U.S. Federal Court Strikes Down Key Component of the Affordable Care Act

In a 2-1 decision this week, the United States Court of Appeals for the Fifth Circuit struck down as unconstitutional the individual mandate provision of the Affordable Care Act (ACA). The requirement for every individual to purchase insurance was an essential part of the healthcare law passed in 2010, because having healthy people in the insurance pool theoretically helps to lower insurance premiums for everyone, including those with pre-existing conditions who require more care.

In the first legal challenge to the ACA brought after its passage in 2010, the U.S. Supreme Court ruled in 2012 that Congress acted within its constitutional taxing authority in imposing the mandate, because those who failed to purchase insurance paid a penalty, which the court ruled was a "tax" for refusing to comply. In 2017, however, Congress eliminated the tax for those failing to purchase health insurance as part of a broader tax law overhaul. With no penalty for failing to carry health insurance, many chose to drop their coverage. 

The 5th Circuit ruled this week that the individual mandate can no longer survive constitutional challenge as a "tax", since there is no longer any tax or penalty associated with having no coverage. The 5th Circuit declined, however, to rule that the entire ACA fails, and sent the case back to the lower federal court for a ruling on that issue. The case is important, because if the entire law fails, many components of the law, including the expansion of Medicaid and subsidies that help other low-income workers afford coverage, would be in jeopardy.