it does it seem likely that some aspects of the ACA that can be severed from the ACA individual mandate will survive. For example, it is difficult to see how most ACA provisions related to the group market relate to, or would be affected by, elimination of the individual mandate. Exceptions to this general statement might be the employer mandate (which is tied to the individual mandate) and group market provisions related to sole proprietors (which are functionally equivalent to the individual market).

One provision of the ACA that almost certainly cannot be severed (and therefore will likely also be deemed unconstitutional along with the Individual Mandate) is the Comprehensive Coverage Requirement for the individual market (42 USC 300gg-6(a)).

The Comprehensive Coverage Requirement requires health insurers in the individual and small group market to sell only policies that include all the ACA’s minimum essential health benefits.

But since individuals are now free to purchase insurance that does not include the essential health benefits package, it seems that insurers should likewise be free to provide new products that also do not offer all the essential health benefits.

For this reason, it seems that the Comprehensive Coverage Requirement (for at least the individual and small group market) cannot be severed and will be deemed unconstitutional along with the Individual Mandate itself.

In the meantime, the case is headed back to the Texas District Court to evaluate which parts of the ACA, if any, can be severed from the ACA Individual Mandate. But even before court opinions on the severance questions are handed down, we may see creative new product offerings in the individual market that do not include all of the ACA’s essential health benefits, without waiting for a definitive “all-clear” signal by the US Supreme Court. Given the speed at which technology products develop in the current age, we should expect nothing less.

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