Individual Mandate Ruled Unconstitutional, But ACA Itself Remains In Place and Cadillac Tax Repealed

By Higginbotham on December 19 , 2019


The United States Court of Appeals for the Fifth Circuit issued its decision in the Texas v. United States case. The case challenged the constitutionality of the Affordable Care Act’s (ACA) individual mandate in light of the Tax Cuts and Jobs Act of 2017, which zeroed out the individual mandate penalty. The appellate court was reviewing the lower court's ruling that found that the individual mandate, with no accompanying tax penalty, is unconstitutional and that the individual mandate is such an essential part of the ACA that the ACA cannot function without the individual mandate in place, and therefore the entire law must be ruled unconstitutional.

The appellate court agreed that the individual mandate is unconstitutional because it can no longer be read as a tax, and there is no other constitutional provision that justifies this exercise of congressional power. However, it felt that the district court did not properly address whether the individual mandate could be separated from the rest of the ACA, so the court sent that question back down to the district court to provide additional analysis of those provisions of the ACA.

Please be aware that this is not a final ruling, and it is expected to be engaged in appeals for the next several months, which will likely culminate in a hearing before the Supreme Court. This means that the ACA continues to be the law of the land, and compliance with the ACA is still being enforced — the ruling essentially pushes the ultimate decision on the case past 2020 and keeps the Supreme Court from needing to decide the future of the ACA during an election year.

In addition, this morning Congress approved the repeal of the Cadillac Tax, Medical Device Tax and Health Insurance Tax as part of its 2020 spending bill. The Medical Device Tax and Health Insurance Tax have been intermittently implemented, while Congress had put a moratorium on the Cadillac Tax until 2022. The House voted overwhelmingly over the summer to drop it completely, and last week, Senate leaders pushed for a full repeal as part of the spending deal.

To help pay for the removal of these taxes, lawmakers plan to wrap in language that would make it easier for generic drug companies to obtain samples of brand-name drugs needed to develop lower-cost competing products. The CREATES Act would also make it easier for generic products to come to market when the brand-name drug is subject to a special FDA-mandated safety program. The act is projected to save nearly $4 billion over the next decade.

The Senate is expected to present the spending bill for President Trump’s signature before government funding expires at midnight Friday.


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