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Emory Law News Center

Faculty and Scholarship

SCOTUS: Health law and regulatory power

Matthew B. Lawrence, Ani B. Satz and Liza Vertinsky |
Lawrence, Satz, Vertinsky

In June, the U.S. Supreme Court decided California v. Texas, the fifth Affordable Care Act (ACA) case to reach the court since the Act’s passage in 2010. California v. Texas asserted that the Tax Cuts and Jobs Act of 2017 rendered the ACA unconstitutional by amending it. The Supreme Court rejected the case on standing grounds.

The facts of California v. Texas, 593 U. S. __ (2021), are intimately connected to the history of the ACA. To promote the affordability of health insurance purchased on the individual market, Congress included a provision imposing a tax on those who failed to purchase health insurance. This provision, known as the “individual mandate,” was challenged as unconstitutional. The Supreme Court held 5-4 in National Federation of Independent Business v. Sebelius (2012) that the federal government can incentivize the purchase of health insurance through the tax code (approximately $700 per adult). Then, in 2017, the Tax Cuts and Jobs Act reset the statutory penalty for failing to buy insurance to $0, effectively repealing the individual mandate.    

The Plaintiffs in California v. Texas—eighteen states and two individuals—asserted that the Tax Cuts and Jobs Act rendered the ACA unconstitutional by negating the individual mandate. They argued: (1) the Tax Cuts and Jobs Act left in place a mandate to purchase insurance, even though the penalty for non-compliance was eliminated, and (2) this mandate could no longer be called a tax and was therefore unconstitutional; therefore, (3) the ACA was unconstitutional because Congress did not intend the act to function without the individual mandate. Although these arguments were challenged by ACA advocates and opponents alike, the Department of Justice refused to defend the case, and the U.S. District Court for the Northern District of Texas ruled for the Plaintiffs, declaring the ACA invalid. The Fifth Circuit Court of Appeals then upheld that ruling.

The Supreme Court’s 7-2 ruling in California v. Texas concluded that the case should not have reached the courts because the plaintiffs did not have standing to bring suit. The court ruled that neither the states nor the individual plaintiffs had demonstrated they would be injured by the mandate, and, thus, they lacked standing. Although a majority of the court expressed skepticism about the merits of the case during oral argument, the court resolved the case on threshold grounds. 

California v. Texas is more notable for reaching the Supreme Court than for what the court ruled. It reflects a broader trend of challenging the federal regulation of health care. Similar challenges to the scope and nature of regulatory power can be seen in other recent Supreme Court cases that do not directly address health care but could have important implications in the health care context.

For example, in Mahanoy Area School District v. Levy, 594 U. S. __ (2021), the Supreme Court continued to expand First Amendment rights and limit the regulatory power of state institutions. In this case, the court ruled in favor of a former cheerleader who had been suspended from her school’s cheerleading squad for a message posted after school and off school grounds on a social media site. While the case focuses on the reach of the First Amendment in an education context, it can be seen as part of a broader trend of limiting regulatory power when it might curtail speech, including commercial speech. In the health care context, this trend could have implications for how courts view restrictions on direct-to-consumer advertising of prescription drugs, drug labels, and requirements to include warnings on drug inserts.

California v. Texas was not the only case to revisit a seemingly settled issue. In Cedar Point Nursery v. Hassid, 594 U. S. __ (2021), the court overruled a 45-year-old regulation authorized by a 1975 California law that granted union organizers limited rights to enter agricultural workplaces during non-working hours to speak with farmworkers. It did so on the grounds that the regulation, by appropriating a right of access to the agricultural workplace, amounted to an unconstitutional taking. While the court was careful to state that this decision did not endanger a host of other state and federal government activities involving entry onto private property, the case may nonetheless open the door for future challenges to government regulations that can be characterized as appropriating property rather than regulating the right to exclude. The reach of the holding for health-related corporations, many of which are subject to a myriad of regulations that include some form of physical entry, such as physical plant inspections, remains unclear.

Matthew B. Lawrence, associate professor of law

Ani B. Satz, professor of law

Liza Vertinsky, associate professor of law