Why a Judge Ruled Obamacare Unconstitutional, and What Policymakers Should Do Next

A judge has declared Obamacare unconstitutional—but the case is far from over.

U.S. District Judge Reed O’Connor, a George W. Bush appointee, granted a motion for summary judgment Friday in favor of 20 states led by Texas that had filed a lawsuit seeking to strike down the Affordable Care Act.

Now that O’Connor has ruled, the losing side is sure to appeal to the 5th U.S. Circuit Court of Appeals, and ultimately the Supreme Court.

However, as the case continues to wind its way through the legal system, it is imperative that policymakers pursue real health care reform. Obamacare isn’t working for too many American families and individuals slammed with high premiums and few choices. Rather than looking for ways to keep Obamacare in place amid these legal challenges, lawmakers should pursue real solutions.

The Judge’s Reasoning in Striking Down Obamacare

As part of the last year’s Tax Cuts and Jobs Act, Congress repealed the financial penalty associated with failing to comply with the individual mandate, effective in 2019.

In 2012, in NFIB v. Sebelius, the Supreme Court upheld the constitutionality of the individual mandate by the narrowest of margins when Chief Justice John Roberts, providing the deciding vote, devised a novel theory construing the penalty associated with violating the individual mandate as a tax that Congress has the power to levy under the Constitution.

Texas argues that once the penalty is reduced to $0, it can no longer be considered a legitimate tax, and that therefore the individual mandate would no longer have a constitutional leg to stand on.

Moreover, Texas argues, in upholding the individual mandate, the Supreme Court appeared to rely on the argument that Congress considered the individual mandate to be a central—indeed, indispensable—component of Obamacare that is not “severable” from the rest of its provisions, and that without it, the rest of the law should be invalidated.

A group of 17 states led by California are defending the law, arguing that even a tax of $0 is still a tax, and that it was never Congress’ intent to get rid of the rest of Obamacare when it repealed the financial penalty associated with the individual mandates as part of last year’s tax bill.

In granting the plaintiffs’ motion, O’Connor stated, showing his agreement with Texas’ argument:

The [Tax Cuts and Jobs Act] eliminated that [individual mandate] tax. The Supreme Court’s reasoning in NFIB—buttressed by other binding precedent and plain text—thus compels the conclusion that the individual mandate may no longer be upheld under the tax power. And because the individual mandate continues to mandate the purchase of health insurance, it remains unsustainable under the Interstate Commerce Clause—as the Supreme Court already held.

Finally, Congress stated many times unequivocally—through enacted text signed by the president—that the individual mandate is “essential” to the ACA. And this essentiality, the [Affordable Care Act’s] text makes clear, means the mandate must work ‘together with the other provisions’ for the Act to function as intended. All nine justices to review the [Affordable Care Act] acknowledged this text and Congress’s manifest intent to establish the individual mandate as the [Affordable Care Act’s] ‘essential’ provision. The current and previous administrations have recognized that, too. Because rewriting the ACA without its ‘essential’ feature is beyond the power of an Article III court, the Court thus adheres to Congress’s textually expressed intent and binding Supreme Court precedent to find the individual mandate is inseverable from the [Affordable Care Act’s] remaining provisions.

What Should Be Next

But the legal fight aside, we need a better health care solution than Obamacare.

One of Obamacare’s core conceits was that what (allegedly) worked in Massachusetts would also work on a national scale. That hasn’t borne out.

Instead, Obamacare led to years of increasing costs and decreasing choices. Premiums doubled in the first four years of the program. Millions lost the coverage they used to have. Americans found it harder to pick the right plan and doctor, as health plan choices declined and provider networks narrowed. Frustrated providers are drowning in red tape and increasingly feeling burned out. Meanwhile, taxpayers are on the hook for the money needed to paper over Obamacare’s flawed structure.

Those who seem to benefit most from Obamacare are big insurance companies that embraced the law and receive a steady stream of taxpayer subsidies and politicians who made endless promises to reform Obamacare but failed to deliver.

Real Solutions for Pre-Existing Conditions

Regardless of these facts, expect many in Congress to call for immediate restoration of Obamacare in the name of protecting the sick and people with pre-existing conditions.

Some on the left claim Congress must protect Obamacare because only Obamacare allows Americans with pre-existing conditions to get coverage. That’s an irresponsible, false dilemma and Congress should reject it.  

There are steps that states can take right now to ensure people with pre-existing conditions are protected, even if Obamacare ultimately goes away.

Congress should let states review their health care regulations and pursue innovative ways to make coverage more affordable and accessible to Americans—regardless of their income or medical status.  Every state legislature is about to go into session in early 2019, so this is both a desirable and possible approach.

Empower the States 

Congress does have a role to play in helping families and individuals get the quality private coverage they want, and helping health care professionals meet their needs. Conservatives have a proposal to achieve this: the Health Care Choices Proposal, which undoes Obamacare’s damage by letting states innovate.

Under Obamacare, insurance companies receive taxpayer subsidies dollar for dollar as they raise prices.  This proposal does away with that flawed spending scheme.

Instead, it would convert existing Obamacare spending into a grant that states would use to ensure chronically-ill patients have access to the health coverage of their choice. Greater flexibility and resources to the states means that all Americans, even those who are chronically sick, would have access to more health plans at better prices.

The Health Care Choices Proposal would lower premiums up to an estimated 32 percent and ensure that everyone can access a quality private coverage arrangement of their choice.

And everyone who gets a subsidy could decide what coverage to use it for, including private or employer-sponsored health insurance.

Individuals and families would be able to decide what coverage arrangement works for them, and decide whether to work directly with a doctor for primary care and buy catastrophic coverage, or get a plan that covers more costs up front. The proposal would be especially helpful to the working poor, who may want to have private coverage but lack the means to pay for it.

For most people, this is a much better option than what happens today: being pushed onto a government-controlled plan a bureaucrat thinks is best for them.

This proposal would build on a promising, emerging trend already happening in the states. When states have been given even a little bit of freedom from Obamacare’s mandates, they’ve been able to lower premiums using tools that ensure that the sick still retain access to care.

Politicians have long promised to replace Obamacare with solutions that help everyone. It’s time to deliver—no matter which way the courts go.