Texas v. United States: The Events that Followed and the Impact of the Government Shutdown

By now most Americans, especially those in the healthcare industry, are aware of the December 14th decision in Texas v. United States, No. 4:18-cv-00167-O (N.D. Tex. Dec. 14, 2018) issued by Judge Reed O’Connor of the Northern District Court of Texas. This decision shook the healthcare industry as it essentially ruled that the Affordable Care Act (“ACA”) is unconstitutional.

By way of background, in 2012 the Supreme Court issued a landmark decision outlining that the ACA’s individual mandate was a valid exercise under Congress’s taxing powers (see, National Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012)). However, more recently, the Tax Cuts and Jobs Act (“TCJA”) of 2017 eliminated the individual mandate penalty. As a result, in February of 2018, plaintiff states and two individuals filed suit in the Northern District of Texas claiming that the individual mandate penalty, which has been zeroed out by the TCJA, was unconstitutional and was not severable from the rest of the ACA. Judge O’Connor’s ruling basically argued the same point—that the individual mandate itself is unconstitutional, and since it is inseverable from the rest of the ACA, the entire ACA is unconstitutional.

While Judge O’Connor’s ruling certainly shocked many, the impact was not as daunting as it seemed. For example, Judge O’Connor could have issued an injunction which would have blocked enforcement of the ACA, but he did not and therefore the ACA remains in effect. Furthermore, on December 30, 2018, Judge O’Connor formally stayed his ruling while the appeals process takes place. This appeared to weaken his stance on the issue, as he stayed the ruling at the request of 17 Democratic attorneys general who intervened in the case. His reasoning to stay the ruling was to avoid the affect it would have on “many everyday Americans [who] would otherwise face great uncertainty during the pendency of appeal” and as such, his order declaring the individual mandate unconstitutional and inseverable has been stayed. Thereafter, as expected, the intervenor states appealed to the Fifth Circuit on January 3, 2019, and the following day the Department of Justice (“DOJ”) filed its notice of appeal, with the key issue being whether the individual mandate can be severed from the rest of the ACA.

Around the same time, the House filed a motion to intervene, and detailed that they have a “unique institutional interest in participating in this litigation to defend the ACA.” This motion was to intervene in separate claims that were made by the plaintiff states which were not ruled on in the December 14th decision. However, on January 7, 2019, the House filed a second motion to intervene which, if granted, would allow the House to defend the ACA with the intervenor states. Of note, in the House’s second motion to intervene, the House laid out a four factor test for timeliness of intervention (see, Sierra Club v. Espy, 18 F.3d 1202, 1205 (5th Cir. 1994)). One of the four factors was for the court to consider “the extent of the prejudice that the would-be intervenor may suffer if intervention is denied.” The House detailed that the decision of the ACA’s constitutionality should involve the participation of a federal entity to defend it, and if they were “permitted to intervene, the House would be the only organ of the Federal Government defending  the  constitutionality  of  the  ACA,  and  it  would  assert  arguments  likely  distinct  from  those  of  the  Intervenor  States.” In other words, the House argues that they have the right to defend the constitutionality of federal laws when the Attorney General or the DOJ do not. Following these motions, the House approved a vote on January 9, 2019, to give itself the power to intervene legally to defend the ACA in federal court. Given that this vote occurred after they filed the motions, it appears this was a politically driven move by the Democrats and House Speaker Nancy Pelosi.

However, this process has come to a halt as the government continues to be shut down. The shutdown, which began on December 22, 2018, is interfering with the DOJ’s ability to meet the deadline to file their opposition to the House’s motion. As a result, the DOJ asked the Fifth Circuit on January 9, 2018, to pause all briefings since Justice attorneys cannot work during the shutdown and therefore will be unable to prepare their motion in time. Specifically, they requested the following:

“The United States House of Representatives has filed a motion to intervene in this appeal, and responses are currently due January 17, 2019. As the government intends to oppose the intervention motion, the government respectfully requests that the stay of proceedings extend to the intervention motion, and that, as soon as Congress has appropriated funds for the Department, the deadline for any response to the intervention motion be set ten days from the date on which funds are appropriated. The government also respectfully requests that appellate proceedings otherwise be stayed, and that, in particular, briefing time on the merits not begin to run until Congress has appropriated funds for the Department.”

On January 11, 2019, the Fifth Circuit issued an order signed by Judge Leslie Southwick granting the DOJ’s request, detailing that they will “stay the proceedings in this court in light of lapse of appropriations.” While this should not have a deep impact on the case as a whole, it presents just one example of many of how the government shutdown is impacting the country.

Once the government re-opens, it will be interesting to see how the House’s motion to intervene will play out. More importantly, the Fifth Circuit’s ruling on the appeals should hopefully take place in 2019, but there is some uncertainty about how the Firth Circuit will rule. If the Fifth Circuit affirms, health plans should consider the consequences as this could affect other ACA provisions outside of the individual mandate, such as the employer mandate, pre-existing conditions, preventive care, dependent coverage, etc. However, even if the Fifth Circuit affirms, it is likely that the Supreme Court will grant certiorari and the fate of the ACA will be in the hands of those nine Justices.

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