New Article: “Undone: The New Constitutional Challenge to Obamacare”

August 18th, 2018

The Texas Review of Law & Politics will publish my new article, “Undone: The New Constitutional Challenge to Obamacare.”

Here is the introduction:

The saga of the Affordable Care Act’s individual mandate can be told in three acts.

Act I: Unprecedented.[1] In 2010, a sharply-divided Congress required most Americans to purchase insurance. Two years later, in NFIB v. Sebelius, a sharply-divided Supreme Court found that Congress lacked the power to enact this unprecedented individual mandate pursuant to the Commerce and Necessary and Proper Clauses.[2] However, through a “saving construction,” the individual mandate was upheld as an exercise of Congress’s taxing power.

Act 2: Unraveled.[3] Between 2012 and 2016, congressional Republicans attempted, over and over again, to “repeal and replace Obamacare.” So long as President Obama wielded the veto pen, these efforts were doomed to fail. Yet, the attempts to unravel the ACA were not limited to Congress. After the first round of litigation failed, conservative groups brought new legal challenges to block the ACA’s payment of subsidies. If successful, millions of Americans would no longer be penalized for going uninsured. However, the Supreme Court once again turned away that challenge in King v. Burwell.[4]

Act 3: Undone. Following the 2016 election, Republicans now controlled the White House, and both Houses of Congress. It soon became apparent that they would be unable to “repeal and replace Obamacare,” as promised. However, through the Tax Cuts and Jobs Act of 2017, the GOP was able to accomplish what NFIB and King did not: eliminate the penalty for going uninsured. Obamacare’s core was undone. Soon enough, Texas and a host of other states brought a new constitutional challenge to the ACA. Now that the individual mandate no longer raised any revenue, they argued, it could no longer be saved as a tax. Therefore, all of Obamacare must be set aside. The Department of Justice agreed in part, and declined to defend the mandate and other portions of the law. New Jersey and a host of other states intervened to defend the ACA in its entirety. And that litigation proceeds apace.

We are now in the midst of Act 3. No one knows how it will end. This article will explain how it begun.

Part I explains the interaction between the Affordable Care Act’s individual mandate and shared responsibility payment. The former imposes a requirement to maintain insurance.[5] The latter penalizes those who do not maintain insurance.[6] Some people are exempt from the mandate, and other people are exempt from the penalty. They are distinct legal requirements. Indeed, Congress found the mandate was “essential” to the operation of the ACA, including its guaranteed issue and community rating provisions.[7] (These two regulations prohibited insurers from denying coverage, or charging extra, to customers with pre-existing conditions.) Congress did not find the penalty was “essential” in any way.

Part II recounts the “saving construction” in NFIB v. Sebelius.[8] Chief Justice Roberts was willing to uphold the individual mandate under Congress’s taxing power because the shared responsibility payment complied with three requirements. First, the penalty “is paid into the Treasury by ‘taxpayer[s]’ when they file their tax returns.”[9] Second, “[f]or taxpayers who do owe the payment, its amount is determined by such familiar factors as taxable income, number of dependents, and joint filing status.”[10] Third, “[t]his process” of making the payments, “yields the essential feature of any tax: It produces at least some revenue for the Government.”[11] These three guardrails are essential to the saving construction.

Part III analyzes the Tax Cuts and Jobs Act of 2017 (TCJA). Starting in 2019, the ACA’s shared responsibility payment—that is, the penalty—will be reduced to $0. However, the TCJA did not repeal the individual mandate. Nor did the TJCA rescind Congress’s findings that the individual mandate was “essential” to the operation of the ACA. Even without a penalty, the mandate will not be toothless. The Congressional Budget Office (CBO) recognized in 2008 that “[p]ersonal [v]alues and [s]ocial [n]orms,” apart from a monetary penalty, also enforce compliance with a requirement to purchase insurance.[12] Indeed, a November 8, 2017 report from CBO and the Joint Committee on Taxation observed that “with no penalty at all, only a small number of people who enroll in insurance because of the mandate under current law would continue to do so solely because of a willingness to comply with the law.”[13] The number is no doubt “small,” but it is not zero. At bottom, some people who are subject to the mandate, will still comply with the mandate, even though there is no penalty for failing to comply with the mandate.

Part IV explains that following the TCJA, the individual mandate can no longer be saved as a constitutional tax on the uninsured. Specifically, the requirement to purchase insurance will now fall outside the three guardrails established by NFIB’s saving construction. (1) Starting in 2019, 0% of Americans have to pay a penalty; (2) therefore, taxpayers will not owe any penalty when they file their tax returns in 2019; and (3) as a result, the penalty will no longer produce any revenue for the government. Texas’s challenge to the constitutionality of the individual mandate is likely to succeed on the merits. Moreover, the Attorney General’s decision not to defend the constitutionality of the mandate was reasonable.

Part V turns to the question of severability: if the individual mandate is no longer constitutional, what other provisions of the ACA—if any—must also be set aside? This Part will consider four options. First, the mandate—and only the mandate—should be enjoined. Second, the entire ACA should be halted. Third, the mandate, along with the ACA’s guaranteed issue and community rating provisions, should be blocked. Fourth, the provision of the Tax Cuts and Jobs Act that reduced the penalty to $0 should be rescinded.

[1] See Josh Blackman, Unprecedented: The Constitutional Challenge to Obamacare (2013).

[2] 567 U.S. 519 (2012).

[3] See Josh Blackman, Unraveled: Obamacare, Religious Liberty, and Executive Power (2016).

[4] 135 S.Ct. 2480 (2016).

[5] 26 U.S.C. § 5000A(a).

[6] 26 U.S.C. § 5000A(b).

[7] 42 U.S.C. § 18091(2)(I)).

[8] NFIB, 567 U.S. at 563-574.

[9] Id. at 563 (citing  26 U.S.C. § 5000A(b)).

[10] Id. at 563 (citing §§ 5000A(b)(3), (c)(2), (c)(4)).

[11] Id. at 563 (citations omitted).

[12] at 53 (emphasis added).


As you may have guessed, I will complete my Obamacare trilogy with Undone.