States Challenge Constitutionality of Obamacare

Published June 6, 2018

Twenty states have filed a lawsuit challenging the constitutionality of Obamacare, based on provisions in the tax reform legislation President Donald Trump signed into law in December 2017.

The U.S. Supreme Court deemed the Affordable Care Act (ACA) constitutional in 2012 in its decision in NFIB v Sebelius. Writing for the majority, Chief Justice John Roberts declared the individual mandate qualified as a tax, validating the authority of Congress to create it.

Under the Tax Cuts and Jobs Act (TCJA), the individual mandate has been set to zero, eliminating the federal penalty or “tax” on individuals who don’t purchase health insurance.

In an announcement declaring intent to join the lawsuit, the Texas Public Policy Foundation stated with the tax penalty set to zero, it no longer serves its “essential function of raising revenue. As a result, under the NFIB v. Sebulius decision, “there is no remaining legal basis on which to uphold the individual mandate.”

Prices Up, Access Down

Twila Brase, president and cofounder of the Citizens’ Council for Health Freedom and a policy advisor for The Heartland Institute, which publishes Health Care News, says Obamacare has raised health care prices and reduced access to insurance.

“It’s clearly made everything unaffordable,” Brase said. “Health insurance, medical prices, hospitalization—everything is less affordable because of increased regulation, because of consolidation, and because Obamacare has forced health insurers to cover people with uninsurable conditions. Because Obamacare now requires insurers to cover people with uninsurable preexisting conditions, we have left true, affordable indemnity insurance behind.”

Tax or Penalty?

Paul Larkin, a senior legal research fellow at the Institute for Constitutional Government at the Heritage Foundation, disagrees with the Court’s decision that the individual mandate is a tax.

“A tax is generally conditioned on being offered to create revenue, whereas the penalty was much more like a parking ticket,” Larkin said. “Here, if you were ordered to do X, which the government otherwise wouldn’t have the authority to do, and you failed to do X, you had to pay a fine. Chief Justice Roberts said, ‘That looks like a tax to me.’ I say no, it looks more like a penalty.”

Larkin says the current case has a long way to go.

“The bottom line is, there is a very good argument to be made that the statute is now unconstitutional, but that doesn’t guarantee the Supreme Court will hold that judgment,” Larkin said. “Before it gets to the Supreme Court, it has to get through the district court and the court of appeals. I think it’s unlikely that those courts would essentially say that they can overrule the Supreme Court by holding the statute unconstitutional. It would be a pretty gutsy step for a district court judge or circuit court judge to say that we’re now going to hold it unconstitutional even though the Supreme Court had previously upheld it.”

Preexisting Conditions Problem

Brase has several proposals she says would reintroduce market solutions to health care problems if the states succeed and Obamacare is struck down as unconstitutional.

“From our perspective, we must get away from employer-sponsored coverage for preexisting conditions,” Brase said. “We must have tax equity so that people are encouraged to buy their own policy, take it with them, get their full wages, and not have a huge part of their wages sent to the health plan.”