Shortly after the November election, the U.S. Supreme Court is scheduled to hear oral arguments in the case of Texas v. Azar, on which the future of the Affordable Care Act hinges. With the confirmation of Judge Amy Coney Barrett to fill the seat left vacant by the passing of Justice Ruth Bader Ginsburg, the ACA appears imperiled. GLG recently sat down with Nicholas Bagley to discuss the case and the outlook for the ACA. Mr. Bagley, who clerked for Justice John Paul Stevens on the U.S. Supreme Court, is a professor of law at the University of Michigan Law School and formerly was with the appellate staff in the civil division of the Justice Department. Edited excerpts from our broader conversation follow.

As a primer, could you provide an overview of the key issues raised by Texas v. Azar?

 The Fifth Circuit accepted an argument brought by several red state attorneys general that a zero-dollar mandate is unconstitutional. They sent the case back down to the trial court judge for further proceedings on severability. In the meantime, the blue states that had intervened to defend the Affordable Care Act went to the Supreme Court, which agreed to hear the case. Of course, the nightmare scenario for the supporters of the Affordable Care Act — that Justice Ginsburg would die before the case could be heard at the Supreme Court — came to pass.

What’s your take on the confirmation of Judge Amy Coney Barrett before the election?

Mitch McConnell says he’s got the votes, and I have no real doubt that he does. Judge Barrett is a capable and quite personable individual who by standard metrics, setting aside part of the disagreement, is certainly qualified. I think she’ll probably perform pretty well at the hearings. And I see no reason to doubt that she’ll be confirmed before Election Day [Ed. note: This conversation took place prior to the COVID-19 outbreak in the Senate.]

If Judge Barrett is confirmed after the case is heard, but before the decision is issued, will she be able, or is she likely, to participate in a ruling? How could her absence in the oral arguments influence her participation?

If she is not confirmed before the election, then it is unlikely that she would be confirmed before November 10, and she would just be absent from oral argument. Traditionally, justices who don’t sit at oral argument don’t render decisions in cases. So the court would have two choices. It could either proceed as an eight-member body, which it might do depending on the vote, or if it split down the middle, it could choose to reschedule the case for another round of oral arguments to ensure Judge Barrett’s participation. But because she’s probably going to be seated before that date, I don’t think it will come to that.

Do you see Chief Justice Roberts postponing the November 10 date?

That’s almost inconceivable because the arguments for delay would be arguments in favor of delaying every case coming before the court. The only reason to treat this case differently is because it is a political hot potato, and the court, of course, wants to maintain the impression that nothing it does is driven by partisan considerations. As a result, it will bend over backward to treat this case as it treats other cases.

Assuming it moves forward as scheduled, what is the likelihood that the Supreme Court will throw out the case on standing issues?

 I’d give that about a 40% chance, because both Chief Justice Roberts and Justice Kavanaugh, who seem like the likeliest conservative justices who would be willing to vote against the lawsuit, are hawks on standing. They’re going to scrutinize plaintiff’s standing with perhaps a more skeptical eye than other justices.

To me, it’s pretty clear that the plaintiffs don’t have standing. When the red states filed the lawsuit, they realized immediately that they had a really big standing problem, so they amended their complaint to add new plaintiffs — two Texas consultants who buy health insurance on the exchanges. These consultants submitted affidavits to the court saying that they felt coerced by the zero-dollar mandate and bought health insurance only because of it. Whatever you might think of the truth of that story, there are well-established legal laws that individual plaintiffs don’t have standing to challenge a mandate that can’t be enforced against them. What’s more, the red states aren’t subject to the individual mandate, so they don’t have standing either. Since standing is a threshold issue, it would provide a face-saving way to turn this lawsuit away without having to endorse or reject the merits of the argument or otherwise weigh in on the ACA.

To dig deeper into how the justices view the legality of that zero-dollar individual mandate, could you tie in their decisions in NFIB v. Sebelius and King v. Burwell?

The most straightforward way to understand what Congress did when it repealed the mandate penalty is to say that the instruction to buy insurance no longer meant anything. Understand that in 2012, Chief Justice Roberts construed the language of the Affordable Care Act as saying that it gave people a “lawful” choice in obtaining health insurance, meaning that people could choose to buy insurance in accord with the instruction or not buy insurance, in which case they’d have to pay a tax penalty. That interpretation of the Affordable Care Act is the authoritative interpretation of the law as handed down by the Supreme Court, which means that it has precedential weight and it is the meaning of the statute unless and until Congress comes along to disturb that interpretation.

When Congress eliminated the tax penalty, it didn’t purport to disturb the Supreme Court’s interpretation of the law. Instead, it meant to eliminate just the penalty for making the choice to go without insurance. And that’s all it did. So if Chief Justice Roberts believes his decision has precedential weight, and I assume he does, then I think he’s going to be pretty dismissive of the argument that the statute after that mandate was eliminated somehow signals that Congress wanted to make the law more coercive than it was before. As for Kavanaugh, it’s a little harder to say. I think both he and the chief have a more practical orientation toward statutory interpretation than, say, Justice Gorsuch, who along with Justice Thomas in particular are more inclined to take a literalistic approach. And if that yields a nonsensical result, well so be it; they can drape themselves in the mantle of textualism and claim not to be caught doing anything political.

If the individual mandate is ruled unconstitutional, what are the odds of the justices determining it to be fully severable, so nothing changes; mostly severable; and nonseverable, leading to taking down the entire individual marketplace?

My best sense is that if the court were to declare the individual mandate unconstitutional, there’s about an 80% to 85% chance that the court would say it’s fully severable. That means there’s a 10% to 15% chance that they’d say that guaranteed issuance and community rating are not severable, which means that the protections for people with preexisting conditions would go away but the rest of the Affordable Care Act, including the Medicaid expansion, would remain in place. Then there’s a 5% chance that the court strikes down all or virtually all of the statute.

If the mandate is invalidated, what functionally changes?

If only the mandate is invalidated, nothing. All the action involves the question of severability. If guaranteed issue and community rating were gone, the exchanges would face extraordinary uncertainty and health insurance markets in 2021 would be decimated. If the court went further and struck down pretty much all the ACA, I can’t even imagine what that would look like. The ACA is part of the basic plumbing of the U.S. health care system. Many payment systems run on it, and it is responsible for many pilot programs that hospitals depend on. It expanded Medicaid to an additional 13 million people who would lose their insurance immediately, including the people who are in the middle of treatment and therapy. It’s just a nightmare. I think the whole system would kind of seize up briefly, and if Congress couldn’t come up with some kind of patch or new law, there’d be an awful lot of confusion and chaos.

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About Nicholas Bagley

Nicholas Bagley is a Professor of Law at the University of Michigan in Ann Arbor, where he teaches and writes in the areas of administrative law, regulatory theory, and health law. Professor Bagley has conducted extensive research on the implementation of the Patient Protection and Affordable Care Act, with a particular emphasis on implementation of health exchanges, the Independent Payment Advisory Board, and the Center for Medicare and Medicaid Innovation. Prior to joining the Law School faculty, he was an attorney with the appellate staff in the Civil Division at the U.S. Department of Justice, where he argued a dozen cases before the U.S. Courts of Appeals, such as Medicare fraud under the False Claims Act. Professor Bagley also served as a law clerk to Justice John Paul Stevens of the U.S. Supreme Court and Judge David S. Tatel of the U.S. Court of Appeals. Separately, he serves as Special Counsel to the Supreme Court and Appellate Litigation practice at Orrick, Herrington & Sutcliffe LLP.

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This article is adapted from the September 29, 2020, GLG teleconference “Texas v. Azar; Implications of Justice Ginsburg’s Death on the ACA.” If you would like access to this video panel or would like to speak with Nicholas Bagley, or any of our more than 700,000 experts, contact us.