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The Future of the Affordable Care Act (ACA)

States Challenge ACA’s Constitutionality and Trump Administration Agrees

At the Affordable Care Act (ACA)’s first introduction, individuals began questioning the constitutionality of the individual mandate arguing that this requirement, and its corresponding penalty, was an overstep of the powers of Congress. The formal challenge ended with the Supreme Court’s 2012 decision to uphold the ACA and individual mandate as constitutional. In this decision, Congress does not require individuals to buy insurance, which is outside the scope of Congress’ power. It merely requires a tax payment if individuals do not purchase insurance, which is within Congress’ purview, i.e. to levy and spend taxes.

Background of ACA’s Constitutionality Challenges

The Law That Resurrects the Constitutionality Question

The December 22, 2017 tax reform law, Tax Cuts and Jobs Act (H.R. 1 – 115), changes the consequences, under the ACA, to individuals who do not maintain minimum essential coverage. Specifically, the law reduces the penalty for non-compliance to $0 effective January 1, 2019. In essence, this removes the tax component of the individual mandate, which is the rationale for constitutionality of the individual mandate provision, i.e. the ability for Congress to tax.

The New Constitutionality Challenge

Once again a formal challenge to the ACA’s constitutionality emerges. Now, 20 states and two individuals are suing the federal government along with the Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) claiming that the ACA is no longer constitutional.

The lawsuit, Texas v. United States, argues that the elimination of the individual mandate penalty (tax) changes the decision that the individual mandate is constitutional. Without the taxation component, the provision mandates that individuals buy insurance, which is an overstep of authority for Congress, as the 2012 Supreme Court decision indicates.

Further, it states that the individual mandate is critical to the effectiveness and operation of the entire ACA and, that without it, the entire ACA law becomes unconstitutional. This is a question of severability.

The original Supreme Court’s decision in 2012 found that the individual mandate was separable from the entire ACA law. If the courts reconsider and find the provision to be inseparable, the entire ACA law will become unconstitutional.

Additionally, the original Supreme Court decision indicates that the guaranteed issue1 and community rating2 requirements of the ACA will not work without the requirement mandating coverage.

Finally, the states confirm that the ACA and its individual mandate have had a negative impact on the insurance markets, caused premium rates to increase, and put unnecessary burdens on individuals, medical providers, insurers, and the insurance departments. They also cite a resulting lack of choice of both health insurers and coverage options for individuals in the marketplace. It is for these reasons that they request remedies under the law.

The Claims/Requests of the Plaintiffs

    1. The individual mandate, as modified by the Tax Cuts and Jobs Act, exceeds the enumerated powers of Congress and is inseparable from the rest of the ACA;
      If the individual mandate is unconstitutional, then:
      1. The rest of the ACA is “irrational” and violates the due process clause3 if the ACA’s individual mandate is unconstitutional;
      2. The remaining provisions of the ACA violate are outside Congress’ authority and violate the Tenth Amendment4;
      3. All other regulations are invalid; and
      4. Entitlement for a preliminary injunction5 based upon the fact that the individual mandate is unconstitutional, as modified by the Tax Cuts and Jobs Act


Current Justice Department Decision

In response to the request, the Justice Department confirms that the individual mandate penalty under the Tax Cuts and Jobs Act can no longer be considered a “tax” since it generates no revenue. Therefore, effective January 1, 2019:

      • the individual mandate will be unconstitutional since the remaining mandate to purchase insurance coverage is outside Congress’ authority;
      • the community rating and guaranteed issue provisions will also be unconstitutional since these were provisions were previously found by the Court to be inseverable from the requirement to obtain insurance coverage; and
      • the individual mandate, community rating, and guaranteed provisions are separable from the rest of the ACA, i.e. the rest of the ACA stands after the removal of these provisions

The Justice Department does not find reason to make a preliminary injunction, therefore, the individual mandate, community rating, and guaranteed issue provisions will remain in effect for the remainder of 2018. The case may advance further but the timeline is unknown.

Many groups are stepping forward with requests to preserve the pre-existing condition protections the ACA affords but that will be eliminated in 2019 with this decision. It is certain that we will see significant rhetoric and activity around preservation of this provision or new legislation to introduce these protections. We will bring you updates as events unfold.

In the interim, we encourage individuals and employers to continue to follow all ACA provisions and regulations, including the individual mandate throughout 2018 or until a final declaratory judgment is made that alters the ACA law. For questions or support regarding these updates, reach out to your OneDigital consultant today.


1. [Guaranteed issue is the requirement that all individuals be issued coverage if they apply. This provision eliminates provisions that deny access to coverage for individuals based on a pre-existing condition.]

2. [Community rating is the provision that requires all insurance rates to be uniform for all those that participate. The only variations in insurance premiums are for age, coverage type, e.g. individual, family, etc., geographic region, and tobacco usage. Insurance plans may not alter premiums based on gender or health conditions.]

3. [The due process clause protects individuals from the denial of life, liberty, or property by the government if the government operates outside the law.]

4. [The Tenth Amendment reserving to the states or to the people powers not delegated to the federal government]

5. [A preliminary injunction requests the court, prior to the final determination of the case, immediately stop the actions that are in dispute because they will cause significant harm]