Obamacare's Survival May Hinge on Some Technical Legal Questions

(Bloomberg) -- The fate of Obamacare, the law that President Donald Trump campaigned on repealing and replacing, could hinge on several technical points of law as a federal appeals court prepares to decide whether it’s unconstitutional.

And the appeal of whatever the three-judge panel rules may land the Affordable Care Act back at the U.S. Supreme Court and in the public eye as the 2020 presidential election season is in full swing.

Several legal observers say they don’t expect the U.S. Court of Appeals for the Fifth Circuit to toss out a December decision from a federal judge in Texas invalidating the entire law. Obamacare critics say Congress never had the authority to require people to buy health insurance, and that argument was strengthened when lawmakers zeroed out the penalty for not doing so.

The three appellate judges -- two appointed by Republican presidents and one by a Democrat -- will consider the arguments on July 9. But before they get to the meat of the claim, they’ll wrestle with a more basic question: Who has the right to even be in the case. That issue arose a few months ago when Trump signaled he’d no longer defend the law, after initially saying elements of the ACA might be worth saving. The judges have already asked the sides to weigh in on whether Democrats can defend the law if Trump won’t. Legal scholars say procedural questions like that might determine the outcome of the case rather than the merits of each side’s arguments.

One Provision

The case could throw the country’s health-care system into disarray and raise further questions about whether any law, not just the Affordable Care Act, can be sunk if just one provision must go.

Insurance companies Centene Corp. and Molina Health Inc., which have large Obamacare enrollments, would have their business models upended if the law is tossed out. Centene had almost 2 million ACA members on its rolls last year, giving it about 20% of the entire Obamacare health-care exchange population.

The costs of losing ACA protections for millions of Americans is “impossible to calculate but enormous,” said Stephen Vladeck, a University of Texas law school professor. “It’s so alarming how much is riding on this technical legal argument.”

U.S. District Court for the Northern District of Texas Judge Reed O’Connor ruled the entire ACA must fall because the tax penalty that gave it constitutional justification was gone. That ruling came a month after Democrats recaptured the House in the 2018 midterm elections, campaigning in part on protecting Obamacare. Congressional Democrats jumped into the case alongside the blue states, led by California, to oppose 18 red states, led by Texas.

Buy Insurance

Conservatives say Congress can’t force everyone to buy insurance. “What in the Constitution delegates to Congress the authority to pass a general health-care bill like the Affordable Care Act?” asked John Eidsmoe, senior counsel at the Foundation for Moral Law, an Alabama-based Christian legal advocacy group that’s supporting the Republican states. “Health insurance until very recently has never been considered the responsibility of the federal government.”

The Supreme Court said in a 5-4 ruling in 2012 that a penalty for going without insurance was a lawful exercise of Congress’s taxing power. When Congress wiped out that penalty in 2017, Republican states sued, arguing that the ACA could not survive because the mandate was no longer a lawful tax.

Despite some public opposition to hefty insurance deductibles and rising premiums, Obamacare provided health coverage for as many as 24 million Americans, either through expanded Medicaid or independent marketplaces and federal subsidies.

If the appeals court finds neither congressional Democrats nor blue states have the right to challenge the lower-court ruling, the judges could throw out the appeal and let O’Connor’s ruling stand.

Dramatic Outcome

“The district court in Texas could then go back and issue an injunction stopping the Affordable Care Act from operating,” said Abbe Gluck, a law professor at Yale Law School. “You can see now how dramatic it would be to allow that to occur without the opportunity to appeal the lower court’s decision.”

People who would lose health coverage if the law is dismantled could then file a new lawsuit seeking to reinstate Obamacare, said Joshua Blackman, a professor at the South Texas College of Law in Houston.

This means the entire case could essentially get a do-over.

The case is being watched by lawmakers, lobbyists, and legal scholars on both sides of the aisle.

Despite trying dozens of times to repeal the ACA, Republicans were never able to do so. Trump campaigned on a platform that prominently featured repealing Obamacare. On his first day as president, Trump signed an executive order blocking enforcement of the tax penalty for non-compliance with the individual mandate.

With control of both the White House and Congress, Republicans tried again to repeal the law but failed memorably on July 28, 2017, when Republican Senator John McCain of Arizona cast a televised thumbs-down vote to buck his political party and keep Obamacare alive. Later that year, Congress passed a measure that repealed the tax penalty but left the rest of Obamacare intact.

The case is Texas v. U.S., 19-10011, U.S. Court of Appeals, Fifth Circuit.

To contact the reporters on this story: Lydia Wheeler in Washington at ldavenport15@bloomberg.net;Laurel Calkins in Houston at lcalkins@bloomberg.net

To contact the editors responsible for this story: Fawn Johnson at fjohnson36@bloomberg.net, Peter Blumberg

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