Federal judges weigh fate of Obamacare as Trump tries to gut the law

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By Pete Williams  with NBC News Politics
Federal judges weigh fate of Obamacare as Trump tries to gut the law

WASHINGTON — A panel of federal judges in New Orleans takes up the future of Obamacare on Tuesday, hearing from states that say it's unconstitutional and from Justice Department lawyers directed by President Donald Trump to oppose the entire law, too.

The Affordable Care Act is nothing more than "a naked command to buy an insurance product the government deems suitable," according to Texas and 17 other red states that filed a lawsuit seeking to get Obamacare struck down.

The U.S. House of Representatives and a group of states led by Democrats are defending the law. They say the ACA "transformed the nation's health care system," giving more than 20 million Americans access to affordable coverage.

At the heart of the controversy is the individual mandate — the requirement that all Americans buy health insurance or face a tax penalty. The Supreme Court upheld the law in 2012, ruling that while the mandate would be unconstitutional by itself, the law as a whole was a legitimate exercise of the power of Congress to impose taxes.

Republicans controlling Congress struck back in 2017, dropping the tax penalty to zero, prompting Texas and the other red states to sue. Federal District Court Judge Reed O'Connor ruled in their favor, concluding that because there no longer was a tax, the law could not be saved as a use of the taxing power.

He further said that because the ACA was a web of interlocking provisions, the entire law must fall, including provisions requiring insurance companies to provide coverage for individuals with preexisting conditions and to allow children to be covered by their parents' plans until age 26.

O'Connor put his ruling on hold while supporters of the law took the case to the Fifth Circuit Court of Appeals. Three judges from that court will hear Tuesday's argument.

The Justice Department at first said it agreed with only part of O'Connor's ruling. The judge should have left some parts of the law in effect, the government said initially, including provisions expanding Medicaid to cover millions of America's poorest, creating health insurance marketplaces, and providing subsidies for low- and moderate-income people.

But in late March, Trump ordered the government to fully embrace the judge's decision. "Upon further consideration," the Justice Department said in its legal brief in the appeals court, "the position of the United States is that the balance of the ACA ... must be struck down."

The court will consider three main issues. Defenders of Obamacare say that by setting the tax at zero, Congress effectively did away with the mandate, so there's no longer any constitutional issue. The law "no longer compels any individual to maintain health care coverage — or to take any other action," the blue states said in their court brief. At most, it's now simply "an encouragement to buy health insurance."

Second, the appeals court must decide whether O'Connor was right that the entire law must be struck down or whether parts of it can still be salvaged. Leading the case for the opponents, Texas said Congress repeatedly said in passing Obamacare that the mandate was "essential" and that the rest of the law would collapse without it. The blue states and the House say if Congress meant for the entire law to be scrapped, it would have said so when it set the tax penalty at zero in 2017.

Finally, the appeals court must sort out whether the case is moot now that the Justice Department, which initially defended at least part of the law, has switched sides and joined with the red states in supporting the lower court decision that struck it down. The two groups of states each say the others have no legal standing to be in court.

If the appeals court rules by December, the case could be heard by the Supreme Court during its next term that begins in the fall.

"My sense is that part of why the appeals court scheduled the oral argument for July was to be able to get the case decided in time for next term," said Prof. Steve Vladeck, an expert on federal courts at the University of Texas School of Law.

A victory for Obamacare's opponents could turn out to be a mixed blessing for the Republicans.

"It has the potential to backfire on them, because it would put health care front and center on the agenda for the 2020 election," Mark Murray, senior political editor at NBC News, said. "Going back to the last election cycle, Democrats have the big advantage when it comes to health care."