Following the Trump administration’s surprise move not to defend major components of the Affordable Care Act (ACA), much more attention is being paid to litigation over the individual mandate known as Texas v. United States.
In Texas, 20 Republican state attorneys general and two individual plaintiffs challenge the constitutionality of the individual mandate—now that the associated penalty has been repealed—and, with it, the entire ACA.
On June 7, 2018, the Department of Justice (DOJ) filed a brief declining to defend the constitutionality of the individual mandate alongside the ACA’s guaranteed issue and community rating protections. These two latter provisions of the law provide critical consumer protections, ensuring that individuals with preexisting conditions cannot be charged more for their coverage or denied coverage altogether based on health status or other factors.
Amici Take Issue With Litigation
The deadline to file amicus briefs was June 14. A range of stakeholders—including economists, public health experts, ideologically diverse legal experts, patient and consumer advocates, small business representatives, unions, insurers, hospitals, the AARP, and physicians—filed briefs. Only one of these briefs (from Citizens United, Gun Owners of America, and others) was filed in support of the lawsuit; all the others highlight the positive impact of the ACA and the harm and chaos that will ensue if the states’ legal challenge is successful. A number of the briefs cite a new analysis from the Urban Institute that finds that the number of uninsured people would increase by 17.1 million—about 50 percent—in 2019 if the ACA is invalidated. Many of the briefs also take issue with the plaintiffs’ and the Department of Justice’s (DOJ’s) legal positions. The brief by the legal experts is a worthwhile read on the issue of severability.
In its brief, America’s Health Insurance Plans (AHIP) underscores that a preliminary injunction or declaratory judgment would “irreparably impair” insurers’ ability to offer plans in 2019. A sudden suspension of the ACA would severely disincentive marketplace participation for 2019: AHIP notes that open enrollment in the 40 states with a federal marketplace “simply would not be possible.” AHIP also takes issue with the plaintiffs’ argument that repeal of the individual mandate penalty will result in a death spiral if guaranteed issue and community rating are not also struck down. Insurers are pricing, and already have priced, their 2019 products to account for loss of the individual mandate. Although premiums are higher because of this, AHIP states that “the individual markets have demonstrated a continued resiliency—and, in many instances, have shown signs of increasing steadiness.”
Criticism From Congress And Governors
Members of Congress were reportedly caught off guard by the Trump administration’s announcement that it would not defend key provisions of the ACA that provide protections for individuals with preexisting medical conditions. Senator Lamar Alexander (R-TN) issued a statement on June 12 saying the DOJ’s argument was “as far-fetched as any I’ve ever heard.” This was in large part because he “didn’t hear a single senator say that they also thought they were repealing protections for people with pre-existing conditions.”
Sens. Mitch McConnell (R-KY) and Orrin Hatch (R-UT) made similar statements to affirm that the Senate wants to maintain protections for people with preexisting conditions. Sen. McConnell noted that “everybody I know in the Senate—everybody—is in favor of maintaining coverage for preexisting conditions.” Sen. Hatch stated that “no American should be denied health coverage based on their pre-existing medical conditions.”
Sen. Alexander’s statement, in particular, confirms the legislative history outlined in the opposition brief filed by the intervenor states, led by California. In their brief, the states identify similar statements from a number of other senior Senators emphasizing that the zeroing out of the mandate penalty is limited to just that: zeroing out the penalty. During debate over the tax reform bill, members of Congress repeatedly stated that the change to the penalty would do nothing to disturb the ACA’s protections for people with preexisting conditions.
On June 18, a bipartisan group of nine governors released a statement calling on the Trump administration to reverse its position in the litigation. The governors refer to the DOJ’s position as a “disappointing decision [that] threatens health care coverage for many in our states.” They, instead, urge the administration to work with Congress and governors on bipartisan solutions to improve the health care system while protecting individuals with preexisting conditions. The governors who signed the letter are John R. Kasich (R-OH), John W. Hickenlooper (D-CO), Bill Walker (I-AK), Tom Wolf (D-PA), Brian Sandoval (R-NV), Roy Cooper (D-NC), Steve Bullock (D-MT), Jay Inslee (D-WA), and Larry Hogan (R-MD).
Employers Not Allowed To Intervene As Plaintiffs
There have already been a number of parties added to the Texas litigation since it was filed in February 2018. In late April, the plaintiff states amended their complaint to add two individual plaintiffs. In mid-May, Democratic attorneys general from 16 states and D.C. were allowed to intervene in the litigation as defendants. Currently, the 20 Republican state attorneys general and two individual plaintiffs are facing off against the Trump administration (at least in name) and 17 Democratic state attorneys general as defendants.
In late May, two employers asked to intervene as plaintiffs. The employers argued that they should be allowed to intervene because they have been harmed by the ACA’s employer mandate and that repeal of the individual mandate penalty exacerbates this harm. This move was opposed by the intervenor defendant states.
On June 15, 2018, Judge O’Connor denied the employers’ request to intervene. He did so narrowly after concluding that the employers met all but one of the elements for intervention as a matter of right—and denied their request for permissive intervention because it “would not serve the interests of justice.”
In a surprising move, Judge O’Connor concluded that the employers do have an interest in the litigation over the individual mandate and share a common question of law with the plaintiffs. He drew this conclusion even though the employers’ main complaint is that they are subject to the employer mandate. Indeed, their complaint about the individual mandate penalty repeal seems to be only that it will exacerbate their concerns about the employer mandate.
Although Judge O’Connor found that the employers have an interest in the litigation, he concluded that their interests were adequately represented by the state plaintiffs. If an intervenor has the “same ultimate objective” as one of the parties, they must show “adversity of interest, collusion, or nonfeasance” by the current parties and that, in the case of the employers, their interest is different from—and will not be represented by—the states. Here, the employers clearly have the same objective as the plaintiff states—to secure a ruling that the individual mandate is unconstitutional. The employers did not, however, show “adversity of interest, collusion, or nonfeasance” by the existing plaintiffs. Thus, the employers did not show that they will not be adequately represented and cannot intervene as a matter of right.
Judge O’Connor found that the employers met all three requirements for permissive intervention: 1) timely application; 2) the main claim or defense and action have a question of law or fact in common; and 3) the intervention will not unduly delay or prejudice the original parties. On the last element, he was “unpersuaded” by the intervenor states who had argued that allowing the employers to intervene would cause a delay in the case.
The employers offered to “significantly contribute to the full development of the underlying factual issues.” However, Judge O’Connor noted that the case is not a factual one. Rather, it is a facial challenge brought to the individual mandate and a legal question. Because the employers only want to join the plaintiff states’ existing effort and not offer new evidence, he concluded that permissive intervention “would not serve the interests of justice in this case.”
Judge O’Connor ended his order by allowing the employers to participate as amici by filing a brief on or before June 22, 2018. He noted that the employers “may be able to present arguments important to the resolution of this case.”