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EDITORS' PICK2,306 viewsDec 19, 2019, 10:31am
Fifth Circuit's Surgical Opinion Could Reshape Obamacare -- For The Better
Avik Roy Forbes Staff
The ApothecaryContributor Group
Commentary from Forbes’ Policy Editor
On December 18, in Texas v. Azar, the U.S. Court of Appeals for the Fifth Circuit ruled that the... [+] Affordable Care Act's individual mandate was unconstitutional.
On December 18, in Texas v. Azar, the U.S. Court of Appeals for the Fifth Circuit ruled that the... [+] GETTY
On December 18, The U.S. Court of Appeals for the Fifth Circuit issued its long-awaited opinion in the latest Obamacare constitutional challenge, Texas v. Azar. By overturning the health law’s individual mandate, but remanding the rest of the ACA back to the lower court for further consideration, the 5th Circuit has created a pathway for improving the law in ways that could lower health insurance premiums for millions.
Background on Texas v. Azar
As you may know if you follow the news, the latest Obamacare court challenge began when a number of attorneys general in red states—led by Texas’ Ken Paxton—argued that Obamacare’s individual mandate is unconstitutional. (The individual mandate is the infamous Obamacare provision that forces many Americans to buy health insurance whether they want to or not.)
The Republican AGs’ reasoning was clever: that while the Supreme Court had previously ruled that the individual mandate was legal, by describing it as a “tax penalty,” that framework no longer applied, because the Tax Cuts and Jobs Act of 2017 reduced the tax penalty to zero, while keeping the rest of the language in place. That 2017 change meant that that the mandate was no longer a tax, but simply a penalty: something that the Supreme Court had opined was not constitutional. (This highly technical theory was first promulgated by health care law blogger Josh Blackman.)
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So far, so good. But then the question becomes: if you overturn the individual mandate, because it is no longer a tax and therefore exceeds Congress’ authority under the interstate commerce clause and other constitutional provisions, what next?
This brings us to December of 2018, when a federal judge in Fort Worth, Texas opined that the entirety of the Affordable Care Act was unconstitutional because the individual mandate was. To use judicial language, the individual mandate was inseverable from the rest of the law.
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As I wrote at the time, this was a plainly ridiculous opinion. The Affordable Care Act, as enacted in 2010, was approximately 2,700 pages long with ten titles and several hundred sections whose functionality is independent of the existence an individual mandate. For example, the ACA changed the structure of the biosimilar drug market (Title VII), mandated calorie counts for menu items at restaurant chains (Section 4205), and reauthorized the Indian Health Care Improvement Act (Title X). None of these provisions would be any less workable without an individual mandate for the purchase of health insurance.
Judge Reed O’Connor, the author of the District Court opinion, could have acted more responsibly in his ruling, by overturning the individual mandate along with other Obamacare regulations that drive up premiums for healthier and younger enrollees. Congress included the mandate, after all, on the theory that once you’ve made health insurance expensive for healthier people, the only way to bring them back into the market was to force them back in.
The Fifth Circuit’s surgical opinion
Thankfully, the Fifth Circuit’s majority opinion, issued this week, corrects O’Connor’s irresponsible error. That opinion, written by George W. Bush appointee Jennifer Walker Elrod and Trump appointee Kurt Engelhardt, points out the obvious: that O’Connor’s ruling “does not explain with precision how particular portions of the ACA as it exists post–2017 rise or fall on the constitutionality of the individual mandate. Instead, the opinion focuses on the 2010 Congress’ labeling of the individual mandate as “essential”…and then proceeds to designate the entire ACA inseparable. In using this approach, the opinion does not address the ACA’s provisions with specificity, nor does it discuss how the individual mandate fits within the post–2017 regulatory scheme of the ACA…the district court must undertake a similar inquiry for each segment of the post–2017 law that it ultimately declares unlawful—and it has not done so.”
Elrod and Engelhardt proceed to instruct O’Connor to “employ a finer-toothed comb on remand and conduct a more searching inquiry into which provisions of the ACA [that] Congress intended to be inseparable from the individual mandate,” while expressing agnosticism as to the “ultimate outcome” of that inquiry.
An opportunity for better law and better policy
The Fifth Circuit’s instructions should improve Obamacare on two fronts: law and policy.
First, on law, the appeals court has given the lower court an opportunity to correct its prior judicial error, and to surgically remove from the ACA those parts of the law that are directly related to the individual mandate; in particular, those that increase premiums for healthier and younger individuals: in particular, the law’s “age bands” that more than double premiums for young people. This more surgical approach is almost certain to be upheld by the Fifth Circuit and by the Supreme Court. Indeed, there is considerable evidence that such an outcome is the one that Supreme Court Chief Justice John Roberts originally sought, and failed to gain, from his colleagues.
Second, by clearing out these unconstitutional aspects of Obamacare, the courts will give Congress an opportunity to reform the individual insurance market in the right way: through reinsurance, or an invisible high-risk pool, that directly subsidizes the costs of those with pre-existing conditions or poor health status, without making insurance unaffordable for the healthy uninsured. Arkansas Rep. Bruce Westerman (R.) has proposed just such a policy in his 2019 health reform plan, the Fair Care Act.
The Fifth Circuit decision has given policymakers a chance to get health reform right. They have every opportunity to take it.
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INVESTORS’ NOTE: The biggest publicly-traded health insurance companies include UnitedHealth (NYSE:UNH), Anthem (NYSE:ANTM), Aetna (NYSE:AET), Molina (NYSE:MOH), and Centene (NYSE:CNC).
I am Forbes' Policy Editor, and president of a non-partisan think tank, the Foundation for Research on Equal Opportunity (FREOPP.org), which develops policy reform i... Read More
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