Court Ruling on Constitutionality of ACA

Federal judge Reed O’Connor in Fort Worth, Texas, ruled the entire Affordable Care Act (ACA) unconstitutional on Friday, but he was unwilling to grant an injunction. So there is no immediate impact to enforcement of the law while it goes through a formal appeal process. Employers should still plan on complying with the law, including any required ACA reporting due early next year.

The primary argument of this lawsuit has been that the individual mandate was upheld as constitutional in 2012 solely by Congress’s authority to tax, so when Congress permanently reset the tax (i.e., the individual mandate penalty) to $0 starting in 2019 under the tax reform law passed last December, the individual mandate is no longer constitutional. The arguments go on to say that since the ACA lacks a severability clause, and the individual mandate was essential to the ACA, the entire law should now fall.

Should this sweeping decision stand, it could potentially mean the end of Medicaid expansion, dependents staying on parents’ coverage through age 26, coverage for pre-existing conditions, individual health coverage subsidies, and other generally popular provisions enacted by the ACA.

The 16 Democrat attorneys general defending the case have vowed to appeal this decision to the Fifth Circuit Court of Appeals. If that conservative Court should uphold the decision, then the U.S. Supreme Court could decide whether to hear arguments on this case. This could all be a long process that takes a year or two.

A White House statement released Friday said: “We expect this ruling will be appealed to the Supreme Court. Pending the appeal process, the law remains in place.”

To read full 55-page decision in Texas v. US, please click here.

Please let your IMA Benefits team know if you have any questions; we will continue to monitor regulator guidance and offer meaningful, practical, timely information.