The Decision
Judge O’Connor reaches three conclusions: 1) the plaintiffs have standing to sue; 2) the individual mandate is no longer permissible under Congress’s taxing power and is unconstitutional; and 3) the individual mandate is essential to and inseverable from the entire ACA, meaning the entire law is declared invalid. This post discusses each of these conclusions in turn.
Standing
A plaintiff must have standing to bring a lawsuit in federal district court in the first place. To show standing, a plaintiff must have suffered an injury that is fairly traceable to the conduct of the defendant that is likely to be redressed by a favorable decision.
The intervenor states and the American Medical Association (AMA), joined by other physician groups in an amicus brief, challenged the standing of both the plaintiff states and the individual plaintiffs. They argued that the individual plaintiffs did not have standing to sue because the harm they faced was self-inflicted. Put another way, the individual plaintiffs could choose to purchase coverage or not and they will pay zero dollars in penalties if they choose to be uninsured beginning in 2019. By choosing to purchase coverage even without the penalty, they are trying to manufacture an injury and standing.
Judge O’Connor rejects this argument, concluding that the individual plaintiffs are the “object” of the individual mandate because they are being required to purchase and maintain health insurance. He also notes that a showing of an economic injury is not required and that standing can be shown where a federal law deters the exercise of a constitutional right. A declaration that the individual mandate is unconstitutional would, in Judge O’Connor’s mind, redress this injury by freeing the individual plaintiffs from “arbitrary governance.”
This analysis has already been criticized by conservative legal scholars, such as Jonathan Adler, who noted that Judge O’Connor “completely botched the relevant analysis, concluding the plaintiffs have standing to challenge a provision of a law that has no legal effect.” Without a penalty or legal sanction for failing to comply with a law, there is no injury to these individual plaintiffs. Judge O’Connor reaches the opposite conclusion “only by ignoring the actual operation of the law.”
In a perplexing move, Judge O’Connor devotes no attention to whether the plaintiff states have standing to sue. The individual plaintiffs were not original parties to the litigation, which was initially brought only by the plaintiff states. The individual plaintiffs were added to the lawsuit nearly two months after it was filed, likely with the goal of bolstering the plaintiffs’ claim of standing.
Instead, Judge O’Connor focuses solely on whether the two individual plaintiffs have standing. He does so under the theory that one party with standing is sufficient to satisfy Article III’s case-or-controversy requirement; thus, not every party needs to show standing. This theory, that “one good plaintiff is enough,” has faced criticism. After concluding that the two individual plaintiffs have standing, Judge O’Connor simply notes that “the case-or-controversy requirement is met.” He includes no discussion of whether—or not—the plaintiff states have standing to sue.
Constitutionality Of The Individual Mandate With $0 Penalty
Judge O’Connor concludes that the individual mandate cannot be saved under Congress’s tax power or its Commerce Clause power and is unconstitutional under either provision.
Tax Power
The opinion makes a distinction between the individual mandate and the individual mandate penalty, noting that the 2010 Congress intended for the two to be distinct. In Judge O’Connor’s view, the 2017 Congress solidified this intent when it zeroed out the penalty but did not repeal or eliminate the mandate itself. He believes that the separation between the mandate and the penalty is consistent with the Supreme Court’s analysis in NFIB. Because the individual mandate included the penalty—which was found to be a functional tax—the entire individual mandate could be viewed as a valid exercise of the tax power.
With this distinction made, Judge O’Connor concludes that the individual mandate under the TCJA does not meet the factors laid out in NFIB to be construed as a tax. These factors were that 1) the penalty was paid to the Treasury department when taxpayers filed their tax returns; 2) the amount owed was determined by “familiar factors” and assessed and collected in the same manner as taxes; and 3) the penalty resulted in “the essential feature of any tax” by producing at least some revenue for the government. With the penalty set at $0, Judge O’Connor concludes that the individual mandate no longer meets these factors and thus no longer “triggers a tax” beginning in 2019.
Commerce Clause
The intervenor states had argued that the individual mandate could now be sustained under the Commerce Clause because there is no longer any compulsion to purchase coverage now that the penalty will be $0 beginning in 2019. Judge O’Connor rejected this argument in large part because he understood the states’ argument to be that the individual mandate was no longer compulsory so it “does absolutely nothing.” Because it “does nothing,” it cannot be found to regulate interstate commerce.
Severability
Setting aside long-standing severability doctrine, Judge O’Connor concludes that the individual mandate is inseverable from the remainder of the ACA and declares the entire ACA to be invalid.
Supreme Court precedent on severability directs courts to limit damage to a statute and be guided by congressional intent. The Eleventh Circuit Court of Appeals, in concluding that the individual mandate was unconstitutional but severable from the ACA in 2011, noted “the Supreme Court’s strong presumption of severability” and the “overwhelming majority of cases” where the Supreme Court has opted to sever a constitutionally defective provision from the remainder of the statute. The Eleventh Circuit ultimately used this “well-established” doctrine to find the mandate to be severable “as a matter of judicial restraint.”
The intervenor states—and many amici—argued that congressional intent in this case is clear: Congress itself zeroed out the mandate’s penalty in 2017 but left other provisions of the ACA undisturbed. Because the Congress of 2017 acted, it is clear what lawmakers intended and the court need not guess which provisions they would have severed or not. The plaintiffs and DOJ argued that the intent of the Congress that passed the ACA in 2010 should control.
In a curveball, Judge O’Connor concludes that both the 2010 Congress (which passed the ACA) and the 2017 Congress (which passed the TCJA) intended for the mandate to be inseverable from the entire ACA. He believes that the 2010 Congress expressed its unambiguous intent that the mandate not be severed from the ACA and that the 2017 Congress “further entrenched” the intent of the 2010 Congress.
