In a 2-1 decision, the Fifth Circuit Court of Appeals has upheld a district court ruling that the individual mandate under the Affordable Care Act is unconstitutional. However, the Fifth Circuit has sent the case back to the district court for further consideration on the extent to which the ruling invalidates other ACA provisions.

The individual mandate requires individuals to obtain minimum essential health coverage or pay an assessment under the Internal Revenue Code. In Nat’l Fed’n of Indep. Bus. v. Sebelius, the Supreme Court upheld this requirement as an exercise of Congress’s taxing power. In 2017, Congress amended the individual mandate provisions to reduce the assessment for not obtaining health coverage to zero dollars. The Fifth Circuit found that, when the individual mandate provisions ceased to produce actual revenue for the U.S. Treasury, it ceased to operate as a tax and could no longer be supported as an appropriate exercise of Congressional authority.

Unlike the district court, the Fifth Circuit was not prepared to strike down all provisions of the ACA as inseverable from the individual mandate. It found that the district court did not give sufficient attention to Congress’s intent when it zeroed out the assessment in 2017 or undertake a sufficiently detailed analysis of how other ACA’s requirements are (or are not) affected by the elimination of that assessment. It remanded the case to the district court to conduct a more “fine-toothed” inquiry and to allow the district court to consider possible limitations on the relief to be provided, which the federal government first raised on appeal. These limitations include applying the judgment only in those states that challenged the law and only to those provisions of the ACA that actually injure the individual plaintiffs in the case (who, most notably, argued that they felt compelled to obtain health coverage even though they could decline without penalty).

The dissenting opinion challenged the majority view at each stage, finding that:

  • The plaintiffs lacked standing to bring the lawsuit;
  • The reduction of the individual mandate penalty to zero dollars did not cause Congress to exceed its authority; and
  • Other provisions of the ACA are severable from the invalidated individual mandate.

The immediate practical effects of the Fifth Circuit’s opinion are negligible. The 2017 amendment to the individual mandate provisions already took away any consequence that might arise from a failure of an individual to obtain health coverage. The bigger stakes come with respect to the effect on other ACA provisions. Although this issue has now been remanded to the district court, there is speculation that it may be taken up by the Supreme Court before the lower court undertakes any further review.

Ballard Spahr attorneys established the Health Care Reform Dashboard as a one-stop resource under the Affordable Care Act. We have expanded the scope of the Dashboard to include other laws, but continue the mission of providing our readers with information about significant changes affecting health care and health benefits in the United States and to establish a repository for analysis and original source material of significant developments that have occurred over time. Change is ongoing, and we will continue to update the Dashboard to reflect new legislation, administrative guidance, and judicial decisions as they are published.