Reed O'Connor, United States District Judge.
The United States healthcare system touches millions of lives in a daily and deeply personal way. Health-insurance policy is therefore a politically charged affair — inflaming emotions and testing civility. But Article III courts, the Supreme Court has confirmed, are not tasked with, nor are they suited to, policymaking.
Here, the Plaintiffs allege that, following passage of the Tax Cuts and Jobs Act of 2017 (TCJA), the Individual Mandate in the Patient Protection and Affordable Care Act (ACA) is unconstitutional. They say it is no longer fairly readable as an exercise of Congress's Tax Power and continues to be unsustainable under the Interstate Commerce Clause. They further urge that, if they are correct, the balance of the ACA is untenable as inseverable from the Invalid Mandate.
Resolution of these claims rests at the intersection of the ACA, the Supreme Court's decision in NFIB, and the TCJA. In NFIB, the Supreme Court held the Individual Mandate was unconstitutional under the Interstate Commerce Clause but could fairly be read as an exercise of Congress's Tax Power because it triggered a tax. The TCJA eliminated that tax. The Supreme Court's reasoning in NFIB — buttressed by other binding precedent and plain text — thus compels the conclusion that the Individual Mandate may no longer be upheld under the Tax Power. And because the Individual Mandate continues to mandate the purchase of health insurance, it remains unsustainable under the Interstate Commerce Clause — as the Supreme Court already held.
Finally, Congress stated many times unequivocally — through enacted text signed by the President — that the Individual Mandate is "essential" to the ACA. And this essentiality, the ACA's text makes clear, means the mandate must work "together with the other provisions" for the Act to function as intended. All nine Justices to review the ACA acknowledged this text and Congress's manifest intent to establish the Individual Mandate as the ACA's "essential" provision. The current and previous Administrations have recognized that, too. Because rewriting the ACA without its "essential" feature is beyond the power of an Article III court, the Court thus adheres to Congress's textually expressed intent and binding Supreme Court precedent to find the Individual
Construing the Plaintiffs' Application for Preliminary Injunction, (ECF No. 39), as a motion for partial summary judgment, the Court therefore
More than any factual developments, the background to this case involves the nuances of the ACA, NFIB, and the TCJA, which the Court traces below.
The ACA became law on March 23, 2010. See Patient Protection and Affordable Care Act, Pub. L. 111-148, 124 Stat. 119-1045 (2010). Congress intended the ACA to achieve "near-universal" health-insurance coverage and to "lower health insurance premiums" through the "creation of effective health insurance markets" and new statutory requirements for individuals and insurance companies. See, e.g., 42 U.S.C. §§ 18091(2)(D), (2)(F), and (2)(I). It pursued these goals through a carefully balanced restructuring of the Nation's health-insurance ecosystem.
For starters, the ACA established a "[r]equirement to maintain minimum essential coverage" — commonly known as the "Individual Mandate." 26 U.S.C. § 5000A(a). To compel compliance with the Individual Mandate, Congress imposed a tax penalty on individuals who were subject to the requirement but chose to disobey it. Id. § 5000A(b). The ACA labeled this penalty the "[s]hared responsibility payment." It was originally to be assessed at either $695.00 or a 2.5 percent share of a family's household income — whichever was greater. Id. § 5000A(c).
From the start, Congress exempted some individuals from Individual Mandate. For example: those qualifying for a "[r]eligious exemption[ ]," id. § 5000A(d)(2)(A); "member[s] of a health care sharing ministry," id. § 5000(d)(2)(B); individuals who are "not ... citizen[s] or national[s] of the United States ... or alien[s] lawfully present in the United States," id. § 5000A(d)(3); and "[i]ncarcerated individuals," id. § 5000A(d)(4). At the same time, Congress exempted five categories of individuals from the shared-responsibility payment but not the Individual Mandate. See id. § 5000A(e). This means several classes of individuals are obligated by § 5000A(a) to obtain minimum-essential coverage but are not subject to the tax penalty for failure to do so.
Congress also wanted to ensure affordable health insurance for those with pre-existing conditions. See 42 U.S.C. § 18091(2)(I) ("By significantly increasing health insurance coverage, the [Individual Mandate], together with the other provisions of this Act, will minimize ... adverse selection and broaden the health insurance risk pool to include healthy individuals, which will lower health insurance premiums... [and] creat[e] effective health insurance markets in which improved health insurance products that are guaranteed issue and do not exclude coverage of preexisting conditions can be sold."). Congress
The ACA includes many other integral regulations and taxes as well. These include, among other things, an excise tax on high-cost insurance plans, 26 U.S.C. § 4980I; the elimination of coverage limits, 42 U.S.C. § 300gg-11; and a provision allowing dependent children to remain on their parents' insurance until age 26, id. § 300gg-14(a). The ACA also implemented an employer mandate and an employer-responsibility assessment. These provisions require employers with at least fifty full-time employees to pay the federal government a penalty if they fail to provide their employees with ACA-compliant health-plan options. See 26 U.S.C. § 4980H.
But just as Congress funneled nearly all Americans into health-insurance coverage on the one hand — through the Individual Mandate and employer mandate, e.g. — it also significantly reduced reimbursements to hospitals by more than $200 billion over ten years on the other. 42 U.S.C. §§ 1395ww(b)(3)(B)(xi)-(xii), 1395ww(q), 1395ww(r), and 1396r-4(f)(7).
Notably, several ACA provisions are tied to another signature reform — the creation and subsidization of health-insurance exchanges. See id. §§ 18031-44. Through these and other provisions, the ACA allocated billions of federal dollars to subsidize the purchase of health insurance through government-run exchanges. Plus, the ACA expanded the scope of Medicaid, adding millions of people to the eligibility roster. See id. § 1396a(a)(10)(A)(i)(VIII).
The ACA also lays out hundreds of minor provisions, spanning the Act's 900-plus pages of legislative text, that complement the above-mentioned major provisions and others.
After the ACA took effect, states, individuals, and businesses challenged its constitutionality in federal courts across the country.
Chief Justice Roberts authored a lengthy opinion considering several issues. See id. at 530-89, 132 S.Ct. 2566. Only certain parts of that opinion garnered a majority of votes or otherwise reached a conclusion agreed to by a majority of the Supreme Court. Here are the pertinent parts.
The Chief Justice disagreed and held the Interstate Commerce Clause authorizes regulating "activity," not inactivity. Id. at 553, 132 S.Ct. 2566. He warned the Government's theory would "extend[ ] the sphere of [Congress's] activity and draw[ ] all power into its impetuous vortex." Id. at 554, 132 S.Ct. 2566 (quoting THE FEDERALIST No. 48, at 309 (James Madison)). "The Framers gave Congress the power to regulate commerce," he reasoned, "not to compel it." Id. at 555, 132 S.Ct. 2566 (emphasis in original).
Though no other Justice joined this part of the Chief Justice's opinion, the "joint dissent" — consisting of Justices Scalia, Kennedy, Thomas, and Alito — reached the same conclusion on the Interstate Commerce Clause question. Id. at 657, 132 S.Ct. 2566 (joint dissent). Accordingly, a majority of the Supreme Court found the Individual Mandate is unconstitutional under the Interstate Commerce Clause,
In
In
The Supreme Court's conclusion that § 5000A constituted a constitutional exercise of Congress's Tax Power turned on several factors. First, the shared-responsibility payment "is paid into the Treasury by taxpayers when they file their tax returns." Id. at 563, 132 S.Ct. 2566 (cleaned up). Second, the amount owed under the ACA "is determined by such familiar factors as taxable income, number of dependents, and joint filing status." Id. (citing 26 U.S.C. §§ 5000A(b)(3), (c)(2), (c)(4)). And "[t]he requirement to pay is found in the Internal Revenue Code and enforced by the IRS, which ... must assess and collect it `in the same manner as taxes.'" Id. at 563-64, 132 S.Ct. 2566. Third and finally, the shared-responsibility payment "yields the essential feature of any tax: It produces at least some revenue for the Government." Id. at 564, 132 S.Ct. 2566 (citing United States v. Kahriger, 345 U.S. 22, 28 n.4, 73 S.Ct. 510, 97 S.Ct. 754 (1953)) (emphasis added). On these bases, the Supreme Court held, "The Federal Government does have the power to impose a tax on those without health insurance. Section 5000A is therefore constitutional, because it can reasonably be read as a tax." Id. at 575, 132 S.Ct. 2566.
Finally, in
Justices Scalia, Kennedy, Thomas, and Alito agreed with the Chief Justice that the Individual Mandate exceeds Congress's powers under the Interstate Commerce and Necessary and Proper Clauses, but they concluded § 5000A could not be characterized as a tax.
Because the joint dissenters concluded the Individual Mandate and the Medicaid expansion were unconstitutional, they — and only they — addressed whether "all other provisions of the Act must fall as
In passing the ACA, the dissenters noted, Congress understood the fiscal concerns surrounding healthcare reform and engineered a system whereby "it did not intend to impose the inevitable costs on any one industry or group of individuals." Id. at 694, 132 S.Ct. 2566. The dissenters reasoned the ACA "attempts to achieve near-universal health insurance coverage by spreading its costs to individuals, insurers, governments, hospitals, and employers — while, at the same time, offsetting significant portions of those costs with new benefits to each group." Id. at 695, 132 S.Ct. 2566. In a nutshell:
Id. at 695-96. "In summary, the Individual Mandate and Medicaid Expansion offset insurance regulations and taxes, which offset reduced reimbursements to hospitals, which offset increases in federal spending." Id. at 696, 132 S.Ct. 2566. And Congress intended the Individual Mandate and Medicaid Expansion to work together with the rest of the ACA. Id. (citing 42 U.S.C. §§ 18091(2)(C), (2)(E), (2)(F), (2)(G), (2)(I), (2)(J)).
Next, the joint dissenters detailed the ACA's major provisions. They concluded, given the above, that these provisions — insurance regulations and taxes; hospital-reimbursement reductions and other reductions in Medicare expenditures; health-insurance exchanges and their federal subsidies; and the employer-responsibility assessment — are all inseverable from the Individual Mandate. See id. at 697-703, 132 S.Ct. 2566. They concluded the same with respect to the ACA's minor provisions. See, e.g., id. at 704, 132 S.Ct. 2566 ("if the major provision were unconstitutional, Congress would not have passed the minor one"). In sum, the joint dissenters would
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 was signed into law. See Pub. L. No. 115-97, 131 Stat. 2054 (2017). Congress passed the TCJA through budget reconciliation, "an expedited procedure [for] considering legislation that would bring existing spending, revenue, and debt limit laws into compliance with the current fiscal priorities established in the annual budget resolution." Megan S. Lynch & James V. Saturno, The Budget Reconciliation Process: Stages of Consideration, at 1, CONGRESSIONAL RESEARCH SERVICE (Jan. 4, 2017). Budget reconciliation limits congressional action to fiscal matters.
In the TCJA, Congress reduced the ACA's shared-responsibility payment to zero, effective January 1, 2019. See TCJA § 11081. Congress took no other action pertaining to the ACA. Nor could it. The reconciliation process limited Congress to doing exactly what it did: reducing taxes. See Fed. Defs.' Resp. 16 n.4, ECF No. 92 ("Although Congress was able to revoke the tax penalty, it could not have revoked the guaranteed-issue or community-rating provisions through reconciliation."); Sept. 5, 2018 Hr'g Tr. at 36:7-12 (Intervenor Defendants) [hereinafter "Hr'g Tr."] ("Congress did not repeal any part of the ACA, including the shared responsibility payment. In fact, it could not do so through the budget reconciliation procedures it used.").
Plaintiffs are the States of Alabama, Arizona, Arkansas, Florida, Georgia, Indiana, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, Wisconsin, Governor Paul LePage of Maine (the "State Plaintiffs"), and individuals Neill Hurley and John Nantz (the "Individual Plaintiffs" and, collectively with the State Plaintiffs, "Plaintiffs").
Defendants are the United States of America, the United States Department of Health and Human Services ("HHS"), Alex Azar, in his official capacity as Secretary of HHS, the United States Internal Revenue Service (the "IRS"), and David J. Kautter, in his official capacity as Acting Commissioner of Internal Revenue (collectively, the "Federal Defendants").
Finally, the States of California, Connecticut, Delaware, Hawaii, Illinois, Kentucky, Massachusetts, Minnesota, New Jersey, New York, North Carolina, Oregon, Rhode Island, Vermont, Virginia, and Washington, and the District of Columbia intervened as defendants (collectively, the "Intervenor Defendants").
The Plaintiffs sued the Federal Defendants seeking, among other things, a declaration that the Individual Mandate, as amended by the TCJA, is unconstitutional and that the remainder of the ACA is inseverable. Am. Compl. 2, ECF No. 27. Their theory is that, because the TCJA eliminated the shared-responsibility tax payment, the tax-based saving construction developed in NFIB no longer applies. Id. at 2-3. Plaintiffs further argue that, as the four joint dissenters reasoned in NFIB, the Individual Mandate is inseverable from the rest of the ACA. Pls.' Br. Prelim. Inj. 35, ECF No. 40 (citing NFIB, 567 U.S. at 691-703, 132 S.Ct. 2566 (joint dissent)) [hereinafter "Pls.' Br."].
The Federal Defendants agree the Individual Mandate is unconstitutional and inseverable from the ACA's pre-existing-condition provisions. But they argue all other ACA provisions are severable from the
The Plaintiffs filed an Application for Preliminary Injunction, (ECF No. 39), on April 26, 2018; the Federal Defendants and the Intervenor Defendants responded, (ECF Nos. 91 and 92), on June 7, 2018; and Plaintiffs replied, (ECF No. 175), on July 5, 2018. Because the Federal Defendants argued a judgment, as opposed to an injunction, was more appropriate, the Court provided notice of its intent to resolve the issues in this case on summary judgment. See July 16, 2018 Order, ECF No. 176 (citing FED. R. CIV. P. 56(f)(3)). The parties responded. See ECF Nos. 177-79.
The Plaintiffs argued they desire a preliminary injunction but are unopposed to "simultaneously considering Plaintiffs' application as a motion for partial summary judgment on the constitutionality of the ACA's mandate." See Pls.' Resp. July 16, 2018 Order, ECF No. 181 (emphasis in original). The Intervenor Defendants opposed converting the preliminary-injunction briefing to a summary-judgment ruling because they wished to more fully brief issues such as Article III standing, the Interstate Commerce Clause, and the scope of injunctive relief. Intervenor Defs.' Resp. July 16, 2018 Order 2, ECF No. 182. At the hearing, the Federal Defendants requested the Court "to defer any ruling until after the close of the open enrollment period which is in mid December, [as] that would ensure that there is no disruption to the open enrollment period." Hr'g Tr. at 30:15-18.
The Court finds the Intervenor Defendants adequately briefed and argued at the September 5, 2018 hearing the standing and Interstate Commerce Clause issues. The Court therefore construes the application as a motion for partial summary judgment.
"Every party that comes before a federal court must establish that it has standing to pursue its claims." Cibolo Waste, Inc. v. City of San Antonio, 718 F.3d 469, 473 (5th Cir. 2013). Standing doctrine is rooted in the Constitution's grant of judicial power to adjudicate cases or controversies. "The doctrine developed in our case law to ensure that federal courts do not exceed their authority as it has been traditionally understood." Spokeo, Inc. v. Robins, ___ U.S. ___, 136 S.Ct. 1540, 1547, 194 L.Ed.2d 635 (2016).
"The doctrine of standing asks `whether the litigant is entitled to have the court decide the merits of the dispute or of particular issues.'" Cibolo Waste, 718 F.3d at 473 (quoting Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 11, 124 S.Ct. 2301, 159 L.Ed.2d 98 (2004)). Standing has both constitutional and prudential components. See id. (quoting Elk Grove, 542 U.S. at 11, 124 S.Ct. 2301) (stating standing "contain[s] two strands: Article III standing... and prudential standing"). The "irreducible constitutional minimum" of Article III standing consists of three elements. Spokeo, 136 S.Ct. at 1547; Lujan v. Defenders of Wildlife, 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The plaintiff must have (1) suffered an injury in fact (2) that is fairly traceable to the challenged conduct of the defendant and (3) that is likely to be redressed by a favorable decision. Lujan, 504 U.S. at 560-61, 112 S.Ct. 2130. It is not necessary for all plaintiffs to demonstrate Article III standing. Rather, "one party with standing is sufficient to satisfy Article III's case-or-controversy requirement." Texas v. United States, 809 F.3d 134, 151 (5th Cir. 2015) (quoting Rumsfeld v. Forum for Academic
"Prudential standing requirements exist in addition to `the immutable requirements of Article III,' ... as an integral part of `judicial self-government.'" ACORN v. Fowler, 178 F.3d 350, 362 (5th Cir. 1999) (quoting Lujan, 504 U.S. at 560, 112 S.Ct. 2130). "The goal of this self-governance is to determine whether the plaintiff `is a proper party to invoke judicial resolution of the dispute and the exercise of the court's remedial power.'" Id. (quoting Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 546 n.8, 106 S.Ct. 1326, 89 L.Ed.2d 501 (1986)). The Supreme Court has observed that prudential standing encompasses "at least three broad principles," including "the general prohibition on a litigant's raising another person's legal rights ...." Lexmark Int'l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 134 S.Ct. 1377, 1386, 188 L.Ed.2d 392 (2014); Cibolo Waste, 718 F.3d at 474 (quoting Elk Grove, 542 U.S. at 12, 124 S.Ct. 2301).
As the parties invoking jurisdiction, the Plaintiffs must show the requirements of standing are satisfied. See Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001).
Summary judgment is proper when the pleadings and evidence show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). "[T]he substantive law will identify which facts are material." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. The movant makes a showing that there is no genuine issue of material fact by informing the court of the basis of its motion and by identifying the portions of the record that reveal there are no genuine material-fact issues. See FED. R. CIV. P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
When reviewing the evidence on a motion for summary judgment, the court must resolve all reasonable doubts and inferences in the light most favorable to the non-movant. See Walker v. Sears, Roebuck & Co., 853 F.2d 355, 358 (5th Cir. 1988). The court cannot make a credibility determination in light of conflicting evidence or competing inferences. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. And if there appears to be some support for the disputed allegations, such that "reasonable minds could differ as to the import of the evidence," the court must deny the motion for summary judgment. Id. at 250, 106 S.Ct. 2505.
The Court's analysis involves three separate inquiries and conclusions. First, the Court finds the Parties satisfy the applicable standing requirements. Second, the Court finds the Individual Mandate can no longer be fairly read as an exercise of Congress's Tax Power and is still impermissible under the Interstate Commerce Clause — meaning the Individual Mandate is unconstitutional. Third, the Court finds the Individual Mandate is essential to and inseverable from the remainder of the ACA.
No party initially challenged the Plaintiffs' standing. But amici raised the
The Individual Plaintiffs, who are citizens and residents of the State of Texas, challenge the Individual Mandate as an unconstitutional requirement to purchase ACA-compliant health insurance. They argue they are injured by the "obligation to comply with the individual mandate... despite the provision's unconstitutionality." Am. Compl. ¶ 43, ECF No. 27. Injury-in-fact must be both particularized and concrete, not conjectural or hypothetical. Spokeo, 136 S.Ct. at 1548 (quoting Lujan, 504 U.S. at 560, 112 S.Ct. 2130). For an injury to be particularized, it "must affect the plaintiff in a personal and individual way." Id. Under Lujan, a concrete and particularized injury generally exists if the "plaintiff is himself an object of the action (or forgone action) at issue. If he is, there is ordinarily little question that the action or inaction has caused him injury, and that a judgment preventing or requiring the action will redress it." Lujan, 504 U.S. at 561-62, 112 S.Ct. 2130. The question of "whether someone is in fact an object of a regulation is a flexible inquiry rooted in common sense" and "underlies all three elements of standing." Contender Farms, LLP v. USDA, 779 F.3d 258, 264, 266 (5th Cir. 2015).
In Contender Farms, a company and its principal, McGartland, challenged a regulation under the Horse Protection Act that required certain entities to suspend horse trainers who engaged in "soring." Id. at 262. The Fifth Circuit analyzed whether the plaintiffs had standing to challenge the regulation and the scope of the agency's rulemaking authority. Applying a "commonsense approach to the facts in [the] case," the court held first that the plaintiffs were the object of the challenged regulation because the regulation "target[ed] participants in Tennessee walking horse events like Contender Farms and McGartland." Id. at 265. Second, the court determined the regulation amounted to an increased regulatory burden because it subjected the plaintiffs to "harsher, mandatory penalties" for violation of the soring rules — it also required competitors to "take additional measures to avoid even the appearance of soring." Id. at 266. Because "[a]n increased regulatory burden typically satisfies the injury in fact requirement," and because the Fifth Circuit found that causation and redressability naturally flowed from the type of injury alleged, the plaintiffs satisfied Article III standing. Id.
Here, the Individual Plaintiffs are the object of the Individual Mandate. It requires them to purchase and maintain certain health-insurance coverage. See 26 U.S.C. § 5000A(a); see also Pls.' App. Supp. Prelim. Inj., Ex. A (Nantz Decl.) ¶ 15, ECF No. 41 ("I am obligated to comply with the [ACA's] individual mandate"); Pls.' App. Supp. Prelim. Inj., Ex. B (Hurley Decl.) ¶ 15, ECF No. 41 ("I continue to maintain minimum essential health
The American Medical Association argues the Individual Plaintiffs have created their own financial injury because they can choose not to comply with the Individual Mandate and, beginning in January 2019, no penalty will be assessed against them. See Br. Am. Med. Ass'n 8-9, ECF No. 113; Hr'g Tr. at 37:9-16. But this argument begs a leading question in this case by assuming the Individual Plaintiffs need not comply with the Individual Mandate. Moreover, a showing of economic injury is not required.
In warning lower courts not to conflate the "actual-injury inquiry with the underlying merits" of a claim, the Fifth Circuit recognizes that standing can be established where a plaintiff alleges that a federal statute or regulation "deters the exercise of his constitutional rights." Duarte, 759 F.3d at 520. Here, the Individual Plaintiffs allege just that. They claim "Section 5000A's individual mandate exceeded Congress's enumerated powers by forcing Individual Plaintiffs to maintain ACA-compliant health insurance coverage." Am. Compl. ¶ 49, ECF No. 27. Intervenor Defendants, meanwhile, contend the Individual Mandate remains a constitutional exercise of Congress's tax or regulatory authority. As a result, the "conflicting contentions of the parties ... present a real, substantial controversy between parties having adverse legal interests, a dispute definite and concrete, not hypothetical or abstract." Babbitt v. United Farm Workers Nat'l Union, 442 U.S. 289, 298, 99 S.Ct. 2301, 60 L.Ed.2d 895 (1979) (quoting Railway Mail Assn. v. Corsi, 326 U.S. 88, 93, 65 S.Ct. 1483, 89 S.Ct. 2072 (1945)). The Individual Plaintiffs have therefore sufficiently alleged an injury in fact that sits at the center of a live controversy.
"Causation and redressability then flow naturally from" the injury created by the Individual Mandate. Contender Farms, 779 F.3d at 266. Without it, the Individual Plaintiffs would not be required to maintain health-insurance coverage and would not be subject to an increased regulatory burden. A favorable decision for the Plaintiffs — a declaration that the Individual Mandate is unconstitutional — would redress the alleged injury. The Individual Plaintiffs, for example, would be free to forego purchasing health insurance altogether or to otherwise purchase health insurance below the "minimum essential coverage" better suited to their health and financial realities. At a minimum, they would be freed from what they essentially allege to be arbitrary governance.
The Court finds the Individual Plaintiffs have standing to challenge the constitutionality of the Individual Mandate.
With standing satisfied, the Court "must ... determine whether the
The question of constitutionality is straightforward: Is the Individual Mandate a constitutional exercise of Congress's enumerated powers when the shared-responsibility payment is zero? Because the Supreme Court upheld the Individual Mandate under Congress's Tax Power, the Court will begin there before proceeding to an Interstate Commerce Clause analysis. The Court finds that both plain text and Supreme Court precedent dictate that the Individual Mandate is unconstitutional under either provision.
In NFIB, the Supreme Court held 26 U.S.C. § 5000A to be a constitutional exercise of Congress's Tax Power. Id. at 570, 132 S.Ct. 2566 (majority) ("Our precedent demonstrates that Congress had the power to impose the exaction in § 5000A under the taxing power, and that § 5000A need not be read to do more than impose a tax. That is sufficient to sustain it."). That power authorizes Congress to "lay and collect Taxes, Duties, Imposts, and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States." U.S. CONST. art. I, § 8, cl. 1. Previously, the shared-responsibility provision, 26 U.S.C. § 5000A(b), imposed an "exaction" for failure to obey the Individual Mandate, id. § 5000A(a). The question here is whether an eliminated shared-responsibility exaction continues to justify construing the Individual Mandate as an exercise of Congress's Tax Power to implement § 5000A.
The Plaintiffs and Federal Defendants say "no." Pls.' Br. 26, ECF No. 40; Fed. Defs.' Resp. 11, ECF No. 92. The Intervenor Defendants, on the other hand, argue § 5000A can still fairly be read as a tax because it continues to satisfy the tax factors discussed in NFIB, including that previous shared-responsibility payments will make their way into the treasury for years to come. Intervenor Defs.' Resp. 16-22, ECF No. 91.
It is critical to clarify something at the outset: the shared-responsibility payment, 26 U.S.C. § 5000A(b), is distinct from the Individual Mandate, id. § 5000A(a). For one thing, the latter is in subsection (a) while the former is in subsection (b).
Other ACA text and functionality demand §§ 5000A(a) and (b) not be lumped together, too. Most obviously, Congress exempted some individuals from the shared-responsibility penalty but not the Individual Mandate. See 26 U.S.C. § 5000A(e). For example, § 5000A(e)(1) provides that "[i]ndividuals who cannot afford coverage" are exempt from the penalty, but not the mandate. Id. § 5000A(e)(1). "Members of Indian tribes" are also subject to the mandate but not the penalty. See id. § 5000A(e)(3). Congress could not possibly have intended the mandate and penalty to be treated as one when it treated them as two.
Congress's codified ACA findings support the distinction as well. As the Plaintiffs argue, those "findings identify the individual mandate itself — `[t]he requirement' to purchase health insurance" — while "making no mention of the separate tax penalty that attaches to some individuals' failure to comply with the mandate." Pls.' Br. 8-9, ECF No. 40 (citation omitted) (emphasis in Plaintiffs' Brief). The Court agrees the findings highlight that Congress believed that, "if there were no requirement" — i.e., no Individual Mandate — "many individuals would wait to purchase health insurance until they needed care." 42 U.S.C. § 18091(2)(I) (emphasis added). That is the belief it acted on and on which it formed its intent.
The 2010 Congress therefore intended the mandate and penalty to be distinct. The 2017 Congress solidified that intent. Section 11081 of the TCJA is entitled "Elimination of shared responsibility payment for individuals failing to maintain minimum essential coverage." TCJA § 11081. This section amends 26 U.S.C.
As described below, the Supreme Court's Tax Power analysis in NFIB proceeded along these lines — recognizing the Individual Mandate as separate and distinct from the shared-responsibility penalty. This distinction is critical to the Court's remaining legal analysis.
NFIB does not contravene Congress's intent to separate the Individual Mandate and shared-responsibility penalty. To the extent the Supreme Court held § 5000A could be fairly read as a tax, it reasoned only that the Individual Mandate could be viewed as part and parcel of a provision supported by the Tax Power — not that the Individual Mandate itself was a tax.
The Supreme Court stated its "precedent demonstrate[d] that Congress had the power to impose the exaction in § 5000A under the taxing power" — and § 5000A(b) is the exaction — "and that § 5000A need not be read to do more than impose a tax. That is sufficient to sustain it." NFIB, 567 U.S. at 570, 132 S.Ct. 2566 (emphasis added). In other words, it was only because of the totally distinct shared-responsibility payment, or exaction, that the Supreme Court could construe § 5000A as a tax provision. As the Government argued at the time, and as Chief Justice Roberts recognized, that meant "the mandate [could] be regarded as establishing a condition — not owning health insurance — that triggers a tax." Id. at 563, 132 S.Ct. 2566 (Roberts, C.J.) (emphasis added).
Put plainly, because Congress had the power to enact the shared-responsibility exaction, § 5000A(b), under the Tax Power, it was fairly possible to read the Individual Mandate, § 5000A(a), as a functional part of that tax also enacted under Congress's Tax Power. Therefore, § 5000A as a whole could be viewed as an exercise of Congress's Tax Power.
The majority's analysis compels this conclusion.
NFIB, 567 U.S. at 563-64, 132 S.Ct. 2566 (majority) (final citation to ACA omitted). The Supreme Court's baseline analysis thus turned on the following: the exaction looks like a tax; it is paid into the treasury; it does not apply to individuals who pay no federal income taxes; familiar tax factors are applied to folks who owe the payment; and the requirement to pay is in the revenue code. Id. Only one of those factors applies to the Individual Mandate, § 5000A(a): it is in the Internal Revenue Code. But the Individual Mandate is not in § 5000A(b), is not called the shared-responsibility payment, is not an exaction, is not paid into the Treasury or otherwise a payment, does not exclude those who pay no federal taxes for income reasons, and is not determined by familiar tax factors. Section 5000A(b) is all those things.
Crucially, after assessing § 5000A(b) against the factors above, the Supreme Court concluded § 5000A "yields the essential feature of any tax: It produces at least some revenue for the Government." Id. at 564, 132 S.Ct. 2566 (citing United States v. Kahriger, 345 U.S. 22, 28 n. 4, 73 S.Ct. 510, 97 S.Ct. 754 (1953)).
The Supreme Court thus identified three basic criteria to conclude § 5000A could be viewed as an exercise of the Tax Power: (1) a payment is paid into the Treasury, (2) the payment amount is determined with reference to income and other familiar factors, and (3) the payment produces revenue for the Government. Id. at 563-64, 132 S.Ct. 2566. In their brief, the Intervenor Defendants urge the "shared responsibility payment continues to maintain these tax-like characteristics." Intervenor Defs.' Resp. 18, ECF No. 91. But at the hearing, they seemed to concede § 5000A will no longer meet the first and second criteria starting January 1, 2019. See Hr'g Tr. at 70:10-16; 70:23-25. They instead focus on the third factor, contending the "production of revenue at all times is not a constitutional requirement for a lawful tax." Intervenor Defs.' Resp. 18, ECF No. 91.
But the Intervenor Defendants downplay the Supreme Court's most crucial conclusion: § 5000A "yield[ed] the essential feature of any tax: It produce[d] at least some revenue for the Government." NFIB, 567 U.S. at 564, 132 S.Ct. 2566 (emphasis added); accord Rosenberger v. Rector and Visitors of Univ. of Virginia, 515 U.S. 819, 841, 115 S.Ct. 2510, 132 L.Ed.2d 700 (1995) ("A tax, in the general understanding of the term, and as used in the Constitution, signifies an exaction for the support of the Government." (citation omitted)). Not indicative, not common — essential.
The Intervenor Defendants argue that "[e]ven if Plaintiffs were correct that a constitutionally-valid tax must produce revenue at all times" — a condition the Supreme Court called essential — "it will be
Intervenor Defendants cite no authority for the proposition that the relevant timeframe to analyze tax revenue is the tax year in which it is remunerated. Plaintiffs reply that "the revenue Intervenor-Defendants identify is attributable to tax year 2018." Pls.' Reply 8 n.9, ECF No. 175.
It is a well-accepted practice that tax revenue is attributable to the tax year in which it is assessed, not the one in which it is paid. See, e.g., NFIB, 567 U.S. at 563, 132 S.Ct. 2566 ("the payment is expected to raise about $4 billion per year by 2017") (emphasis added); CONGRESSIONAL BUDGET OFFICE, ANALYSIS OF MAJOR HEALTH CARE LEGISLATION ENACTED IN MARCH 2010, at 14 (Mar. 30, 2011) (analyzing by fiscal year estimated budgetary effects of ACA tax credits and revenue from excise taxes). When individuals file tax returns in April 2019, for example, the taxes they pay and the returns they receive will affect the government's 2018 tax-year revenue. The same holds true even if individuals receive deferrals or make late payments in the months and years thereafter. And at any rate, because the TCJA eliminated the shared-responsibility payment "beginning after December 31, 2018," that provision no longer produces revenue for the Government — present tense — and any future monies that come in will be because the provision once produced revenue for the Government — past tense. So, it is true the shared-responsibility payment once had the essential feature of any tax. But it no longer does.
Finally, the Intervenor Defendants point to three examples of Congress delaying or suspending taxes within the ACA: the Cadillac Tax, the Medical Device Tax, and the Health Insurance Providers Fee. Intervenor Defs.' Resp. 18-20. Drawing on these examples, the Intervenor Defenders argue "[t]he shared responsibility payment has not been rendered unconstitutional merely because it will be $0 in 2019." Id. at 18.
As an initial matter, suspending or delaying a tax is not equivalent to eliminating it. And the TCJA does not suspend collection of the shared-responsibility payment, it eliminates it. See TCJA § 11081 ("Elimination of shared responsibility payment for individuals failing to maintain minimum essential coverage."). Put differently, until a change in law, there is no shared-responsibility payment. True, Congress may reinstate the payment in the future. But that would be a change in law. The Court cannot rule on a hypothetical counterfactual. It may only "say what the law is," not what it someday could be. Marbury, 5 U.S. at 177.
But at a more fundamental level, the Intervenor Defendants' argument demonstrates they misapprehend the Plaintiffs' basic position. The Intervenor Defendants assert: "The shared responsibility payment has not been rendered unconstitutional merely because it will be $0 in 2019." Intervenor Defs.' Resp. 18, ECF No. 91 (emphasis added). The Plaintiffs do not argue that; they argue the Individual Mandate is unconstitutional. And as the Court has explained, the text of the ACA and TCJA, as well as the Supreme Court's reasoning in NFIB, all hinge on an understanding that the Individual Mandate and the shared-responsibility payment are two very different creatures. The saving construction in NFIB was available only because
Under the law as it now stands, the Individual Mandate no longer "triggers a tax" beginning in 2019. So long as the shared-responsibility payment is zero, the saving construction articulated in NFIB is inapplicable and the Individual Mandate cannot be upheld under Congress's Tax Power. See NFIB, 567 U.S. at 574, 132 S.Ct. 2566 ("Congress's authority under the Taxing power is limited to requiring an individual to pay money into the Federal Treasury, no more." (emphasis added)).
Because the Individual Mandate can no longer be read as an exercise of Congress's Tax Power, the Court takes up the Intervenor Defendants' argument that the mandate is now sustainable under the Interstate Commerce Clause.
The Constitution grants Congress the power to "regulate Commerce ... among the several States." U.S. CONST. art. 1, § 8, cl. 3. Before NFIB, the Supreme Court had never considered whether Congress's power to regulate interstate commerce allowed it to compel citizens into commerce — i.e., to regulate inactivity. 567 U.S. at 647, 132 S.Ct. 2566 (joint dissent) (identifying issue of first impression). As outlined above, the Supreme Court concluded it does not. It therefore held the Individual Mandate could not be sustained under the Interstate Commerce Clause. See id. at 572, 132 S.Ct. 2566 (majority).
The Plaintiffs argue this issue is decided because the Supreme Court already concluded in NFIB that the Individual Mandate cannot be upheld under the Interstate Commerce Clause. Pls.' Br. 22, ECF No. 40.
The Individual Mandate provides: "An applicable individual shall ... ensure that the individual ... is covered under minimum essential coverage ...." 26 U.S.C. § 5000A(a). The Intervenor Defendants argue the provision "gives the individuals the same choice they've always had — to either purchase insurance or pay the tax." Hr'g Tr. at 67:17-19. But the Intervenor Defendants' position is logically self-defeating and contrary to the evidence in this case, the language of the ACA, and Fifth Circuit and Supreme Court precedent.
At the threshold, the Intervenor Defendants hope to have their cake and eat it too by arguing the Individual Mandate does absolutely nothing but regulates interstate commerce. That is, they first say the Individual Mandate "does not compel anyone to purchase insurance." Hr'g Tr. at 37:12. Yet they ask the Court to find the provision "regulate[s] Commerce ... among the several States." U.S. CONST. art. 1, § 8, cl. 3. The Intervenor Defendants' theory, then, is that Congress regulates interstate commerce when it regulates nothing at all. But to "regulate" is "to govern or direct according to rule" and to "bring under the control of law or constituted authority." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1913 (1986). Accepting Intervenor Defendants' theory that the Individual Mandate does nothing thus requires finding that it is not an exercise of Congress's Interstate Commerce Power. Cf. Gibbons v. Ogden, 22 U.S. (9 Wheat.) 1, 189-90, 6 S.Ct. 23 (1824) ("Commerce ... is regulated by prescribing rules ...." (emphasis added)).
Despite the Intervenor Defendants' logical gymnastics, the undisputed evidence in this case suggests the Individual Mandate fixes an obligation. The Individual Plaintiffs assert they feel compelled to comply with the law. Pls.' App. Supp. Prelim. Inj., Ex. A (Nantz Decl.) ¶ 15, ECF No. 41 ("I value compliance with my legal obligations... [t]he repeal of the associated health insurance tax penalty did not relieve me of the requirement to purchase health insurance"); Pls.' App. Supp. Prelim. Inj., Ex. B (Hurley Decl.) ¶ 15, ECF No. 41 ("I continue to maintain minimum essential health coverage because I am obligated to comply with the [ACA's] individual mandate"). This should come as no surprise. "It is the attribute of law, of course, that it binds; it states a rule that will be regarded as compulsory for all who come within its jurisdiction." HADLEY ARKES, FIRST THINGS: AN INQUIRY INTO THE FIRST PRINCIPLES OF MORALS AND JUSTICE 11 (1986). Law therefore has an enormous influence on social norms and individual conduct in society. See CONGRESSIONAL BUDGET OFFICE, KEY ISSUES IN ANALYZING MAJOR HEALTH INSURANCE PROPOSALS at 53 (Dec. 2008) (noting compliance "is generally observed, even when there is little or no enforcement"). That is the point.
Undoubtedly, now that the shared-responsibility payment has been eliminated, more individuals will choose not to comply with the Individual Mandate. See CONGRESSIONAL BUDGET OFFICE, REPEALING THE INDIVIDUAL HEALTH INSURANCE MANDATE: AN UPDATED ESTIMATE at 1 (Nov. 8, 2017). And that is likely to undermine Congress's intent in passing the ACA: Near-universal healthcare and reduced healthcare costs. See id. But the fact that many individuals will no longer feel bound by the Individual Mandate does not change either that some
And therein lies the rub. The Individual Mandate is law. 26 U.S.C. § 5000A(a). To be precise, the "[r]equirement to maintain minimum essential coverage" is still law. Id. § 5000A(a) (emphasis added). As the Intervenor Defendants concede, Congress "deliberately left the rest of the ACA untouched" — including the Individual Mandate. Hr'g Tr. at 40:12-13.
That the Individual Mandate persists, the Court must conclude, is no mistake. "[I]t is no more the court's function to revise by subtraction than by addition." READING LAW, supra note 9, at 174. The surplusage canon holds that, while "[s]ometimes lawyers will seek to have a crucially important word ignored," courts must "avoid a reading that renders some words altogether redundant" or "pointless." Id. at 174, 176. And this is just as true when parties "argue that an entire provision should be ignored." Id. at 175; see also Yates v. United States, ___ U.S. ___, 135 S.Ct. 1074, 1085, 191 L.Ed.2d 64 (2015) ("We resist a reading ... that would render superfluous an entire provision ....").
To accept the Intervenor Defendants' argument that the Individual Mandate does nothing would be doubly sinful under the canon against surplusage — it would require ignoring both the mandatory words of the provision and the function of the provision itself. As to the words of the provision, it is entitled, "Requirement to maintain minimum essential coverage," and provides that "[a]n applicable individual shall ... ensure" that she or he is covered under an appropriate plan. 26 U.S.C. § 5000A(a). These words must be interpreted according to their plain meaning. See United States v. Yeatts, 639 F.2d 1186, 1189 (5th Cir. 1981) ("A basic canon of statutory construction is that words should be interpreted as taking their ordinary and plain meaning." (citing Perrin v. United States, 444 U.S. 37, 42, 100 S.Ct. 311, 62 L.Ed.2d 199 (1979))); READING LAW, supra note 9, at 69.
The words "requirement" and "shall" are both mandatory. Webster's defines "requirement" as "something required," "something wanted or needed," and "something called for or demanded." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1929 (1986). And it provides the following as the non-archaic meaning of "shall": "used to express a command or exhortation." Id. at 2085. But a plethora of binding caselaw already establishes that there is nothing permissive about a Congressionally enacted requirement that properly
This is precisely why Chief Justice Roberts, in explaining his road to the NFIB majority, noted that the Individual Mandate "reads more naturally as a command to buy insurance." NFIB, 567 U.S. at 574, 132 S.Ct. 2566 (Roberts, C.J.). Indeed, the Chief Justice reasoned that he "would uphold it as a command if the Constitution allowed it." Id. But because courts "have a duty to construe a statute to save it, if fairly possible," id., and because "§ 5000A [could] be interpreted as a tax" at the time, id., the Chief Justice construed the Individual Mandate "as establishing a condition... that triggers a tax," id. at 563, 132 S.Ct. 2566. In other words, to the extent the majority construed the Individual Mandate as something other than a standalone mandate, it did so only because it was possible to construe the provision as triggering a tax. That "fundamental construct," as the Intervenor Defendants call it, see Hr'g Tr. at 66:15, was just that — a construct. And in light of this Court's finding on the Tax Power today, the construct no longer holds.
But even under the NFIB construct, the Individual Mandate created an obligation.
The logic of the NFIB construct is that an individual can comply with the law after disobeying the Individual Mandate only by paying the shared-responsibility payment. "The only thing they may not lawfully do is not buy health insurance and not pay the resulting tax." Id. at 574 n.11, 132 S.Ct. 2566. But this means the Individual Mandate is no more optional than the tax.
If an individual can satisfy the law only by satisfying either Condition 1 (the Individual Mandate) or Condition 2 (the tax), then both conditions are equally optional and mandatory. To state it differently, under the NFIB construct, failing Condition 1 no more triggers Condition 2 than failing Condition 2 triggers Condition 1. So, an individual who disobeys the Individual Mandate can satisfy the law only by paying a tax, but an individual who disregards the tax can satisfy the law only by obeying the Individual Mandate. And only in a world where the Individual Mandate were truly non-binding could an individual disobey the Individual Mandate and forego the tax. But under the NFIB majority's construct, that is not the case. That is because logic demands that the Individual Mandate was never — pardon the oxymoron — a non-binding law.
The remainder of the ACA proves that, too. As noted above, § 5000A(e), did and still does exempt some individuals from the eliminated shared-responsibility payment
At least five Justices agreed the Individual Mandate reads more naturally as a command to buy health insurance than as a tax,
The Court today finds the Individual Mandate is no longer fairly readable as an exercise of Congress's Tax Power and continues to be unsustainable under Congress's Interstate Commerce Power. The Court therefore finds the Individual Mandate, unmoored from a tax, is unconstitutional and
Since the Individual Mandate is unconstitutional, the next question is whether that provision is severable from the rest of the ACA. The Plaintiffs and the Federal Defendants agree, based on the text of 42 U.S.C. § 18091 and all the opinions in NFIB, that the guaranteed-issue and community-rating provisions of the ACA are inseverable from the Individual Mandate. See Pls.' Br. 30-35, ECF No. 40; Fed. Defs.' Resp. 13-16, ECF No. 92; Pls.' Reply 9, ECF No. 175. The Plaintiffs, however, argue the Individual Mandate is inseverable from the entire ACA, pointing again to § 18091 and NFIB. Pls.' Br. 27-40, ECF No. 40. The Intervenor Defendants first argue the Individual Mandate is severable from all provisions in the ACA. Intervenor Defs.' Resp. 28-33, ECF No. 91. But they also specifically urge that the guaranteed-issue and community-rating provisions are severable from the Individual Mandate. Id. at 33-43.
Notably, the parties dispute which Congress's intent controls — the 2010 Congress that passed the ACA or the 2017 Congress that passed the TCJA. See Pls.' Reply 14, ECF No. 175 (arguing the intent of the 2010 Congress controls); Intervenor Defs.' Resp. 28-30, ECF No. 91 (contending the intent of the 2017 Congress controls); Hr'g Tr. at 43-44. This is a bit of a red herring because, applying the relevant standards, the Court finds both Congresses manifested the same intent: The Individual Mandate is inseverable from the entire ACA.
Because the story begins with the 2010 Congress, the Court begins there as well, analyzing both plain text and Supreme Court precedent. But first, a word about severability doctrine.
The doctrine of severability is rooted in the separation of powers. See Ayotte v. Planned Parenthood of N. New
Severability, however, is possible only where "an act of Congress contains unobjectionable provisions separable from those found to be unconstitutional." Id. (quoting El Paso & Ne. R. Co. v. Gutierrez, 215 U.S. 87, 96, 30 S.Ct. 21, 54 S.Ct. 106 (1909)) (emphasis added). Were a court to overplay deference to sever an inseverable statute, it would embrace the very evil the doctrine is designed to deter. See, e.g., R.R. Ret. Bd. v. Alton R.R. Co., 295 U.S. 330, 362, 55 S.Ct. 758, 79 S.Ct. 1468 (1935) ("[W]e cannot rewrite a statute and give it an effect altogether different from that sought by the measure viewed as a whole."). Put bluntly, severing an inseverable statute "is legislative work beyond the power and function of the court." Hill v. Wallace, 259 U.S. 44, 70, 42 S.Ct. 453, 66 S.Ct. 822 (1922). For that reason, the Supreme Court has also readily held whole statutes unconstitutional due to an inseverable part.
In light of these background principles, the test for severability is often stated as follows: "Unless it is evident that the Legislature would not have enacted those provisions which are within its power, independently of that which is not, the invalid part may be dropped if what is left is fully operative as a law."
So, a court's severability analysis begins with a bread-and-butter exercise: parsing a provision's text and gleaning the ordinary meaning. See Murphy, 138 S.Ct. at 1486 (Thomas, J., concurring) ("Because courts cannot take a blue pencil to statutes, the severability doctrine must be an exercise in statutory interpretation."). If the text reflects Congress's intent that an unconstitutional provision not be severed — i.e., if "it is evident" Congress "would not have enacted those provisions which are within its power, independently of that which is not," Alaska Airlines, 480 U.S. at 684, 107 S.Ct. 1476 — the analysis ends. The provision is inseverable.
If the text does not reflect a clear legislative intent, however, the court must ask whether the constitutional provisions, severed from the unconstitutional one, would remain "fully operative as a law." Free Enterprise, 561 U.S. at 509, 130 S.Ct. 3138 (citing New York, 505 U.S. at 186, 112 S.Ct. 2408; Alaska Airlines, 480 U.S. at 684, 107 S.Ct. 1476). This is because "Congress could not have intended a constitutionally flawed provision to be severed from the remainder of the statute if the balance of the legislation is incapable of functioning independently." Alaska Airlines, 480 U.S. at 684, 107 S.Ct. 1476. Here too the touchstone is intent.
Applying these standards, the Court finds the 2010 Congress expressed through plain text an unambiguous intent that the Individual Mandate not be severed from the ACA. Supreme Court precedent supports that finding. And in passing the TCJA through the reconciliation process, the 2017 Congress further entrenched the intent manifested by the 2010 Congress.
The Intervenor Defendants contend that, "even if it were proper to consider the legislative intent of the 2010 Congress that passed the minimum coverage provision in its original ... form — and to graft that intent onto a statutory amendment passed by a different Congress — that would still be of no assistance to Plaintiffs." Intervenor Defs.' Resp. 30, ECF No. 91. They first briefly point to the fact that several ACA provisions went into effect before the Individual Mandate. Id. at 31-32. They then argue that, "[i]n light of the ACA's numerous stand-alone provisions addressing a vast array of diverse topics, it is not remotely `evident' that Congress would want the extraordinary disruption that would be caused by" a finding of inseverability. Id. at 32-33. Finally, the Intervenor Defendants devote ten pages to explaining why the Individual Mandate is specifically severable from the guaranteed-issue and community-rating provisions, arguing Congress intended to end discriminatory underwriting practices and that Congress's findings are irrelevant as they focused on an adverse-selection problem that no longer exists. Id. at 33-43.
"[T]he touchstone for any decision about remedy is legislative intent, for a court cannot use its remedial powers to circumvent the intent of the legislature."
The findings state Congress intended to "significantly increas[e] healthcare coverage," "lower health insurance premiums," ensure that "improved health insurance products that are guaranteed issue," and ensure that such health insurance products "do not exclude coverage of pre-existing conditions." 42 U.S.C. § 18091(2)(I). And Congress intended to achieve those goals in a very specific way. Congress knew that "[i]n the absence of the requirement,
"The requirement," Congress intended, would "achieve[ ] near-universal coverage" — a major goal of the ACA — "by building upon and strengthening the private employer-based health insurance system." Id. § 18091(2)(D). Congress believed this would work because "[i]n Massachusetts, a similar requirement ha[d] strengthened private employer-based coverage." Id. Moreover, Congress stated "the requirement, together with the other provisions of this Act, will significantly reduce [the] economic cost" caused by uninsured individuals. Id. § 18091(2)(E). Congress also intended the Individual Mandate to achieve another stated goal: "By significantly reducing the number of the uninsured, the requirement, together with the other provisions of this Act, will lower health insurance premiums." Id. § 18091(2)(F). And "the requirement, together with the other provisions of this Act," Congress stated, "will improve financial security for families." Id. § 18091(2)(G).
If there were any lingering doubt Congress intended the Individual Mandate to be inseverable, Congress removed it: "The requirement is an essential part of this larger regulation of economic activity, and the absence of the requirement would undercut Federal regulation of the health insurance market." Id. § 18091(2)(H) (emphasis added). That is because, "if there were no requirement, many individuals would wait to purchase health insurance
Congress closed by adding that it intended "the requirement, together with the other provisions," to "significantly reduce administrative costs and lower health insurance premiums." Id. § 18091(2)(J). "The requirement is essential," Congress reiterated, "to creating effective health insurance markets that do not require underwriting and eliminate its associated administrative costs." Id. (emphasis added).
All told, Congress stated three separate times that the Individual Mandate is essential to the ACA.
As the Supreme Court has repeatedly explained, "The best evidence of congressional intent ... is the statutory text that Congress enacted."
On the unambiguous enacted text alone, the Court finds the Individual Mandate is inseverable from the Act to which it is essential.
While the ACA's plain text alone justifies finding complete inseverability, this text-based conclusion is further compelled by two separate Supreme Court decisions. All nine Justices to address the issue, for example, agreed the Individual Mandate is inseverable from at least the pre-existing-condition provisions.
Justice Ginsburg, joined by Justices Breyer, Kagan, and Sotomayor, agreed. She wrote: "To make its chosen approach work ... Congress had to use some new tools, including a requirement that most individuals obtain private health insurance coverage." Id. at 596, 132 S.Ct. 2566 (Ginsburg, J., joined by Breyer, Kagan, and Sotomayor, JJ.) (citing 26 U.S.C.§ 5000A) (emphasis added). She elaborated: "To ensure that individuals with medical histories have access to affordable insurance, Congress devised a three-part solution." Id. at 597, 132 S.Ct. 2566. Part one: guaranteed issue. Id. Part two: community rating. Id. "But these two provisions, Congress comprehended, could not work effectively unless individuals were given a powerful incentive to obtain insurance." Id. (emphasis added). Congress drew this lesson from the "disastrous" results of seven different states that experienced "skyrocketing insurance premium costs, reductions in individuals with coverage, and reductions in insurance products and providers" after "enact[ing] guaranteed-issue and community-rating laws without requiring universal acquisition of insurance coverage." Id. at 597-98, 132 S.Ct. 2566 (citations and quotation marks omitted).
Based on these lessons, "Congress comprehended that guaranteed-issue and community-rating laws alone will not work." Id. at 598, 132 S.Ct. 2566 (emphasis added). So, taking a cue from Massachusetts, "Congress passed the minimum coverage provision as a key component of the ACA." Id. at 599, 132 S.Ct. 2566 (emphasis added). As did the Chief Justice, then, Justices Ginsburg, Breyer, Kagan, and Sotomayor all understood what Congress understood: Without the Individual Mandate, the guaranteed-issue and community-rating provisions "could not work."
Make that nine Justices. As the joint dissent explained, "Insurance companies bear new costs imposed by a collection of insurance regulations and taxes, including `guaranteed issue' and `community rating' requirements to give coverage regardless of the insured's pre-existing conditions." Id. at 695, 132 S.Ct. 2566 (joint dissent). But, keeping with the careful balance described by the other Justices, "the insurers benefit from the new, healthy purchasers who are forced by the Individual Mandate to buy the insurers' product and from the new low-income Medicaid recipients who will enroll in insurance companies' Medicaid-funded managed care programs." Id. at 695-96, 132 S.Ct. 2566. Because the Supreme Court held the ACA's Medicaid Expansion could not be compulsory, see id. at 575-85, 132 S.Ct. 2566 (Roberts, C.J.), the Court's finding today that the Individual Mandate is unconstitutional means both components the joint dissenters found to be inseverable from the pre-existing-conditions provisions have now fallen.
In King v. Burwell, the Supreme Court reaffirmed many of the Justices' severability conclusions from NFIB. See ___ U.S. ___, 135 S.Ct. 2480, 2485-87, 192 L.Ed.2d 483 (2015). There, a six-Justice majority recounted the history of several states attempting to expand health-insurance coverage without implementing a mandate — an experiment that repeatedly "led to an economic `death spiral.'" Id. at 2486. It then explained what all nine Justices in NFIB expressed: the guaranteed-issue provision, the community-rating provision, and the Individual Mandate "are closely
So, after King, the Government
But the reasoning in the above opinions also confirms the Individual Mandate is inseverable from the entirety of the ACA. See, e.g., King, 135 S.Ct. at 2486 (noting the successful Massachusetts model used by Congress relied not only on a mandate but instead on "[t]he combination of these three reforms — insurance market regulations, a coverage mandate, and tax credits" (emphasis added)). Notably, the joint dissent in NFIB was the only block of Justices to fully consider severability because it was the only block of Justices to find the Individual Mandate unconstitutional — which is now the controlling framework. And they explained why the Individual Mandate was inseverable from the ACA as a whole. That explanation is consistent with the reasoning offered in the Chief Justice's opinion and in Justice Ginsburg's opinion.
The joint dissent first detailed how "[t]he whole design of the [ACA] is to balance the costs and benefits affecting each set of regulated parties." Id. at 694, 132 S.Ct. 2566; accord id. at 548, 132 S.Ct. 2566 (Roberts, C.J.) (noting "the mandate prevents cost shifting"); id. at 593, 132 S.Ct. 2566 (Ginsburg, J., joined by Breyer, Kagan, and Sotomayor, JJ.) (noting Congress wanted to address "[t]hose with health insurance subsidiz[ing] the medical care of those without it"). To that end, "individuals are required to obtain health insurance"; insurers must "sell them insurance regardless of ... pre-existing conditions and ... comply with a host of other regulations ... [and] pay new taxes"; "States are expected to expand Medicaid eligibility and to create regulated marketplaces"; "[s]ome persons who cannot afford insurance are provided it through the Medicaid Expansion, and others are aided in their purchase of insurance through federal subsidies"; "[t]he Federal Government's increased spending is offset by new taxes and cuts in other federal expenditures"; and certain employers "must either provide employees with adequate health benefits or pay a financial exaction." Id. at 694-95, 132 S.Ct. 2566 (joint dissent) (citations omitted). "In short," the joint dissent explained, "the Act attempts to achieve
As the joint dissent concluded, "the Act's major provisions are interdependent." Id. at 696, 132 S.Ct. 2566 (joint dissent). Indeed, the ACA "refers to these interdependencies as `shared responsibility.'" Id. (citations omitted). And the joint dissent cited Congress's findings to buttress its conclusion on the Individual Mandate's complete inseverability, noting that "[i]n at least six places, the Act describes the Individual Mandate as working `together with the other provisions of this Act.'" Id. (citing 42 U.S.C. §§ 18091(2)(C), (E), (F), (G), (I), and (J)). The joint dissent further noted that the ACA "calls the Individual Mandate `an essential part' of federal regulation of health insurance and warns that `the absence of the requirement would undercut Federal regulation of the health insurance market.'" Id. (citing 42 U.S.C. § 18091(2)(H)).
"In sum, Congress passed the minimum coverage provision as a key component of the ACA." Id. at 599, 132 S.Ct. 2566 (Ginsburg, J., joined by Breyer, Kagan, and Sotomayor, JJ.) (emphasis added); accord id. at 539, 132 S.Ct. 2566 (majority) ("This case concerns constitutional challenges to two key provisions, commonly referred to as the individual mandate and the Medicaid expansion." (emphasis added)). Not a key component of the guaranteed-issue and community-rating provisions, but of the ACA. The Supreme Court's only reasoning on the topic thus supports what the text says: The Individual Mandate is essential to the ACA.
The ACA's text and the Supreme Court's decisions in NFIB and King thus make clear the Individual Mandate is inseverable from the ACA. As Justice Ginsburg explained, "Congress could have taken over the health-insurance market by establishing a tax-and-spend federal program like Social Security." Id. at 595, 132 S.Ct. 2566 (Ginsburg, J., joined by Breyer, Kagan, and Sotomayor, JJ.). But it did not. "Instead of going this route, Congress enacted the ACA ... To make its chosen approach work, however, Congress had to use ... a requirement that most individuals obtain private health insurance coverage." Id. (citing 26 U.S.C.§ 5000A). That requirement — the Individual Mandate — was essential to the ACA's architecture. Congress intended it to place the Act's myriad parts in perfect tension. Without it, Congress and the Supreme Court have stated, that architectural design fails. "Without a mandate, premiums would skyrocket. The guaranteed issue and community rating provisions, in the absence of the individual mandate, would create an unsustainable death spiral of costs, thus
Yet the parties focus on particular provisions. It is like watching a slow game of Jenga, each party poking at a different provision to see if the ACA falls. Meanwhile, Congress was explicit: The Individual Mandate is essential to the ACA, and that essentiality requires the mandate to work together with the Act's other provisions. See 42 U.S.C. § 18091. If the "other provisions" were severed and preserved, they would no longer be working together with the mandate and therefore no longer working as Congress intended. On that basis alone, the Court must find the Individual Mandate inseverable from the ACA. To find otherwise would be to introduce an entirely new regulatory scheme never intended by Congress or signed by the President. And the Court "cannot rewrite a statute and give it an effect altogether different from that sought by the measure viewed as a whole." Murphy, 138 S.Ct. at 1482 (quoting Alton, 295 U.S. at 362, 55 S.Ct. 758).
Even if the Court preferred to ignore the clear text of § 18091 and parse the ACA's provisions one by one, the text- and precedent-based conclusion would only be reinforced: Upholding the ACA in the absence of the Individual Mandate would change the "effect" of the ACA "as a whole." See Alton, 295 U.S. at 362, 55 S.Ct. 758. For example, the Individual Mandate reduces the financial risk forced upon insurance companies and their customers by the ACA's major regulations and taxes. See 42 U.S.C. §§ 18091(2)(C), (I). If the regulations and taxes were severed from the Individual Mandate, insurance companies would face billions of dollars in ACA-imposed regulatory and tax costs without the benefit of an expanded risk pool and customer base — a choice no Congress made and one contrary to the text. See NFIB, 567 U.S. at 698, 132 S.Ct. 2566 (joint dissent); 42 U.S.C. § 18091(2)(C) and (I). Similarly, the ACA "reduce[d] payments by the Federal Government to hospitals by more than $200 billion over 10 years." NFIB, 567 U.S. at 699, 132 S.Ct. 2566 (joint dissent). Without the Individual Mandate (or forced Medicaid expansion), hospitals would encounter massive losses due to providing uncompensated care. See BLACKMAN, supra note 3, at 2-4 (discussing the free-rider and cost-shifting problems in healthcare). This would, as Plaintiffs argue, "distort the ACA's design of `shared responsibility.'" Pls.' Br. 36, ECF No. 40 (citing NFIB, 567 U.S. at 699, 132 S.Ct. 2566 (joint dissent)).
The story is the same with respect to the ACA's other major provisions, too. The ACA allocates billions of dollars in subsidies to help individuals purchase a government-designed health-insurance product on exchanges established by the States (or the federal government). See, e.g., 26 U.S.C. § 36B; 42 U.S.C. § 18071. But if the Individual Mandate falls, and especially if the pre-existing-condition provisions fall, upholding the subsidies and exchanges would transform the ACA into a law that subsidizes the kinds of discriminatory products Congress sought to abolish at, presumably, the re-inflated prices it sought to suppress. Cf. Williams v. Standard Oil Co. of Louisiana, 278 U.S. 235, 244, 49 S.Ct. 115, 73 S.Ct. 287 (1929), overruled in part on other grounds by Olsen v. Nebraska ex rel. W. Reference & Bond Ass'n, 313 U.S. 236, 61 S.Ct. 862, 85 S.Ct. 1305 (1941) ("The taxes imposed by section 10 are solely for the purpose of
Nor did Congress ever contemplate, never mind intend, a duty on employers, see 26 U.S.C. § 4980H, to cover the "skyrocketing insurance premium costs" of their employees that would inevitably result from removing "a key component of the ACA." (Ginsburg, J., joined by Breyer, Kagan, and Sotomayor, JJ.). And the Medicaid-expansion provisions were designed to serve and assist fulfillment of the Individual Mandate and offset reduced hospital reimbursements by aiding "low-income individuals who are simply not able to obtain insurance." Id. at 685, 132 S.Ct. 2566 (joint dissent).
The result is no different with respect to the ACA's minor provisions. For example, the Intervenor Defendants assert that, "[i]n addition to protecting consumers with preexisting medical conditions, Congress also enacted the guaranteed-issue and community-rating provisions to reduce administrative costs and lower premiums." Intervenor Defs.' Resp. 35, ECF No. 91; see also id. at 34 ("Congress independently sought to end discriminatory underwriting practices and to lower administrative costs."). But Congress stated explicitly that the Individual Mandate "is essential to creating effective health insurance markets that do not require underwriting and eliminate its associated administrative costs." 42 U.S.C. § 18091(2)(J) (emphasis added). At any rate, to the extent most of the minor provisions "are mere adjuncts of the" now-unconstitutional Individual Mandate and nonmandatory Medicaid expansion, "or mere aids to their effective execution," if the Individual Mandate "be stricken down as invalid" then "the existence of the [minor provisions] becomes without object." Williams, 278 U.S. at 243, 49 S.Ct. 115.
Perhaps it is impossible to know which minor provisions Congress would have passed absent the Individual Mandate. But the level of legislative guesswork entailed in reconstructing the ACA's innumerable trade-offs without the one feature Congress called "essential" is plainly beyond the judicial power. See Alton, 295 U.S. at 362, 55 S.Ct. 758; Wallace, 259 U.S. at 70, 42 S.Ct. 453. And there is every reason to believe Congress would not have enacted the ACA absent the Individual Mandate — given the Act's text as interpreted by the Supreme Court — but "no reason to believe that Congress would have enacted [the minor provisions] independently." NFIB, 567 U.S. at 705, 132 S.Ct. 2566 (joint dissent).
In sum, the Individual Mandate "is so interwoven with [the ACA's] regulations that they cannot be separated. None of them can stand." Wallace, 259 U.S. at 70, 42 S.Ct. 453.
Neither the ACA's text nor Supreme Court precedent leave any doubt. The 2010 Congress never intended the ACA "to impose massive new costs on insurers" while allowing widespread "cost shifting." Id. at 548, 132 S.Ct. 2566 (Roberts, C.J.). It never intended the ACA to go on without the signature provision that everyone knew would "make its chosen approach work" — the signature provision Congress "had to use." Id. at 596, 132 S.Ct. 2566 (Ginsburg, J., joined by Breyer, Kagan, and Sotomayor, JJ.). It never agreed to a law that would lead to "disastrous" results like "skyrocketing insurance premium costs, reductions in individuals with coverage,
Historical context confirms Congress would not have enacted the ACA absent the constitutional infirmities.
This tells the Court all it needs to know. Based on unambiguous text, Supreme Court guidance, and historical context, the Court finds "it is evident that the Legislature would not have enacted" the ACA "independently of" the Individual Mandate. Alaska Airlines, 480 U.S. at 684, 107 S.Ct. 1476. That is to say, Congress "would not have enacted those provisions which are within its power, independently of [those] which [are] not." Murphy, 138 S.Ct. at 1482 (quoting Alaska Airlines, 480 U.S. at 684, 107 S.Ct. 1476). "Though this inquiry can sometimes be elusive, the answer here seems clear." Free Enterprise, 561 U.S. at 509, 130 S.Ct. 3138 (cleaned up). Congress intended the Individual Mandate to serve as the keystone, the linchpin of the ACA. That is a conclusion the Court can reach without marching through every nook and cranny of the ACA's 900-plus pages because Congress plainly told the public when it wrote the ACA that "[t]he minimum coverage provision is ... an `essential par[t] of a larger regulation of economic activity'" and "without the provision, `the regulatory scheme [w]ould be undercut.'" NFIB, 567 U.S. at 619, 132 S.Ct. 2566 (Ginsburg, J., joined by Breyer, Kagan, and Sotomayor, JJ.) (quoting but not citing Congress's findings in 42 U.S.C. § 18091).
In the face of overwhelming textual and Supreme Court clarity, the Court finds "it is `unthinkable' and `impossible' that the Congress would have created the" ACA's delicately balanced regulatory scheme without the Individual Mandate. Alton, 295 U.S. at 362, 55 S.Ct. 758. The Individual Mandate "so affect[s] the dominant aim of the whole statute as to carry it down with" it. Id. To find otherwise would "rewrite [the ACA] and give it an effect altogether different from that sought by the measure viewed as a whole." Alton, 295 U.S. at 362, 55 S.Ct. 758. Employing such a strained view of severance would be tantamount to "legislative work beyond the power and function of the court." Wallace, 259 U.S. at 70, 42 S.Ct. 453.
Looking for any severability-related intent in the 2017 Congress is a fool's errand because the 2017 "Congress did not repeal any part of the ACA, including the shared responsibility payment. In fact, it could not do so through the budget reconciliation procedures that it used." Hr'g Tr. at 36:7-10 (Intervenor Defendants); accord id. at 98:1-3 (Federal Defendants) ("The only thing that we know for sure about Congress' intent in 2017 ... is that Congress wanted to pass a tax cut."). So, asking
But suppose it is true the intent of the TCJA-enacting Congress of 2017 controls severability rather than the intent of the ACA-enacting Congress of 2010. The Intervenor Defendants argue the Court should infer that, by eliminating the shared-responsibility payment while leaving the rest of the ACA intact, the 2017 Congress intended to preserve the balance of the ACA. Intervenor Defs.' Resp. 28-30, ECF No. 91; Hr'g Tr. at 42:10-11 ("The 2017 Congress that amended § 5000A(c) deliberately left the rest of the ACA intact....").
But consider what Congress did not do in 2017 — or ever. First and foremost, it did not repeal the Individual Mandate. As the Court described in great detail, see supra Part IV.B.1.a, the shared-responsibility payment is not the Individual Mandate. That matters. The Individual Mandate, not the shared-responsibility payment, is "essential" to the ACA. See 42 U.S.C. § 18091. And the 2017 Congress did not repeal it. Accord Hr'g Tr. at 42:10-11 (Intervenor Defendants) ("The 2017 Congress that amended § 5000A(c) deliberately left the rest of the ACA intact ...."). So, at best, searching the 2017 Congress's legislation for severability-related intent would create an inference that the 2017 Congress, like the 2010 Congress, intended to preserve the Individual Mandate because the 2017 Congress, like the 2010 Congress, knew that provision is essential to the ACA. Intervenor Defendants' argument that the 2017 Congress manifested an intent of severability is therefore unavailing. Indeed, one would have to take the incorrect view that the shared-responsibility payment is the Individual Mandate to accept the argument that the 2017 Congress, by eliminating the payment, intended to sever the Individual Mandate.
Secondly, the 2017 Congress did not repeal 42 U.S.C. § 18091, which every Supreme Court Justice to review the ACA cited and which definitively establishes Congress's intent that the Individual Mandate be "an essential part of" its "regulation of the health insurance market." 42 U.S.C. § 18091(2)(H); see generally supra Part IV.C.1.a. Finally, given the 2017 Congress repealed neither the Individual Mandate nor § 18091, the 2017 Congress did nothing to repudiate or otherwise supersede the Supreme Court's NFIB and King opinions detailing the Individual Mandate's essentiality to the ACA.
The Intervenor Defendants thus ask the Court to infer a severability-related intent from a Congress that did not and could not amend the ACA and that therefore did not and could not repeal the Individual Mandate or the enacted text stating the mandate is "essential" to the whole scheme when working "together with the other provisions." They then ask the Court "to graft that intent" onto the Congress that did pass the ACA, that did employ the Individual Mandate as the keystone, and that did memorialize its intent through enacted text stating the Individual Mandate is essential.
The Court finds the 2017 Congress had no intent with respect to the Individual Mandate's severability. But even if it did, the Court would find that "here we know exactly what Congress intended based on what Congress actually did." Hr'g Tr. at 42:8-10 (Intervenor Defendants). If the 2017 Congress had any relevant intent, it was to preserve § 18091 and to preserve the Individual Mandate, which the 2017 Congress must have agreed was essential to the ACA.
In some ways, the question before the Court involves the intent of both the 2010 and 2017 Congresses. The former enacted the ACA. The latter sawed off the last leg it stood on. But however one slices it, the following is clear: The 2010 Congress memorialized that it knew the Individual Mandate was the ACA keystone, see 42 U.S.C. § 18091; the Supreme Court stated repeatedly that it knew Congress knew that, see, e.g., NFIB, 567 U.S. at 547, 132 S.Ct. 2566 (Roberts, C.J.) (citing 42 U.S.C. § 18091(2)(F)); King, 135 S.Ct. at 2487 (citing 42 U.S.C. § 18091(2)(I)); and knowing the Supreme Court knew what the 2010 Congress had known, the 2017 Congress did not repeal the Individual Mandate and did not repeal § 18091.
"The principle of separation of powers was not simply an abstract generalization in the minds of the Framers: it was woven into the documents that they drafted in Philadelphia in the summer of 1787." Chadha, 462 U.S. at 946, 103 S.Ct. 2764 (quoting Buckley, 424 U.S. at 124, 96 S.Ct. 612). For that reason, the Court respects Congress's plain language. And here, "[t]he language is plain. There is no room for construction, unless it be as to the effect of the Constitution." In re Trade-Mark Cases, 100 U.S. 82, 99, 25 S.Ct. 550 (1879). "To limit this statute in the manner now asked for," therefore "would be to make a
The Court finds the Individual Mandate "is essential to" and inseverable from "the other provisions of" the ACA.
For the reasons stated above, the Court grants Plaintiffs partial summary judgment and declares the Individual Mandate, 26 U.S.C. § 5000A(a),
