Texas Judge Declares ACA Invalid; Appeals Planned | Mercer

Texas Judge Declares ACA Invalid; Appeals Planned

Our Thinking / Law and Policy Group /

Texas Judge Declares ACA Invalid; Appeals Planned
Texas Judge Declares ACA Invalid; Appeals Planned
Calendar23 January 2019

Late Friday, a federal district court issued a decision invalidating the Affordable Care Act (ACA) in Texas v. United States (N.D. Tex. Dec. 14, 2018), reopening the political and legal minefield surrounding the health care reform law. The ruling, which has no immediate effect, is headed for appeal and could eventually reach the Supreme Court.

Focus on individual mandate. The case arose shortly after Congress cut the individual-mandate penalty for not having health coverage to $0 starting in 2019 as part of the tax reforms enacted in December 2017. Texas and 19 other Republican-led states sued, arguing the individual mandate is unconstitutional if it no longer imposes any tax. The Supreme Court had upheld the constitutionality of the ACA's individual mandate in 2012 based on Congress' power to tax.

ACA undone if no mandate. Because the individual mandate is integral to the ACA, the entire law must be struck if the mandate is no longer constitutional, the GOP states argued. Although the Trump administration declined to defend the ACA in this case, the Justice Department filed a brief disagreeing that the whole law should be invalidated. Instead, the administration argued that only certain ACA protections (such as the ban on pre-existing condition exclusions) are inseverable from the individual mandate and must fall. 

Texas decision. The Texas judge sided with the GOP states on both issues. The court ruled that if the individual mandate's penalty is $0, the mandate is unconstitutional and since it can't be severed from the rest of the ACA, the entire ACA is invalid.

Next steps. A group of 16 Democrat-led states and the District of Columbia that had defended the law are promising to appeal the decision. In the House, Democrats are planning a series of hearing on issues raised by the ruling and hope to pass legislation — now that they hold a majority — to strengthen the law's pre-existing conditions protections. Many Republican lawmakers have said they also support preserving those protections and will likely reintroduce legislation of their own.

No immediate employer impact. Unless and until this case is upheld on appeal, employers should continue to comply with all aspects of the ACA, including the employer shared-responsibility requirements, IRS assessments, and related reporting obligations. The Trump administration has said that "pending the appeal process, the law remains in place." Officials from the Centers for Medicare and Medicaid Services have likewise indicated that the decision does not have any impact on current or 2019 coverage. Employers should monitor further developments in the courts and in Congress.

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