California v. Texas

By December 2017, President Trump signed into law a large tax relief bill, the Tax Cuts and Jobs Act of 2017. Among many other tax cuts, the Act eliminated the individual mandate requirement from the ACA by reducing the required amount of health coverage to US$0 starting in 2019. The elimination of the individual mandate was estimated by the Congressional Budget Office to save more than US$300 billion in federal spending though would cause premium rates to go up for some individual tax payers.[5] Political commentators recognized the removal of the individual mandate was a partial victory for the Republicans that were trying to repeal the ACA before.[6]

In February 2018, Texas led 19 other states in a federal lawsuit in the United States District Court for the Northern District of Texas challenging the constitutionality of the ACA following the removal of the individual mandate from the Tax Cuts and Jobs Act. The suit, Texas v. Azar, established that since the individual mandate was seen as core provision of the ACA as determined by the Supreme Court in Sebelius, then with its removal, the entire law became an unconstitutional exercise of Congressional taxing power.[7] The United States Department of Justice told the district court in June 2018 that it mostly agreed with the general basis of the lawsuit, in that without the individual mandate, certain provisions of the ACA were invalidated such as the protections it had provided for those with pre-existing conditions, and would not defend those factors in court. However, the Justice Department still believed certain provisions of the ACA were valid.[8]

On December 14, 2018, District Judge Reed O'Connor released his opinion on the case, affirming that without the individual mandate, the whole of the ACA was unconstitutional, going farther than the Justice Department had even indicated. O'Connor wrote that the "Individual Mandate can no longer be fairly read as an exercise of Congress's Tax Power and is still impermissible under the Interstate Commerce Clause—meaning the Individual Mandate is unconstitutional."[9] He then further reasoned that the individual mandate is an essential part of the entire law, and thus was not severable, making the entire law unconstitutional.[10][11] O'Connor's decision rendered the ACA unconstitutional but did not immediately overturn the law, granting a stay pending the resolution of the case on appeal.[12] Among reaction to this decision was California and several other states, vowing to lead a challenge to the ruling.[13]

By early January 2019, 17 states led by California filed an appeal of O'Connor's decision to the Fifth Circuit, as the Justice Department had indicated it would not challenge the ruling. At point, it was recognized that the case was likely bound for the Supreme Court, and would land in the midst of the 2020 elections, making it a critical issue for either party.[14] Four additional states joined California's challenge by February 2019, bringing the number to 21. The Democrat-controlled House of Representatives following the 2018 election also joined in the defense.[15] The Department of Justice filed a brief in support of the defendants (Texas et al.) in March 2019, now in full agreement with O'Connor's decision that the ACA as a whole was unconstitutional without the individual mandate, and would support Texas in defending the challenge.[16]

Prior to the July 2019 oral hearings, the judges in the Fifth Circuit raised the question of whether California and the other states had standing to bring the challenge to the original suit.[17] The oral hearings before Judges Carolyn Dineen King, Jennifer Walker Elrod, and Kurt Engelhardt focused on the constitutional challenge, the intent of Congress when they wrote and passed the Tax Cuts and Jobs Act, and on the matter of standing. Observers believed the case would be decided upholding O'Connor's ruling due to how the questioning fell, with Judges Elrod and Engelhardt, both appointed under Republican presidents, asking the bulk of the questions, while Senior Judge King, appointed under Democrat Jimmy Carter, was relatively silent.[18]

The Fifth Circuit issued its ruling on December 18, 2019.[19] The 2–1 decision, joined by Judges Elrod and Engelhardt, upheld in principle District Judge O'Connor's decision that with the elimination of the individual mandate, parts of the ACA were potentially unconstitutional. However, the decision remanded the case back to the district court, arguing that O'Connor's conclusion that the whole of the ACA was unconstitutional may be flawed. The Fifth Circuit decision asked the District Court to consider the concept of severability, since the individual mandate aspect was not apparently tied to other parts of the ACA like the health insurance marketplace. The Fifth Circuit also asked the District Court to consider a suggestion that the Justice Department had included in one of its briefs where the ACA may be invalid only in those states that had challenged it. As questions remained to the degree to which the ACA was unconstitutional, the ACA remained in enforcement following the decision.[20]