Supreme Court Leaves Affordable Care Act In Place

On June 17, 2021, the United States Supreme Court held that the plaintiffs did not have standing to pursue an action under the Patient Protection and Affordable Care Act (PPACA) because the individual mandate is unenforceable and, as such, “unenforceable language is insufficient to establish standing.” Regarding the states, the Supreme Court held that the "pocketbook injuries" cannot be traced to the government’s unlawful conduct. The Supreme Court failed to consider whether reducing the penalty to zero rendered the individual mandate unconstitutional and, in turn, if the individual mandate is unconstitutional, whether the individual mandate is severable from the remainder of the PPACA.

The lawsuit was narrowly centered around the individual mandate, which requires an individual to enroll in health coverage for the year or pay a penalty. In 2017, Congress passed the Tax Cuts and Jobs Act, which reduced the tax imposed by the individual mandate to zero effective January 1, 2019. Thereafter, two individuals and various states filed a lawsuit claiming the reduction of the tax to zero rendered the individual mandate unconstitutional. In particular, the entirety of the PPACA depends on the individual mandate and its effective removal rendered every other provision under the PPACA inoperable. The circuit court agreed with the plaintiffs and held that the individual mandate became an unconstitutional command when Congress reduced the amount to zero and, thus, it required the entirety of the PPACA to be struck down. The court of appeals held that the district court’s severability argument was incomplete and requested that the district court review the entirety of the PPACA to determine whether any of its provisions were affected by the reduction of the tax to zero beginning in 2017. In response, the petitioners, 16 states led by the State of California, filed a writ of certiorari to review the lower court’s decision.

Because the Supreme Court failed to review the constitutionality of the individual mandate and its effect on the PPACA, the PPACA continues to be in effect.  Nonetheless, it is unclear whether the current administration will increase the individual mandate penalty amount to prevent future attacks on the PPACA. If the penalty is increased, employers should expect their employees to enroll in either employer-sponsored, individual, or other health coverage.