by Jordan Roberts
Director of Government Affairs, John Locke Foundation
We learned on Friday evening that a federal judged had ruled the Affordable Care Act, commonly referred to as Obamacare, was unconstitutional. The challenge came from a group of 20 Republican Attorneys General that sought to have the law struck down. U.S. District Judge Reed O’Connor ruled that the law could not stand because Congress recently eliminated the penalty for the individual mandate.
The most controversial part of Obamacare was the individual mandate, the part of the law that forced people to buy health insurance. A tax penalty was levied on individuals that didn’t comply with the individual mandate to obtain coverage. This provision was held constitutional by the Supreme Court during the initial legal challenge to Obamacare, stating that the individual mandate penalty tax was constitutional under Congress’s power to collect taxes.
The individual mandate penalty was lowered to zero by the Tax Cuts and Jobs Act, the tax reform bill that was passed following the election of President Trump. In the original Supreme Court argument for Obamacare, the Obama administration said the individual mandate provision, the community rating provision, which prohibited insurance companies from charging sicker people higher rates, and the guaranteed issue provision, which prohibited insurers from denying people coverage with pre-existing conditions, were “inseverable” from each other meaning the law could not stand without all three of them.
Therefore, with the individual mandate penalty reduced to nothing, the judge ruled that this was an unconstitutional overreach by Congress to mandate the coverage of health insurance for everyone without a tax. Further, by ruling that the individual mandate without a tax penalty was unconstitutional, the other core parts of the bill that were “inseverable” from the invidiual mandate must be struck down with the individual mandate as well.
Judge O’Connor’s ruling is almost certain to be appealed by Democratic state Attorneys General. The ruling leaves many who receive coverage under Obamacare uncertain about the future of this program, raises questions for people who receive subsidies to buy insurance from the exchanges, and raises questions for the states who expanded their Medicaid programs with the promise of the federal government paying the majority of that bill. Uncertainty is not conducive to a well-functioning health insurance market.
This debate about the constitutionality of the Affordable Care Act always raises a question that has stuck with me since the debate about the longevity of the law began: why is it that continuing the Obamacare framework or moving to something even more centralized such as “Medicare-for-All” are the only two public policy options presented to the public? We know that the Affordable Care Act didn’t live up to the promises that the architects of the law made to those who agreed to support the law so why should we believe that giving further power over the healthcare system to the federal government is a good idea?
The reality is if we want a more sustainable system in America we need to move away from a centrally planned healthcare sector. We need more consumer freedom and choice, more competition, and more state flexibility to run healthcare markets. That is going to involve some disruption in the current system, just like what happened when the Affordable Care Act was implemented. However, when the only two choices presented to the American people are the notably flawed Obamacare law or the “Medicare-for-All” route, the conversation and debate get bogged down to a zero-sum game of either supporting fixes for Obamacare or supporting a move to a single-payer, “Medicare-for-All” system which would disrupt the current healthcare sector exponentially harder than Obamacare did.
Given that Congress, nor the states, can agree on what the U.S. healthcare system should look like, it will be interesting to see how the appeals process and future healthcare legislation correspond to this court ruling.