Awaiting A Decision: Determining the ACA’s Destiny

CATEGORY: Authored Articles
CLIENT TYPE: Public Employers
DATE: Jun 15, 2021

In the 2nd Quarter 2021 issue of Workspan, LCW Associate and Affordable Care Act (ACA) expert Stephanie Lowe shares her thoughts on how the Supreme Court might rule on a case regarding the ACA’s individual mandate. The article explores whether the individual mandate can be severed from the ACA as well as whether the mandate and the ACA as a whole are constitutional. Please see the article below.

It’s been a bumpy road for the Affordable Care Act (ACA). Signed into law by President Obama in 2010, the ACA was intended to overhaul the American health-care system, greatly expanding access to health insurance while helping to tamp down ever-increasing health-care costs.

The ACA has been successful to varying degrees on those fronts, but has been consistently effective at serving as a lightning rod for controversy. The legislation has already survived numerous challenges to its constitutionality and is facing a fresh challenge in front of the Supreme Court.

The ACA’s individual mandate — which required all Americans to either obtain health insurance or pay a penalty — has been the most frequent target of those opposed to the legislation. In 2012, for example, the individual mandate was at the center of a landmark Supreme Court case in which the Court ruled that the directive was constitutional on the grounds that it essentially served as a tax. The Court found that Congress lacked the authority to enact the mandate but could impose a tax on those who did not comply.

(Five years later, the Tax Cuts and Jobs Act of 2017 effectively eliminated the federal tax penalty that came with violations of the ACA’s individual mandate, setting the shared responsibility payment at zero dollars, as of Jan. 1, 2019.)

In 2018, however, a group of state attorneys general filed a lawsuit, California v. Texas, claiming that the individual mandate is no longer a tax and is unconstitutional, and that the Act as a whole is invalid without the mandate.

In December 2019, the U.S. Court of Appeals for the 5th Circuit affirmed a trial court’s decision that the individual mandate is no longer constitutional. Rather than ruling on whether the rest of the ACA should be eliminated, the appeals court sent the case back to the trial court for further analysis.

The Supreme Court has since agreed to review the case, with a decision expected in the first half of 2021. With this ruling on the horizon, WorldatWork asked a handful of ACA experts to weigh in on how they expect the Court to rule, and how that ruling figures to affect employers and their benefits programs.


It’s “quite possible” that a majority of the Supreme Court will ultimately decide that the plaintiffs had no standing to bring this claim, said Tom Christina, a Greenville, S.C.-based attorney in Ogletree Deakins’ employee benefits practice.

“To have standing to sue in a federal court, the plaintiff must show that he or she suffered a legally recognizable injury as a result of the challenged act that a court can remedy,” he said.

If a majority of the Supreme Court decides that the individual mandate is no longer supported, the Court would be required to hold that the coverage mandate is unconstitutional, in order to avoid overruling prior precedent, Christina said.

“However, that holding would be a far cry from holding that the ACA as a whole must be struck down.”

Tim Stanton, a Chicago-based attorney with Ogletree Deakins, doesn’t foresee the Court over-turning the entire Affordable Care Act after 11 years. “I think the Court will either find that the plaintiffs do not have standing or, maybe a little more likely, [the Court will find] that the individual mandate with a $0 penalty is an unconstitutional tax, but that it is severable from all or almost all of the rest of the ACA,” said Stanton, whose practice focus includes ACA compliance.

The severability question is indeed the crucial issue in this case, and “the one that will be important for employers,” said Stephanie Lowe, an attorney at Liebert Cassidy Whitmore.

“If the Supreme Court affirms the Fifth Circuit Court of Appeal’s decision that the ACA’s individual mandate is unconstitutional, then the next question will be whether the unconstitutionality of that one portion of the ACA renders all or any of any other portion of the ACA unconstitutional,” said Lowe, who has expertise advising employers throughout California on the ACA.

One of those other portions, the Employer Shared  Responsibility Provision, requires certain employers to offer affordable minimum essential health coverage to full-time employees and their dependents, or else pay a tax penalty, Lowe explained.

“If the Supreme Court rules that the individual mandate is essential to and not severable from the rest of the ACA, then the entire ACA — including the Employer Shared Responsibility Provision — will be deemed unconstitutional.”


Like Stanton, Lowe is doubtful that the Affordable Care Act will be eliminated in its entirety.

“Our prediction is that the Supreme Court is unlikely to strike down the entire ACA as unconstitutional,” she said.

If, however, the court finds the individual mandate is unconstitutional, “there are hints that the Supreme Court will sever the individual mandate from other portions of the ACA,” she added.

The highest court in the land tends to follow a presumption of severability, said Lowe, which allows it to strike down one portion of a law as unconstitutional, but allows the remainder of the law to stay in place.

Lowe notes that the Supreme Court posed questions during oral arguments regarding whether Congress would want the rest of the law to survive if an unconstitutional provision were severed, with several justices making statements in favor of severability.

If the Court were to cut the individual mandate from the Employer Shared Responsibility Provision, “this ruling will result in no change in the current employer requirements for offering affordable health care,” she said. “Employers would continue to comply with the ACA’s Employer Shared Responsibility Provision.”

If the Supreme Court upholds the 5th Circuit decision that the ACA must produce revenue to be a legitimate use of Congress’s

power to tax, and hence the $0 individual mandate renders the act unconstitu¬tional, Congress could enact legislation to save the ACA, said Sarah Bhagwandin, a Denver-based attorney with Bryan Cave Leighton Paisner.

Given the slim Democratic majorities in the Senate and House, the clearest path to doing so would be to increase the penalty from $0 through the budget reconciliation process, she said. Alternatively, Congress could attempt to sever the mandate from the rest of the ACA or eliminate it altogether. Either option, however, would require a filibuster-proof majority of 60 Senate votes.

“In the current political climate,” said Bhagwandin, “it seems highly unlikely to gain bipartisan support for these kinds of actions.”

“Unless the Court goes much further than expected, I don’t think HR and total rewards leaders will see much direct impact,” Stanton said. “They will most likely have more pressing legal issues to worry about this spring and summer: vaccinations and other return-to-work issues, COBRA subsidies, deadline extensions related to HIPAA special enrollment, COBRA claims and appeals, and mental health parity.”

Deirdre Macbeth, content director at WorldatWork and an attorney who formerly specialized in labor and employment law, agrees that the Supreme Court is likely to “main¬tain the status quo, with the ACA remaining in place.”

Macbeth echoes Christina’s sentiment that the Court can achieve this outcome by finding that the plaintiffs do not have standing and declaring the individual mandate constitutional or finding it unconstitutional but separating it from the rest of the ACA.

“All options would likely lead to the ACA staying (mostly) intact,” she said, “without substantial impact to employers and HR and total rewards leaders.”

Mark McGraw is the managing editor of Workspan. He can be reached at mark.mcgraw@worldatwork.org.