Defending The ACA Versus Enforcing The ACA In Texas v. United States

A potential upcoming preliminary injunction could block enforcement of the entire ACA or, alternatively, of the individual mandate, guaranteed issue, community rating, and preexisting condition exclusion ban provisions of the ACA………………….

Katie Keith

AUGUST 8, 2018

A lawsuit over the individual mandate—known as Texas v. United States—continues, with a potential decision on the merits expected soon. In Texas, 20 Republican state attorneys general and two individual plaintiffs challenge the constitutionality of the individual mandate—now that the penalty has been repealed—and, with it, the entire Affordable Care Act (ACA). Democratic state attorneys general from 16 states and the District of Columbia have been allowed to intervene in the case to defend the ACA.

The plaintiffs had requested a preliminary injunction to strike down the individual mandate ahead of 2019, when the penalty is zeroed out. Instead of a preliminary injunction, the Trump administration asked Judge Reed O’Connor of the federal district court for the Northern District of Texas to construe the plaintiffs’ request for a preliminary injunction as a request for summary judgment (and, thus, a consideration on the merits of the case). In particular, the Department of Justice (DOJ) asked for a declaratory judgment that the individual mandate and ACA provisions on guaranteed issue, community rating, and preexisting condition exclusions are invalid beginning on January 1, 2019.

In mid-July, Judge O’Connor asked the parties to file additional information on why he should not rule on the merits of the case, which he has discretion to do under the Federal Rules of Civil Procedure. Only the plaintiffs and intervenor states filed responses, which were due on July 30, 2018. The DOJ did not submit additional comment on whether the court should consider the merits of the case at this time.

In their filing, the plaintiffs continue to request a preliminary injunction. They argue that the court would not have sufficient time to consider and rule on their four claims before January 1, 2019, when the individual mandate penalty is zeroed out. However, the plaintiffs do not oppose the court treating their request as a “combined application” for both a preliminary injunction and a motion for partial summary judgment on the constitutionality of the individual mandate.

The intervenor states oppose the idea of proceeding with summary judgment. They argue that there are different legal and evidentiary standards for a preliminary injunction compared to summary judgment and they ask for time to more fully present relevant arguments and issues. They particularly raise issues such as standing, the constitutionality of the mandate under the Commerce Clause, and whether an injunction in only the 20 plaintiff states is permissible. If Judge O’Connor decides to move forward on summary judgment, the intervenor states request a 30-day period to file additional information.

From here, the parties await a decision from Judge O’Connor on how to proceed. In addition to deciding whether to rule on the request for a preliminary injunction or on summary judgment, Judge O’Connor might schedule a hearing or an additional round of briefing before he reaches a decision.  The motion for a preliminary injunction is fully briefed, however, and Judge O’Connor could at any time simply enter or deny a preliminary injunction. If granted, a preliminary injunction could block enforcement of the entire ACA or, alternatively, of the individual mandate, guaranteed issue, community rating, and preexisting condition exclusion ban provisions of the ACA.

Departing From Previous Administrations By Failing To Promise Enforcement

Regardless of how Judge O’Connor rules, the case is likely to be appealed. Both the plaintiff states and intervenor states would almost certainly appeal an adverse ruling. (As noted above, the plaintiff states recently requestedthat an injunction be limited only to their 20 states. Even if the plaintiff states did so with the goal of blocking the Democratic states from an appeal, the intervenor states may be able to appeal due to repercussions beyond state lines. Affected individuals, such as someone with a preexisting condition, in one the 20 plaintiff states might also attempt to join the litigation.) The lawsuit would be appealed first to the Fifth Circuit and, potentially, up to the Supreme Court.

As with other ACA litigation, this lawsuit will take time to wind its way through the judicial system. This is true even if Judge O’Connor hastens his decision on the merits of the case. In the meantime, the only part of the ACA’s statute that has changed (and is at issue here) is the individual mandate penalty, which was zeroed out by Congress in December 2017. The ACA’s provisions on guaranteed issue, community rating, and preexisting condition exclusions remain in effect and, until a court says otherwise, are the law of the land.

This is true even though the DOJ, in a highly unusual move, decided not to defend the constitutionality of the individual mandate. Beyond this, the DOJ noted its belief that additional provisions of the ACA are inseverable from the mandate. These provisions, as noted, are guaranteed issue (42 U.S.C. §§ 300gg-1, 300gg-4(a)), community rating (42 U.S.C. §§ 300gg(a)(1), 300gg-4(b)), and the ban on preexisting condition exclusions and discrimination based on health status (42 U.S.C. § 300gg-3).

The DOJ does not take issue with the constitutionality of these additional provisions; instead, the Trump administration argues that they are inseverable from the mandate as a matter of statutory interpretation and thus should be invalidated. In June 2018, the DOJ sent identical letters to House Speaker Paul Ryan and Minority Leader Nancy Pelosi laying out this position, noting that “this is a rare case where the proper course is to forgo defense” of federal law.

The DOJ’s position in the case could have devastating consequences for millions of Americans, especially those with preexisting conditions, in the 20 plaintiff states and beyond. This position is, however, limited to the DOJ’s view on the constitutionality of the individual mandate (and the severability of the other ACA provisions). Whether the Trump administration will enforcethese requirements is a separate question.

Previous administrations have made this distinction clearly. In 2011, Attorney General Eric Holder sent a similar letter to members of Congress to inform them that the DOJ would no longer defend the constitutionality of the Defense of Marriage Act (DOMA). Much like the recent letters from Sessions on the individual mandate, Holder outlined his rationale for reaching this conclusion. Holder’s letter also, however, included a paragraph clearly stating that the federal government would continue to enforce DOMA as written. It would do so pursuant to the duty to faithfully execute the law unless and until that law is changed by Congress or there is a definitive verdict on its constitutionality. This paragraph reads:

Notwithstanding this determination, the President has informed me that Section 3 will continue to be enforced by the Executive Branch. To that end, the President has instructed Executive agencies to continue to comply with Section 3 of DOMA, consistent with the Executive’s obligation to take care that the laws be faithfully executed, unless and until Congress repeals Section 3 or the judicial branch renders a definitive verdict against the law’s constitutionality. This course of action respects the actions of the prior Congress that enacted DOMA, and it recognizes the judiciary as the final arbiter of the constitutional claims raised.

The Sessions letter to congressional leaders describing his position in the Texas case did not include a similar statement on enforcement or that the judiciary would serve as the final arbiter of the law’s constitutionality. To my knowledge, the Department of Health and Human Services (HHS) has not made a statement to that effect either.

The lack of an explicit enforcement stance could be important in light of a recent legal theory posited by a private attorney in a presentation before the Health Insurance and Managed Care (B) Committee at the National Association of Insurance Commissioners summer annual meeting on August 5, 2018. In a public briefing on the “potential effects on the market and enforcement,” Anthony Shelley argued that the DOJ’s position in Texas meant that 1) the federal government could refrain from enforcing the parts of the ACA it deems unconstitutional (as well as the ACA’s provisions on guaranteed issue, community rating, and preexisting condition exclusions); and 2) states, too, could opt not to enforce those provisions.

(Shelley is the same attorney who served as outside counsel for Blue Cross of Idaho and argued to HHS that the Idaho Department of Insurance should have the authority to approve non-ACA-compliant “state-based” plans. HHS recently cautioned the Idaho Department of Insurance that it will step in to enforce the ACA if Idaho moves forward with its proposal to authorize plans that do not comply with the ACA.)

Federal Options

Both prongs of Shelley’s argument are, however, flawed and subject to important limitations. The first part of the argument—that the executive branch has discretion to refrain from enforcing any law that it deems unconstitutional—is far from settled law. Under the Take Care Clause of the Constitution, the executive branch has a duty to defend the constitutionality of federal statutes, with limited exceptions. Generally speaking, these exceptions exist when a law significantly restricts executive branch enforcement discretion or where no reasonable arguments can be made in defense of a statute. Executive discretion in enforcement remains an ongoing topic of debate that spans across presidential administrations and party.

In making this argument, Shelley notes dissents from Supreme Court Justice Antonin Scalia and D.C. Circuit Judge Brett Kavanaugh as well as internal memoranda issued by DOJ during previous administrations (under Presidents Clinton and Bush). Judge Kavanaugh stated in a 2011 dissent—in a case regarding the ACA’s individual mandate penalty—that a President can decline to enforce laws that he or she believes to be unconstitutional. He wrote that a President could do so “even if a court has held or would hold the statute constitutional.” As has been raised elsewhere, this would represent an expansion of executive authority and could embolden the Trump administration to set aside other provisions of the ACA that it reasonably believed to be unconstitutional.

Moreover, the only constitutional challenge at issue in Texas is to the individual mandate penalty. The Sessions letter is clear that the other provisions of the ACA that it believes are invalid—guaranteed issue, community rating, and preexisting condition exclusions—are invalid because they are not severable from the individual mandate as a matter of statutory interpretation. In other words, the DOJ believes that the mandate is essential to these other provisions and, without the mandate, the other provisions would not have been adopted by Congress.

The letter describes the severability of these other provisions as a “question of statutory interpretation [that] does not involve the ACA’s constitutionality and therefore does not implicate the Department’s general practice of defending the constitutionality of federal law.” Thus, even if one accepts Shelley’s reasoning here, the only statute at issue that President Trump could decline to enforce would be the individual mandate penalty (not the other ACA consumer protections).

State Options

The second part of the argument is that the DOJ’s position in Texas—combined with a decision by the federal government not to enforce the ACA—would mean that states could choose to ignore the ACA. States, Shelley argues, should have the same enforcement power as the federal government. Thus, a state could not be faulted for failing to “substantially enforce” a part of the ACA that the federal government believes is unconstitutional. Shelley believes that states could assert this position even if the DOJ loses on this point in district court.

The crux of this argument is that states can adopt the DOJ’s position as their own and decide not to enforce the ACA’s provisions on guaranteed issue, community rating, and the ban on preexisting condition exclusions. The problem with this argument, however, is the assertion that the ACA would no longer apply in those states based solely on the DOJ’s position. To the contrary, the DOJ’s position does nothing to disturb existing law or the application of the ACA in all 50 states and the District of Columbia.

Further, states already have the option not to enforce federal insurance law. A state could decide today that it will not enforce the ACA’s provisions on guaranteed issue, community rating, and preexisting condition exclusions. In that case, however, federal regulators would be obligated to step in and enforce those protections under a federal-state framework adopted under HIPAA in 1996.

This “federal fallback” option for enforcement is currently used in Missouri, Oklahoma, Texas, and Wyoming where HHS is the primary regulator of ACA products. As noted above, HHS  said it will step in to enforce the ACA if Idaho authorizes plans that violate the ACA.

So states can decline to defend federal insurance law, as they always have been able to. But states cannot simply ignore federal law—or authorize private insurers to disregard federal law—regardless of the position that the federal government has taken in a lawsuit.

Setting aside Shelley’s legal theory, there is no evidence to suggest that HHS is not enforcing the ACA for 2019 or has changed its long-standing enforcement stance in light of the DOJ’s position (or for any other reason). And there is nothing to suggest that HHS is not requiring insurers to comply with guaranteed issue, community rating, or the ban on preexisting condition exclusions for 2019 in the four states where HHS is the primary enforcer of the ACA.

States can and should continue to enforce the ACA so long as it remains the law of the land, meaning until it has been changed by Congress or until the highest court provides a definitive decision. If states decline to do so, the federal government is required to step in, as was recently confirmed in HHS’ letter to Idaho. The Trump administration should clarify—as the Obama administration did in declining to defend the constitutionality of DOMA—that it will continue to enforce the ACA’s provisions.