Supreme Court Update for Banking and Financial Services Professionals

by Charles W. Prueter, Waller

The new Term kicks off at One First Street in Washington, D.C., next Monday morning. Last month, the Update previewed several of the cases on the Supreme Court’s docket, including a collection of three cases presenting the question of whether discrimination against employees because of sexual orientation constitutes prohibited employment discrimination under a federal law known as Title VII. The Title VII cases will be heard next Tuesday; barring some hot impeachment news that consumes the media in all of its forms, you should expect media coverage of those three cases on Tuesday and Wednesday. Today, the Update takes a step back to preview a case that is not yet on the Court’s docket but may get there before this Term is said and done.

The Affordable Care Act, as readers know, marked a significant shift in pretty much all things health care — and, ultimately, all things national economy. It was nearly 1,000 pages long, and it authorized the promulgation of regulations that filled 1,000 pages several times over. And yet, back in 2010 and 2011, there was just one small piece of the ACA that first got the pundits, the lawyers, and the justices all fired up: The Individual Mandate. In short, this provision of the law required all Americans to maintain health insurance — either through their employers or through the marketplace. Those who didn’t were required to pay a monetary penalty (or, ahem, a “tax,” as we will later see). Indeed, as the Individual Mandate rolled through the courts and the media and up to the Supreme Court in 2012, the focus was on the government’s authority (or lack thereof) to force Americans to buy insurance or suffer the penalty. One of the analogies that was floating around during this time and made famous by the late Justice Antonin Scalia centered on what my children call little trees. Yes, broccoli. That is, if the government could force Americans to buy health insurance (because it’s the healthy and responsible thing to do) or suffer the penalty, then it could also force Americans to buy broccoli (because it’s the healthy and responsible thing to do) or suffer a penalty! O tempora, o mores! This sort of reductio ad absurdum was quite effective, and, ultimately, the Supreme Court answered that question in the negative: No, the government cannot force Americans to buy health insurance or suffer the penalty.

But — and you knew there was a but — the government’s power to tax is much broader than its power to punish. Thus, in June 2012, the Supreme Court upheld the Individual Mandate because the government does have the power to impose a tax on those without health insurance. The Individual Mandate, therefore, was constitutional because it could reasonably be read as a tax. Because, in many ways, the Individual Mandate is essential to the viability of the ACA as a whole, this decision meant that the whole ACA (with a few exceptions) would be permitted to go into effect.

Life went on, and for several years, as anyone who filed a tax return knows, Americans had to verify that they had health insurance. The Individual Mandate thus was administered through the IRS.

Enter the 115th United States Congress. (Congress changes every two years; now we’re under the 116th Congress.) Through the Tax Cuts and Jobs Act of 2017, which was signed into law by the president on Dec. 22, 2017, Congress eliminated that tax created by the Individual Mandate.

A collection of states (all with Republican attorneys general, including Texas and Alabama) then realized that the Supreme Court’s reasoning upholding the Individual Mandate — i.e., it was constitutional because it could reasonably be read as a tax — no longer made much sense and decided to challenge the Individual Mandate in federal district court in Texas, in a case known as Texas v. United States. Siding with the challengers, the federal judge in Texas explained that the Tax Cuts and Jobs Act “sawed off the last leg” that the ACA stood on. The judge reasoned that under the law as it now stands, the Individual Mandate no longer “triggers a tax” and, therefore, cannot be upheld under the government’s tax power. (In other words, without the tax component, the government can force Americans neither to buy broccoli nor buy health insurance.) And if the Individual Mandate is not constitutional and must be struck down, the theory goes, the whole ACA must be struck down with it.

The case is now pending at the U.S. Court of Appeals for the Fifth Circuit, where a panel of three judges will decide the fate of the Individual Mandate — and, potentially, the whole ACA. The court held oral argument in the case in July 2019 but has not yet issued an opinion. When it comes to the way health care is governed in this country, and the expansive impact that health care has on our economy as a whole, it is difficult to overstate the ramifications of this case. Because the ACA was such a complete overhaul, and because the government has proved incapable of replacing it with any sort of functional equivalent, the striking down of the entire law would effect massive change.

Expect a decision from the Fifth Circuit before the end of the year, and, whichever way it goes, expect the Supreme Court to take it up relatively soon thereafter.

Charles W. Prueter is an appellate lawyer at Waller Lansden Dortch & Davis, LLP, in Birmingham. He can be reached by email at