Understanding Texas’s New Challenge to the ACA’s Individual Mandate: Part IV

July 5th, 2018

Part I of this series explained that “[e]ven though the [Affordable Care Act’s] penalty is [now] set to $0, the individual mandate still plays an important social function to reduce adverse selection, and plays a role in the operation of employer-based coverage.” It still has a legal effect. Part II “focus[ed] on how the recent tax reform legislation affects Chief Justice Roberts’s saving construction in NFIB v. Sebelius.” Specifically, because the mandate can no longer fall within the NFIB saving construction—because the penalty is $0—it is no longer constitutional. Part III concluded that the severability analysis “presents a lot of really, really difficult issues that have been dismissed far too easily.” Professor Nick Bagley disagreed, and responded,“[t]he severability question is not hard.” This fourth installment will address Bagley’s post.

Frost’s Bite

First, Bagley describes the relevance of Frost v. Corporate Commission of Oklahoma as “simple”:

it involved (1) a statute that was perfectly constitutional upon its adoption and (2) a later proviso that the Supreme Court held to be unconstitutional. “[S]ince that body sought to express its will by an amendment which, being unconstitutional, is a nullity and, therefore, powerless to work any change in the existing statute, that statute must stand as the only valid expression of the legislative intent.”

Respectfully, Bagley’s analysis is incomplete. In Frost, it was not simply the case that “a later proviso” was unconstitutional. Rather, the latter proviso rendered the original statute unconstitutional. That is, the latter proviso, when combined with the former statute, was unconstitutional.  Specifically, by exempting a certain class of businesses, the proviso created an unconstitutional distinction for purposes of the Equal Protection in the underlying regime. The Court explained: “since [the legislature] sought to express its will by an amendment which, being unconstitutional, is a nullity and, therefore, powerless to work any change in the existing statute, that statute must stand as the only valid expression of the legislative intent.” Frost stands for the proposition that permissible laws can become unconstitutional in light of later-enacted laws. And the remedy is somewhat counterintuitive. Furthermore, Frost teaches that the actions of the later-in-time Congress that rendered the earlier-in-time statute unconstitutional, are a “nullity.”

That analysis resembles the situation in the ACA litigation: by zeroing out the penalty, Congress removed the mandate from NFIB’s saving construction, thus creating the constitutional violation. In both Frost and Texas, there are two provisions that, by themselves would be constitutional. But in both cases, when the provisions are combined, we have a constitutional violation. New Jersey Attorney General—perhaps after reading James Durling and E. Garrett West’s article—seems to agree. He suggested this unconventional remedy to any convergent constitutional violations: “The proper remedy is to strike the amendment that reduced the tax liability to $0 and revert back to the prior tax penalty found constitutional in NFIB.” Brief at 2.

Next, Bagley contends that Congress did not act unconstitutionally by zeroing out the tax:

Frost would be on point if the 2017 Congress had acted unconstitutionally when it repealed the mandate penalty. But it didn’t. Congress is perfectly free to zero out a tax if it wishes to. Its action may have knocked the constitutional legs out from under the preexisting, $0-penalty individual mandate, but the penalty’s elimination is itself perfectly constitutional.

Again, with respect, Bagley is incorrect. Congress always has the power to modify a tax. However, Congress cannot legislate in such a fashion that renders an earlier-in-time statute unconstitutional. (For purposes of this analysis, I presume that Congress finds itself bound by Chief Justice Roberts’s saving construction).  

Next, Bagley offers this critique of my analysis:

Nonetheless, Blackman says he agrees with Durling & West “in the abstract.” Oddly, however, he then dismisses their argument, saying that no one’s challenged the constitutionality of the penalty’s elimination. Having ditched his opening gambit, Blackman turn to what he views as the key question: “The severability analysis, as always, turns on Congress’s intent. But which Congress: the Congress that enacted the ACA in 2010 or the Congress that enacted [eliminated the mandate] in 2017?”

There is nothing odd about this position at all. Courts do not have the power to set aside laws that are not challenged. I acknowledged that “if New Jersey (or another similarly situated party) challenged the constitutionality of the tax cut as rendering the individual mandate unconstitutional . . . a federal court could in fact set aside the TCJA, leaving the mandate in place.” In no way did I “ditch [my] opening gambit.”  It is simply inapplicable in the current litigation.

Finally, Bagley insists that we are all wrong:

“Durling & West—and Blackman and New Jersey—misunderstand Frost’s application to this case.”

If there is that much disagreement about the applicability of Frost, from people who wildly disagree about the outcome of the case, then the issue cannot be straightforward.

Dorsey’s Implications

Second, Dismissing Frost, Bagley responds that other precedents are more relevant:

the authority that Blackman is looking for is right under nose. As the Supreme Court explained in Dorsey v. United States (and elsewhere):

[S]tatutes enacted by one Congress cannot bind a later Congress, which remains free to repeal the earlier statute, to exempt the current statute from the earlier statute, to modify the earlier statute, or to apply the earlier statute but as modified. And Congress remains free to express any such intention either expressly or by implication as it chooses. (emphasis in original).

The emphasized portions are important. Without question, in 2017, Congress did “apply the earlier statute but as modified,” but only with respect to the penalty. It did not, and under the rules of reconciliation, could not actually modify other portions.  The second emphasized portion, which focuses on what Congress did “by implication,” is relevant for purposes of the severability analysis in Texas v. U.S.

The Mandate, Not The Penalty, Is “Essential”

Bagley writes:

Congress in 2010 said that the mandate penalty was indispensable; Congress in 2017 nonetheless dispensed with it. In so doing, Congress superseded its original finding. It’s a straightforward application of the last-in-time rule.

This syllogism fails. First, in 2010, Congress did not find “that the mandate penalty was indispensable.” To the contrary, as I discuss in Part I:

[Section] 5000A(e) [of the ACA] exempts five categories of people from the penalty. That is, “no penalty should be imposed under subsection (a) with respect to” (1) individuals who cannot afford coverage, (2) taxpayers with income below the filing threshold, (3) members of Indian tribes, (4) people with short gaps in coverage, and (5) those who have “suffered a hardship” as defined by the Secretary. These individuals are still subject to mandate, but are exempt from the penalty.

Congress subjected certain groups to the mandate, but not the penalty. It did not find that the “the mandate penalty was indispensable.” Chief Justice Roberts’s controlling opinion in NFIB relied on this distinction for purposes of the saving construction:

The exaction the Affordable Care Act imposes on those without health insurance looks like a tax in many respects. The “[s]hared responsibility payment,” as the statute entitles it, is paid into the Treasury by “taxpayer[s]” when they file their tax returns. 26 U. S. C. §5000A(b). It does not apply to individuals who do not pay federal income taxes because their household income is less than the filing threshold in the Internal Revenue Code. §5000A(e)(2).

Bagley conflates the penalty with the mandate. Congress structured them as separate elements, and this bifurcation was critical to the Chief’s saving construction.

Second, Congress’s statutory findings in 42 U.S.C. § 18091(2)(i)  stated that the mandate was “essential,” not the penalty:

The requirement is essential to creating effective health insurance markets in which improved health insurance products that are guaranteed issue and do not exclude coverage of pre-existing conditions can be sold

As I discussed in Part I, the penalty was not even mentioned in the findings.  

Third, because Congress  in 2010 did not find that the “mandate penalty was indispensable,” it did not “dispense” with that finding in 2017. More importantly, Congress could not “dispense” or “supersede” any statutory findings, because it proceeded under the budget reconciliation process. All it could do, under the rules of proceeding, was to zero out the penalty. Once again, the critical question is how we understood what Congress did, in Dorsey’s framing, “by implication.” Frost applies an important twist to the “last-in-time” rule that the brief simply fails to engage.

Finally, in his penultimate sentence, Bagley writes “Congress repealed the mandate because it thought it was bad policy and left the rest of the ACA standing.” This statement, by itself, is incorrect. I will give Bagley the benefit of the doubt, and charitably presume he meant to refer to “the mandate penalty” or perhaps stated that Congress “effectively repealed” the mandate. But Congress did not “repeal[] the mandate” through the tax bill.


To reiterate my conclusion from Part III, the “severability analysis ‘presents a lot of really, really difficult issues that have been dismissed far too easily.’” The failure of the scholars to even mention Frost, and Bagley’s subsequent dismissal of the case, diminishes the usefulness of their brief to the Court. I hope they can engage this important precedent in future pleadings.