ACA Ruled Unconstitutional

By: Allison Shelton, J.D.

On December 14, 2018, in Texas v. United States, Judge Reed O’Connor from the U.S. District Court for the Northern District of Texas ruled that (1) the Individual Mandate in the Affordable Care Act (ACA) is unconstitutional, and (2) the remaining provisions of the ACA are invalid. The ruling does not immediately affect the health care and insurance industries. An appeal to the Fifth Circuit Court of Appeals was filed on January 3, 2019, and Judge O’Connor agreed to stay his ruling pending the appeal.

The Individual Mandate requires individuals to obtain health insurance coverage. Failure to do so could result in a tax penalty under the ACA. In 2012, the Supreme Court concluded that the Individual Mandate was an appropriate use of Congress’s taxing authority under the Constitution. Thereafter, a tax bill passed in December of 2017 which repealed the tax penalty effective January 1, 2019. As a result, Judge O’Connor held that the Individual Mandate is now unconstitutional. Further, Judge O’Connor determined that the Individual Mandate is essential to the ACA and could not be severed from other provisions in the act. Therefore, Judge O’Connor held that the entire ACA is invalid. If upheld on appeal, Judge O’Connor’s decision could have a significant impact on the health care industry.

The ACA includes not only the Individual Mandate but also several provisions that have shaped the health care industry since 2010:

• Certain provisions in the ACA were designed to enhance the ability of agencies to combat fraud and abuse in the industry. For example, the ACA provides that Medicare and Medicaid payments may be suspended when there is a “credible allegation of fraud” against a provider.
• The ACA established the Physician Payments and Sunshine Act which requires group purchasing organizations and manufacturers of prescription drugs and devices to annually report certain financial relationships with teaching hospitals, physicians, and immediate family members of physicians.
• Section 6402(a) of the ACA sets forth the obligation to report and refund overpayments within 60 days.
• The ACA requires tax-exempt hospitals to conduct community health needs assessments and to develop financial assistance policies.
• Section 1557 of the ACA requires providers that participate in Medicare or Medicaid to take steps to prevent discrimination on the basis of race, color, national origin, sex, age, or disability.

These provisions and others will be invalidated if Judge O’Connor’s ruling is upheld on appeal. Accordingly, Texas v. United States is a case to watch in the coming year.

Allison Shelton is a member of a team at Brown & Fortunato, P.C. that routinely represents hospitals and health systems on a broad spectrum of corporate, regulatory and operational issues. The team is led by Beth Anne Jackson (bjackson@bf-law.com), Elizabeth Jepson (ejepson@bf-law.com), Lisa Smith (lsmith@bf-law.com), and Allison Shelton (ashelton@bf-law.com). You can reach the Hospitals and Health Systems team at Brown & Fortunato at 806-345-6300.