Chapter 9.A.2: Private Health Insurance

As part of health care reform, the federal government has created this website for navigating various health insurance options:

To get a sense of what health insurance costs at different benefit levels, go to  

See this Onion parody for an amusing take on the complexity of health insurance.

Inserts for pages 1047 and 1066

Page 1047 after note 6

The American Rescue Plan

The American Rescue Plan, a $1.9 trillion legislative package passed in 2021 and aimed at providing pandemic relief, contains several provisions aimed at bolstering the Affordable Care Act. The law thus marks the first major expansion of the ACA since its adoption in 2010. Though the changes are temporary, Democrats hope to make them permanent, suggesting that the American Rescue Plan may offer insight into health-reform measures that the Biden administration means to pursue.

Most significantly, the law substantially increases the federal subsidies available to cover the costs of private exchange plans. See American Rescue Plan Act of 2021, §9661, Pub. L. 117- 2. The biggest change involves individuals who were previously ineligible for subsidies because they earned more than 400% of the poverty level. That “subsidy cliff” made insurance unaffordable for many older, middle-income Americans. The American Rescue Plan Act eliminates the cliff for 2021 and 2022 and provides that people earning over 400% of the poverty level will have their premiums capped at 8.5% of their income.

The law also significantly expands subsidies for lower-income people and makes anyone who received unemployment insurance in 2021 eligible for the maximum amount of subsidies available under the ACA. In addition, taxpayers who underestimated their income in 2020 will not have to repay any excess premium tax credits when they file their taxes. All told, the Congressional Budget Office estimates that the expanded subsidies will mean that 2.5 million additional people will receive coverage by the end of 2023.1

The relief package also aims to encourage states that have not yet done so to expand their Medicaid programs. Under the ACA, the federal government already bears 90% of the costs of the Medicaid expansion. Under the American Rescue Plan, non-expansion states that choose to expand will receive, for two years, a bonus 5% contribution toward their traditional Medicaid programs, which are subject to a lower federal match rate of anywhere between 50% to 85%, depending on a state’s average per capita income. See §9814. Because the “traditional, non-expansion population accounts for about 79 percent of overall Medicaid spending in expansion states,” the increased funding for that population would greatly exceed the amount that the state would otherwise have to contribute toward the expansion population.2

Oklahoma will receive the additional funding because it expanded its Medicaid program in July 2021. Missouri may as well, depending on the outcome of litigation over its voter-approved expansion. But voters in both states approved their Medicaid expansions prior to the American Rescue Plan’s adoption. As of this writing (July 2021), it is not at all clear that the financial incentives in the new law will induce any holdout states to expand.

Beyond these changes, the American Rescue Plan temporarily subsidizes COBRA continuation coverage for people who would otherwise have lost their employer-sponsored coverage, see §9501, and expands certain categories of Medicaid coverage, including for COVID-19 vaccines and treatment, see §9811-9813. Though Republicans have criticized the law for being a poorly targeted giveaway to insurance companies, many Democrats argue that it does not go far enough: “It does not, for instance, fix the ‘family glitch,’ tie the ACA benchmark plan to a gold plan (as opposed to the current silver plan), fund state initiatives, bolster outreach and enrollment funding, or adopt a public option.”3

See  Congressional Budget Office, Reconciliation Recommendations of the House Committee on Ways and Means, Feb. 15, 2021; Congressional Budget Office, Reconciliation Recommendations of the House Committee on Education and Labor, Feb. 15, 2021.

2 Katie Keith, Final Coverage Provisions in the American Rescue Plan and What Comes Next, Health Affairs, Mar. 11, 2021.

3 Id.

Page 1066 after note 5

In June 2021, the Supreme Court rejected the third broadside challenge to the Affordable Care Act. Though legal experts across the political spectrum had always believed that the case was weak, the case got a warm reception from the Trump administration, which sided with the challengers and refused to defend the law. The lower federal courts were similarly sympathetic. In December 2019, a Texas district court ruled that the entire law was invalid, and the Fifth Circuit adopted most of the lower court’s reasoning the following year. See Texas v. United States, 340 F. Supp. 3d 579 (N.D. Tex. 2018); Texas v. United States, 945 F.3d 355 (5th Cir. 2020).

At that juncture, the Supreme Court agreed to hear the case. The ACA’s supporters initially welcomed the Court’s intervention: Chief Justice Roberts was the swing vote and he had already voted to turn away two much stronger challenges to the ACA. But with Justice Ginsburg’s death and Justice Barrett’s subsequent confirmation, the ideological balance of the Court shifted to the right, increasing the odds that the Supreme Court might side with the challengers. In the end, however, seven justices joined an opinion dismissing the case for want of jurisdiction.

CALIFORNIA V. TEXAS, 593 U.S. __ (2021)

JUSTICE BREYER delivered the opinion of the Court.

As originally enacted in 2010, the Patient Protection and Affordable Care Act required most Americans to obtain minimum essential health insurance coverage. The Act also imposed a monetary penalty, scaled according to income, upon individuals who failed to do so. In 2017, Congress effectively nullified the penalty by setting its amount at $0. See Tax Cuts and Jobs Act of 2017, Pub. L. 115–97, §11081, 131 Stat. 2092 (codified in 26 U. S. C. §5000A(c)).

Texas and 17 other States brought this lawsuit against the United States and federal officials. They were later joined by two individuals (Neill Hurley and John Nantz). The plaintiffs claim that without the penalty the Act’s minimum essential coverage requirement is unconstitutional. Specifically, they say neither the Commerce Clause nor the Tax Clause (nor any other enumerated power) grants Congress the power to enact it. See U. S. Const., Art. I, §8. They also argue that the minimum essential coverage requirement is not severable from the rest of the Act. Hence, they believe the Act as a whole is invalid. We do not reach these questions of the Act’s validity, however, for Texas and the other plaintiffs in this suit lack the standing necessary to raise them.


We begin by describing the provision of the Act that the plaintiffs attack as unconstitutional. The Act says in relevant part:

“(a) Requirement to maintain minimum essential coverage

“An applicable individual shall . . . ensure that the individual, and any dependent . . . who is an applicable individual, is covered under minimum essential coverage . . . . “

(b) Shared responsibility payment

“(1) In general

“If a taxpayer who is an applicable individual . . .fails to meet the requirement of subsection (a) . . . there is hereby imposed on the taxpayer a penalty . . . in the amount determined under subsection (c).

(2) Inclusion with return

 “Any penalty imposed by this section . . . shall be included with a taxpayer’s return . . . for the taxable year . . . .” 26 U. S. C. §5000A.

The Act defines “applicable individual” to include all tax payers who do not fall within a set of exemptions. As first enacted, the Act set forth a schedule of penalties applicable to those who failed to meet its minimum essential coverage requirement. See §5000A(c). The penalties varied with a taxpayer’s income and exempted, among others, persons whose annual incomes fell below the federal income tax filing threshold. And the Act required that those subject to a penalty include it with their annual tax return. In 2017, Congress amended the Act by setting the amount of the penalty in each category in §5000A(c) to “$0,” effective beginning tax year 2019.


In 2018, Texas and more than a dozen other States (state plaintiffs) brought this lawsuit against the Secretary of Health and Human Services and the Commissioner of Internal Revenue, among others. App. 12, 34. They sought a declaration that §5000A(a)’s minimum essential coverage provision is unconstitutional, a finding that the rest of the Act is not severable from §5000A(a), and an injunction against the rest of the Act’s enforcement. Hurley and Nantz (individual plaintiffs) soon joined them. Although nominally defendants to the suit, the United States took the side of the plaintiffs. Therefore California, along with 15 other States and the District of Columbia (state intervenors), intervened in order to defend the Act’s constitutionality, as did the U. S. House of Representatives at the appellate stage.


We begin with the two individual plaintiffs. They claim a particularized individual harm in the form of payments they have made and will make each month to carry the minimum essential coverage that §5000A(a) requires. The individual plaintiffs point to the statutory language, which, they say, commands them to buy health insurance. But even if we assume that this pocketbook injury satisfies the injury element of Article III standing, the plaintiffs nevertheless fail to satisfy the traceability requirement.

Their problem lies in the fact that the statutory provision, while it tells them to obtain that coverage, has no means of enforcement. With the penalty zeroed out, the IRS can no longer seek a penalty from those who fail to comply. See 26 U. S. C. §5000A(g) (setting out IRS enforcement only of the taxpayer’s failure to pay the penalty, not of the taxpayer’s failure to maintain minimum essential coverage). Because of this, there is no possible Government action that is causally connected to the plaintiffs’ injury—the costs of purchasing health insurance. Or to put the matter conversely, that injury is not “fairly traceable” to any “allegedly unlawful conduct” of which the plaintiffs complain. Allen v. Wright, 468 U. S. 737, 751 (1984). They have not pointed to any way in which the defendants, the Commissioner of Internal Revenue and the Secretary of Health and Human 5 Services, will act to enforce §5000A(a). They have not shown how any other federal employees could do so either. In a word, they have not shown that any kind of Government action or con duct has caused or will cause the injury they attribute to §5000A(a).


Next, we turn to the state plaintiffs. [They] claim that the minimum essential coverage provision has led state residents subject to it to enroll in state-operated or statesponsored insurance programs such as Medicaid and health insurance programs for state employees. The state plaintiffs say they must pay a share of the costs of serving those new enrollees. As with the individual plaintiffs, the States also have failed to show how this injury is directly traceable to any actual or possible unlawful Government conduct in enforcing §5000A(a). Cf. Clapper v. Amnesty Int’l USA, 568 U. S. 398, 414, n. 5 (2013) (“plaintiffs bear the burden of . . . showing that the defendant’s actual action has caused the substantial risk of harm” (emphasis added)). That alone is enough to show that they, like the individual plaintiffs, lack Article III standing.

But setting aside that pure issue of law, we need only examine the initial factual premise of their claim to uncover another fatal weakness: The state plaintiffs have failed to show that the challenged minimum essential coverage provision, without any prospect of penalty, will harm them by leading more individuals to enroll in these programs. We have said that, where a causal relation between injury and challenged action depends upon the decision of an independent third party (here an individual’s decision to enroll in, say, Medicaid), “standing is not precluded, but it is ordinarily ‘substantially more difficult’ to establish” Lujan v. Defenders of Wildlife, 504 U. S. 555, 562 (1992) (quoting Allen, 468 U. S., at 758); see also Clapper, 568 U. S., at 414 (expressing “reluctance to endorse standing theories that rest on speculation about the decisions of independent actors”). To satisfy that burden, the plaintiff must show at the least “that third parties will likely react in predictable ways.” Department of Commerce v. New York, 588 U. S. ___, ___ (2019) (slip op., at 10). And, “at the summary judgment stage, such a party can no longer rest on . . . mere allegations, but must set forth . . . specific facts” that adequately support their contention. Clapper, 568 U. S., at 411–412 (internal quotation marks omitted). The state plaintiffs have not done so.

The programs to which the state plaintiffs point offer their recipients many benefits that have nothing to do with the minimum essential coverage provision of §5000A(a). See, e.g., 42 U. S. C. §§1396o(a)–(b) (providing for no-cost Medicaid services furnished to children and pregnant women, and for emergency services, hospice care, and COVID–19 testing related services, among others, as well as “nominal” charges for other individuals and services); §1396o(c) (prohibiting Medicaid premiums for certain individuals with family income below 150 percent of the poverty line and capping the premium at 10 percent of an eligible individual’s family income above that line); 26 U. S. C. §36B(c)(2)(C) (providing premium tax credits to make health insurance plans, including employersponsored plans, more affordable). Given these benefits, neither logic nor intuition 6 suggests that the presence of the minimum essential coverage requirement would lead an individual to enroll in one of those programs that its absence would lead them to ignore. A penalty might have led some inertia-bound individuals to enroll. But without a penalty, what incentive could the provision provide?

* * * * *

Justice Alito, joined by Justice Gorsuch in dissent, argued that the states did have standing—not because they were harmed directly by the zero-dollar mandate, but because they were harmed by other parts of the ACA that were inextricably linked to the mandate. (The majority declined to pass on the argument because it was “not directly argued by the plaintiffs in the courts below.”) On the merits, Alito would have sided with the plaintiffs: he would have held that the zero-dollar mandate was unconstitutional, that it was not severable from the rest of the law, and that no part of the ACA could be enforced in any of the plaintiff-states.