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The Supreme Court of the United States (SCOTUS) ruled on June 17 on a case against the Affordable Care Act (ACA), the third challenge to the law since its 2010 inception.
 
The case, Texas v. California, centered on the constitutionality of the ACA’s “Individual Shared Responsibility” (individual mandate) provisions, and the resulting viability of the entire law. The court has now ruled 7-2 that the states challenging the law do not have the legal standing to upend the law.
 
To understand the challenges to the ACA, it’s important to highlight the three main pillars of the law. These pillars are often referred to as the ACA’s “three-legged stool” principles. The three pillars of the law (its “legs”) support the entire ACA (the “stool”). If one leg is pulled from the stool, one would assume the entire stool would fall down. While true in the physical world, the logic might not work the same when applied to the ACA. This created a potential problem for the law today.
 
ACA’s Three-legged Stool Principles
The ACA contains three major principles, which is the key structure of the law. These principles shape access to affordable health care in the country, and are the core of the law as follows:
 
Principle 1 of 3: The “Individual Shared Responsibility” (individual mandate) provisions
This item requires Americans to maintain “Minimum Essential Coverage” (MEC) – that is, health coverage that meets standards prescribed by the law – for themselves and their tax dependents, or pay a penalty. This penalty was reduced later to $0.00 beginning in 2019, which triggered the current case against the ACA.
 
Principle 2 of 3: Prohibition on pre-existing condition exclusions
The ACA mandated that carriers could not charge higher premiums or refuse to insure a person based on his or her pre-existing health conditions. The ACA was able to apply this on insurers by creating the individual mandate that ensured all people would seek/maintain coverage – including the healthy Americans who might have foregone obtaining coverage without the mandate itself. This broadened the risk-pools for insurers, allowing them to drop consideration of a person’s individual health when determining whether or not to extend coverage.
 
Principle 3 of 3: Premium Tax Credits (PTCs) and Marketplaces/Exchanges
The ACA created state Exchanges, like Covered California and Nevada Health Link, which allow American consumers a place to compare and purchase individual coverage outside the workplace (with annual enrollment periods), which meets “MEC” standards and has no limits on pre-existing exclusions. The ACA also created PTCs to help Americans with incomes below certain thresholds pay for coverage purchased on an Exchange. PTCs are paid in advance to individual insurance carriers, which significantly decrease the cost of coverage for persons with Individual and Family Plan coverage purchased on a state exchange.
 
Note: Other provisions, such as the employer mandate and reporting responsibilities, Essential Health Benefits, etc., are included in the ACA, too. While important, they are often considered “noise” outside of the heart of the ACA’s core – which is formed by the three aforementioned principles. This brief overview of the ACA is not intended to be comprehensive.
 
Case Against the ACA in 2012
When the ACA was first signed into law in March 2010, the constitutionality of the “individual shared responsibility” (individual mandate) was challenged. In a 2012 SCOTUS decision, SCOTUS determined the “individual shared responsibility” provisions – including the resulting tax penalties for non-compliance – are considered constitutional. SCOTUS highlighted that Congress has the authority to issue taxes to raise revenues. Because non-compliance penalties for the “individual shared responsibility” are taxes from Congress, it is within Congress’s authority to issue the mandate. At the time, SCOTUS was split 5-4, with a conservative lead. Chief Justice John Roberts, a conservative, switched aisles with the liberal justices in this groundbreaking decision.
 
“Repeal and Replace” the ACA
Following the 2016 elections, Republicans swept the Presidency, U.S. House, and U.S. Senate. One of the main messages of the Republican campaign was to “repeal and replace” the ACA, which became a primary focus of the new Trump Administration. Even though Republicans had a slight majority in the Senate, some senators from more moderate states were concerned about the scope of “replacement,” and the resulting public perception if the ACA was eliminated. In 2017, the House passed a bill that would repeal and replace the ACA, dubbed the “skinny replacement” bill. When it made its way to the Senate, it failed by a 49-to-51 vote, with the late Senator John McCain breaking ranks with Republicans casting the 51^st “no.” Plans for repeal and replacement of the ACA were stalled.
 
Reduction of “Individual Shared Responsibility” Provisions Penalty
In 2017, the Trump Administration successfully passed the “Tax Cuts and Jobs Act” (TCJA), which was a law targeting tax reform and corporate taxes. TCJA also targeted the individual mandate tax penalty, and reduced it to $0.00 beginning in 2019. This was done through a budgetary process called “reconciliation,” which only requires a majority vote and is reserved for changes in taxes and revenues only.
 
This brought challenges to the previous 2012 court decision, which ruled that the ACA Individual Mandate is constitutional because of the tax “penalty” Congress can assess onto individuals for non-compliance. SCOTUS ruled that Congress has the authority to issue taxes to raise revenues. However, now that the penalty is $0.00, it is impossible for Congress to raise revenues and, therefore, the mandate might no longer be valid. Moreover, because it’s one of the ACA’s three main legs of its stool, the entire ACA may fall with it.
 
Most-Recent Case: Can the ACA Stand with a $0 Penalty for “Individual Mandate” Non-compliance?
Republican state attorneys general, led by Texas, filed a lawsuit against the United States claiming that the individual mandate is no longer constitutional and the entire law must therefore be removed. Democrat state attorneys general and the U.S. House of Representatives (now under control by Democrats) stepped in to defend ACA. 
 
In December 2018, a federal court in Texas (5^th Circuit) struck down the ACA in whole, but stayed its ruling pending appeal. The court ruled the individual mandate invalid – and that the mandate was so connected to the law, Congress would not have passed the ACA without it.
 
On appeal, a split panel decision made by the three federal judges in the 5th Circuit of Appeals deemed only the “individual mandate” of the ACA is unconstitutional – but not the entire law. The appeals court directed the lower court to re-hear the case and create a report on the areas of the ACA that Congress intended to be in severable from the mandate. Before the lower courts could make progress on the directive, in March 2019, SCOTUS announced it would hear the case in its fall 2020 term for a decision in 2021. This action blocked the lower courts from carrying out the appellate court’s directive. SCOTUS thus began considering Texas vs. California.
 
Supreme Court’s Options
In its ruling (technically, an “opinion”) on June 17, 2021, SCOTUS had several options as it decided the case:

1. It could dismiss the case on technical grounds, claiming that Texas plaintiffs lacked standing to bring the case forth in the first place. It could throw the entire case out, upholding the entire ACA - with the individual mandate and its $0.00 noncompliance penalty.
2. It could maintain the status quo – agreeing with the Texas 5^th Circuit Appellate court’s ruling on the invalidity of the individual mandate, allowing the lower courts to begin deciding which parts of the ACA Congress intended to be “severable” from the whole law (which would take several years).
3. It could uphold the ACA, but invalidate the individual mandate and everything tied close to it.
4. It could strike down the ACA in full. 

The Court’s decision to reject the case on technical grounds (1, above) still leaves the door open to future ACA challenges; however, for now, the law remains in effect. Health insurance brokers and employers should note that the entirety of the law as we know it today remains in place – including the employer mandate and employer reporting responsibilities, in addition to the individual mandate and all other items contained in the law.