Severability for Obamacare: The First Cut Is the Deepest

When the Supreme Court announces next week its ruling in the case challenging the constitutionality of the Affordable Care Act (ACA), the greatest suspense will involve not whether or not the individual coverage mandate survives (It’s dead, Jim, as Dr. “Bones” McCoy might advise). The more important question is: What other provisions of the health law, if any, might remain to limp ahead awkwardly?

Most conventional analysis paints three or four basic scenarios, while overlooking a more likely one – amputating the Title I private insurance leg of the Act.

Obamacare diehards maintain, perhaps out of habit, that the Court will simply uphold the entire law, so there’s no need for further “severability” analysis. A surprisingly under-informed set of health policy analysts and media sources seem to be gravitating toward the conclusion that the Court will only strike down the individual mandate and leave everything else standing (as the 11^th Circuit Court of Appeals decision in this case did, mistakenly). This overlooks the fact that even the official legal position of the solicitor general on behalf of the Obama administration is that, if the individual mandate is declared unconstitutional, two other insurance regulation provisions for guaranteed issue of private health coverage and adjusted community rating of the premiums for such insurance would need to be dropped as well. (Translation: The ACA’s over-touted “protections” against insurers’ charging more, or denying coverage, in the individual insurance market would be overturned even before they are scheduled to go into effect in January 2014). Consider this the “best case” scenario for ACA defenders if they lose the individual mandate issue on constitutional grounds.

Such a ruling is certainly plausible, if not probable, given the backdrop of congressional findings of fact (or fiction, but within the standards of most Capitol Hill deliberations) in the ACA statutory text that tried to justify the individual mandate as necessary to make those two regulatory provisions feasible.

The primary opposing scenario, in our bipolar world of health politics merged with constitutional law litigation, would involve the Court declaring the entire law unconstitutional and beyond redemption (at least until after the next election). Most opponents of the health law are hoping for this result, but it may prove too sweeping and politically charged (Bush v. Gore, redux?) for a majority of Supreme Court justices.

However, there may be another way to excise the most constitutionally infirm portions of the ACA, without letting its regulatory and income redistribution weeds grow back within a few years. Last January, I headed a group of ten health policy scholars (most of whom are affiliated with AEI) in joining our friends at the Competitive Enterprise Institute in filing an amicus brief on this severability issue in NFIB v. Sebelius. With the expert legal work of former Reagan Justice Department attorney Thomas Christina (now at Ogletree, Deakins, Nash, Smoak & Stewart), the brief argued, first, for overturning the entire ACA on the basis of its legislative history and congressional intent but, second, at a minimum invalidating all of its Title I provisions due to their interrelated structure, coordinated functions, and common goals. Here are the plain English basics of the argument:

Severability analysis (what happens to the rest of a law passed by Congress when a portion is declared unconstitutional) at the Supreme Court is not always consistent. Sometimes, the desired legal outcome comes first, and then the Court works backward to come up with a rationale for it. (There goes my bar membership, for uttering such heresy!) The more polite language to use is that how such a remedy is shaped remains “discretionary.”

But in most cases, a two-part test usually involves, first, whether Congress would have voted to enact the rest of the law without its unconstitutional provision (i.e., Did the essential “legislative bargain” require its retention?). Second (but not always in this order), can the rest of the law still function without the offending provision in the manner that Congress intended? (This is sometimes called the functionality test.)

Although some legal or health policy analysts sometimes blow smoke to the contrary, there are no presumptions to be drawn from the absence of a severability clause in a piece of challenged federal legislation, and the Court does not automatically presume that it must try to retain as much of a constitutionally flawed law as it can. But it generally will refrain from narrowly reconstructing or rewriting such laws, to avoid creating new versions that Congress never adopted.

Our amicus brief argument contends that if the standard of analysis is congressional intent, then the history of the ACA clearly indicates that Congress could not have adopted the law without including the individual mandate. Final House passage occurred in March 2010 under a closed rule requiring an up or down vote on the Senate-passed version of the ACA (with the individual mandate inside as its coverage microprocessor) and no amendments allowed. The loss of a 60-vote majority for Senate Democrats after the Scott Brown election the previous January meant that no revised legislation could pass a filibuster-prone Senate again.

This half of our brief supports the case for invalidating the entire ACA, if the individual mandate is declared unconstitutional.

The second half examines how the ACA might function without an individual mandate. We conclude that all of the provisions in Title I of the law are inextricably intertwined, as essential parts of a comprehensive strategy to establish and promote more health care. The centerpiece of its plan to achieve coverage, quality, and affordability goals for a specific subset of the population (working Americans and their families) in various stages involve provisions for health benefits exchanges, along with the individual mandate, an employer mandate, tax subsidies for premiums, essential benefits rules, cost sharing restrictions, and a number of other new insurance requirements. For example, the individual mandate was designed to lower the official budgetary costs of additional coverage requirements, while the exchanges are assigned the job of determining exemptions from the mandate. Federally required enhancements of insurance benefits are aimed at increasing demand for exchange-based coverage as well as employer-sponsored insurance.

Hence, if the Court balks at overturning the entire ACA after finding the individual mandate unconstitutional, we argue that it should not pick and choose among different parts of Title 1 but instead strike down that entire self-contained section of the overall law.

What about the Medicaid expansion provisions in Title II of the ACA? Another amicus brief has argued for striking it down along with Title I. Loss of the individual mandate would reduce demand for new Medicaid coverage, but it appears more difficult to invalidate other Medicaid reform provisions in that section of the ACA, and some Justices might grow apprehensive about invalidating expanded coverage for as many as 16 million currently uninsured Americans (particularly if the Court has already ruled against a more direct challenge to the Medicaid expansion that claims it is unconstitutionally coercive).

A few other amicus briefs representing health industry sectors have argued narrowly for overturning the employer mandate, or the guaranteed issue/community rating portions of Title 1, if the individual mandate falls. But their arguments appeared too narrowly selective and transparently self-serving.

During oral argument on March 28, Justice Samuel Alito specifically noted the basic contention of our amicus brief, to consider striking down all of Title I (p. 25). And Chief Justice Roberts later signaled subtly that even the Medicaid coverage provisions might become vulnerable if the individual mandate was ruled unconstitutional (p. 49).

So don’t be surprised if the Court decides to take a somewhat more surgical approach to how it severs remaining surviving portions of the ACA, if it decides to rule the individual mandate unconstitutional. But don’t expect the justices to go completely Old School, in the King Solomon sense.