Does Killing the Individual Mandate Kill All of Obamacare?

There are no immediate prospects either in Congress or the courts that Obamacare will be undone. But just as barflies never stop trying to resolve the world’s problems from behind a pint glass, there has emerged yet another rift between Republicans over the law’s regulations—this time with a legal twist that provides insight into the party’s thinking.

In February, Texas, Wisconsin, and 16 other states petitioned a federal district court to declare all of Obamacare unconstitutional, based on changes to the law made by the Tax Cuts and Jobs Act. Through creative use of Senate procedure, the tax bill reduced Obamacare’s individual mandate penalty to $0, thereby “eliminating” it in practice, if not in law.

Although the change prompted President Trump to declare that “there is no such thing as Obamacare anymore,” the tax legislation did not touch the health law’s Medicaid expansion, or its regulations of the individual market—some of which long have been the bane of conservative policymakers. The latest conservative recourse, then, is states going after the rest of Obamacare by applying the TCJA to legal precedent.

Remember that a majority of the Supreme Court ruled in NFIB v. Sebelius that the individual mandate was constitutional only as a tax. But if the mandate penalty is $0, the thinking goes, the court cannot consider it a tax any longer—it can be considered only an attempt to regulate commerce, as Congress in fact originally intended. In NFIB, a separate majority of the court ruled that this intent was unconstitutional. Therefore, the states argue that the penalty should become illegal the moment it is zeroed out next year—the moment it is no longer raising revenue for the government.

The states said there is a cascade to this: If the mandate is struck down, the rest of the law must go, too, since the mandate is inseparable from the whole. They explained:

As Congress made clear, “[t]he requirement [for individuals to buy health insurance] is essential to creating effective health insurance markets.” 42 U.S.C. § 18091(2)(I) (emphasis added). “[T]he absence of th[is] requirement would undercut Federal regulation of the health insurance market.” … So because the remainder of ACA does not “function in a manner consistent with the intent of Congress,” the whole Act must fall with the mandate. Alaska Airlines, Inc. v. Brock, 480 U.S. 678, 684–85 (1987)

On the merits of substance, it’s a flimsy position. The individual mandate has no policy implications for Medicaid expansion, for example, and Obamacare provided for regulations of the individual market other than “guaranteed issue” and “community rating”—the two big’uns that prohibited insurers from denying coverage to applicants or differentiating premiums based on pre-existing conditions. These regulations complemented the individual mandate.

This was the Justice Department’s position in a brief it filed last week. Congress did not say that the mandate couldn’t be severed from the law’s “other major provisions … concerning various insurance regulations, health insurance exchanges and associated subsidies, the employer mandate and Medicaid expansion, and reduced federal healthcare reimbursement rates for hospitals.” However, the government previously argued in NFIB that Congress made guaranteed issue, community rating, and the mandate all part of a whole, “And the Supreme Court has since essentially agreed, noting [in King v. Burwell] that these ‘three reforms are closely intertwined’ and that ‘Congress found that the guaranteed issue and community rating requirements would not work without the coverage requirement.’”

All that merely would amount to a recounting of history were it not for this—in its brief, the Justice Department agreed with the states that the tax bill rendered the individual mandate unconstitutional, for the same reasons they cited. As a result, it is now the position of the federal government that Obamacare’s guaranteed issue and community rating provisions—considered as a pair, what media and politicians call the core “protections for people with pre-existing conditions”—should be declared illegal.

This is the latest swing at the part of Obamacare that drives right-of-center voters the craziest: the “government takeover” part. The individual mandate was always among the most unpopular components of it, and the easiest major component to attack politically. But many policy-minded conservatives argued in recent years that the regulations—the “preexisting conditions protections”—were to blame for some consumers’ high premiums and pending market failures. They contended that loosening these regulations and instead jacking up subsidies to vulnerable consumers and insurers was a preferable public policy choice. Ted Cruz was an example of this.

But that argument failed. It didn’t help that Republicans used a complicated legislative process that sacrificed the ability to include creative ideas for better odds of repealing the law in-part. But “repeal” was the party’s political priority. When Democrats attacked the right for undermining protections for people with preexisting conditions, they had no rebuttal—not because they couldn’t explain their rebuttal, but because they didn’t have much of one.

This has not changed in the year since. The chairman of the Senate health committee, Sen. Lamar Alexander—who has engaged on the details, not just the politics, of health reform—lambasted the Justice Department’s brief in the Texas Obamacare lawsuit. “There’s no way Congress is going to repeal protections for people with pre-existing conditions who want to buy health insurance. The Justice Department argument in the Texas case is as far-fetched as any I’ve ever heard,” he said.

“Congress specifically repealed the individual mandate penalty, but I didn’t hear a single senator say that they also thought they were repealing protections for people with pre-existing conditions.”

Tough noogies, if that ends up being an unintended consequence of Congress’s action in December. But as Alexander’s statement makes clear: Even if there now is a legal debate about Obamacare’s regulations, the policy debate remains dormant indefinitely.

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