US Federal Judge Rules Obamacare Unconstitutional

December 14, 2018 Updated: December 15, 2018

Affordable healthcare legislation that has already been passed through U.S. Congress is unconstitutional, a U.S. district judge has ruled.

Judge Reed O’Connor from Fort Worth, Texas agreed on Dec. 14 with a coalition of 20 states that a 2017 change in tax law to eliminate the penalty for not having health insurance invalidates the entire the Affordable Care Act (ACA), also known as Obamacare.

President Donald Trump quickly praised the ruling in a pair of tweets and challenged Senate majority leader Mitch McConnell (R-Ky.) and likely incoming House Speaker Nancy Pelosi (D-Calif.) to successfully pass a new healthcare law in Congress.

“As I predicted all along, Obamacare has been struck down as an unconstitutional disaster! Now Congress must pass a strong law that provides great healthcare and protects pre-existing conditions. Mitch and Nancy, get it done!”

Specifically, the court ruled the individual mandate is unconstitutional and, since the mandate cannot be separated from the rest of the ACA, O’Connor ruled the entire Act was invalid.

Apart from some exemptions, the individual mandate requires individuals to be insured or face fines at the end of the year.

Flaws in Obamacare Explained

On Feb. 28, 2018 a federal judge in New Mexico barred the Centers for Medicare and Medicaid Services (CMS) from making further collections or payments under the program. This was due to a flaw found in the formula used to calculate risk adjustment payments.

President Trump later said on July 7 that CMS would also temporarily suspend some payments to health insurers under the ACA.

The risk adjustment program redistributes funds from plans with lower-risk enrollees to plans with higher-risk enrollees. According to CMS, the calculated risk adjustment payment for 2017 was $10.4 billion.

“Risk adjustment under the ACA has been an example of a well-meaning regulation that has had destructive impacts directly contrary to its intent,” Jonathan Halvorson, a health care public policy adviser at consulting firm Sachs Policy Group, stated in an article for The Health Care Blog.

“It has caused insurer collapses and market exits that reduced competition. It has also led to upstarts, small plans, and unprofitable ones paying billions of dollars to larger, more established, and profitable insurers.”

Bypassing Obamacare Requirements

On Nov. 29, CMS released four concepts for ACA waivers, to give states ideas on how they could use the waivers to lower costs and create flexibility under the Act.

They were to allow states to deposit subsidy money into an account controlled by the beneficiary, create their own subsidy plan for premiums, use subsidies to target certain plans; and states create re-insurance programs that use public money to offset the costliest beneficiaries.

Only eight states applied for waivers, seven for reinsurance programs, and one, Hawaii, for an exemption in providing a small-business health program.

CMS administrator Seema Verma said on Nov. 29 that whatever states propose will have to be approved by CMS and the U.S. Treasury Department, and subject to “guardrails” that would ensure people with pre-existing conditions be covered. They will be paying especially close attention to how the waivers affect people of low income and complex health issues, she said.

Trump’s Campaign Promise Delivered

Repealing the ACA was a central part of Trump’s presidential campaign platform, in his bid for The White House in 2015. He touted the ruling in another post to Twitter as great news for the country.

“Wow, but not surprisingly, ObamaCare was just ruled unconstitutional by a highly respected judge in Texas. Great news for America!” he said.

O’Connor’s decision is expected to be appealed to the U.S. Supreme Court.

Reuters contributed to this report.