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ACA Still Business as Usual, Despite New Challenge to Its Constitutionality

Despite a federal judge’s Dec. 14 ruling that the Affordable Care Act (ACA) is unconstitutional, the existing law remains in effect and employers should continue to abide by it for now.

The case of Texas v. Azar was brought to federal court by the attorneys general of 20 states, who argued that when Congress zeroed out the individual mandate penalty (which becomes effective Jan. 1, 2019, as part of the December 2017 Tax Cuts and Jobs Act), the ACA became unconstitutional. Judge Reed O’Connor agreed.

However, O’Connor has not issued an injunction or any other type of order that prohibits enforcement of the ACA at this time. Furthermore, the federally run marketplace at currently displays a banner reading, “Court’s decision does not affect 2019 enrollment or coverage.”

Seema Verma, administrator for the Centers for Medicare and Medicaid Services, issued a statement via Twitter that reads in part, “We expect this ruling will be appealed to the Supreme Court. Pending the appeal process, the law remains in place.”

In another tweet, Verma added, “The recent federal court decision is still moving through the courts, and the exchanges are still open for business and we will continue with open enrollment. There is no impact to current coverage or coverage in a 2019 plan.”

Background of the battle

In 2012, the U.S. Supreme Court held in National Federation of Independent Business (NFIB) v. Sebelius that the ACA’s individual mandate was constitutional as an exercise of Congress’s taxing power.

This year, in Texas v. Azar, the attorneys general argued that because the individual mandate penalty is now zero for tax years beginning in 2019, it is no longer a revenue-raising measure; therefore, the reasoning of NFIB v. Sebelius no longer applies.

The attorneys general from an additional 16 states intervened in the lawsuit to argue that the ACA is constitutional and should be upheld.

O’Connor sided with the plaintiffs, issuing a declaratory judgment that the entirety of the ACA is unconstitutional because he found that the individual mandate was “essential” to its structure, and could not be separated from the law’s other requirements.

His ruling certainly is headed to the Fifth Circuit of Appeals, and possibly even to the Supreme Court. However, many legal observers view its chances of being upheld as very small.

Regardless, the ACA remains in full force and effect, as the lawsuit will take time to move through the courts. Paycom will continue to monitor developments in this area as the case progresses.