By now, most have heard that a federal judge has ruled that the Affordable Care Act (aka Obamacare) is unconstitutional. What some have heard is that the ruling was based on the elimination of the tax penalty under the tax law passed at the end 2017, generally referred to as the Tax Cuts and Jobs Act (although that’s not its official name). That tax penalty was applicable to people who violated the individual mandate, that is, for those who did not maintain health care insurance. U.S. District Judge Reed O’Connor in Fort Worth is the judge who issued the opinion. (Click here to download a copy.) Many don’t know why the removal of the penalty scuttled the law.
Here is why: when the act originally went through Congress, the Democrats touted it as a health care bill and, for constitutional purposes, referred to the commerce clause under the Constitution. However, when the law was challenged, the lawyers from the Justice Department defending the law saw that was not going to work, and so their defense was centered on the taxing power. The U.S. Supreme Court upheld the law primarily because of the taxing power. See National Federation of Independent Businesses, et al v. Sebelius, 567 U.S. 519, 132 S.Ct. 2099, 109 AFTR 2d 2012-2530 (2012) (Click here to download a copy.) With the taxing power now out of the picture, the primary basis for upholding the law is gone. That doesn’t mean that the law can’t be upheld on other grounds. Many predict that the case is likely to go to the Supreme Court.