Democratic state attorneys general (the "intervenor states") have appealed to the Fifth Circuit Court of Appeals a district court order that the ACA's individual mandate is unconstitutional and the ACA itself is invalid (Texas v. Azar, (N.D. Tex. Dec. 14, 2018)). The appeal will allow the Fifth Circuit to review an order, issued by Judge Reed O'Connor of the Northern District of Texas, that:

(See Legal Update, ACA Individual Mandate Is Unconstitutional and ACA Is Invalid: Texas District Court. Regarding health plan compliance requirements under the ACA, see Affordable Care Act (ACA) Overview and Affordable Care Act (ACA) Toolkit.)

Following the district court's December 14, 2018 order, the intervenor states requested clarification regarding whether the order was immediately binding. In response, on December 30, 2018, the district court:

The court also issued an order staying the remaining claims in the litigation. (As an example of the remaining claims, Count II of the plaintiffs' complaint challenges the individual mandate on a Due Process Clause theory.)

The Texas litigation addresses the constitutionality of the ACA's individual mandate in light of the Tax Cuts and Jobs Act (TCJA) (Pub. L. No. 115-97 (2017)), which reduced to zero the payment for violating the individual mandate (Tax Cuts and Jobs Act (TCJA) Compliance for Fringe Benefits and Health Plans Toolkit and Legal Update, Tax Reform Is Enacted, with Significant Implications for Executive Compensation and Employee Benefits). The plaintiffs – Republican attorneys general from 19 states, the Governor of Maine, and two individual plaintiffs from Texas – sought a declaration (in Count I of their amended complaint) that the ACA's individual mandate was no longer constitutional because it no longer triggers a tax. The plaintiffs argued that their Count I claim followed from a 2012 Supreme Court decision upholding the individual mandate as a valid exercise of Congress's taxing power (Nat'l Fed'n of Indep. Businesses v. Sebelius (NFIB), 567 U.S. 519 (2012); see Legal Update, Supreme Court Upholds the ACA's Individual Mandate). The plaintiffs also argued that the remainder of the ACA is not severable from the ACA's individual mandate.

The intervenor states later joined the litigation to defend the ACA. The federal defendants, which include the US, HHS, and the IRS, did not defend the individual mandate's constitutionality, but argued that the mandate was severable from other ACA provisions.

The district court's December 14 order granted summary judgment on Count I of the plaintiffs' amended complaint. The district court's December 30, 2018 orders allowed the intervenor states to appeal the Count I ruling on the individual mandate claim to the Fifth Circuit, which they did on January 3, 2019.

The district court concluded that entering final judgment on the plaintiffs' Count I individual mandate claim was warranted under a federal procedure rule permitting the court to enter final judgment on fewer than all claims in a dispute if there is no just reason for delay (Federal Rule of Civil Procedure (FRCP) 54(b); see Practice Note, Fifth Circuit Civil Appeals: Initiating an Appeal: Orders or Judgments Appealable as of Right). Because the district court's December 14 order did not address all counts in the plaintiffs' amended complaint, it was not immediately appealable. However, the court's December 30 orders entered final judgment on the Count I claim and severed it from the plaintiffs' remaining claims – allowing an appeal to the Fifth Circuit on the Count I claim.

In issuing the December 30 orders, the district court rejected the federal defendants' argument that:

In the district court's view, the plaintiffs' claims were "related but distinct."

The district court also concluded that staying its December 14 order pending appeal was warranted. According to the district court, the equities favored a stay, even if – in the district court's view – the intervenor states are unlikely to succeed on the merits.

Attention now turns to the Fifth Circuit, which will be tasked with reviewing Judge O'Connor's order on the individual mandate and the ACA's constitutionality. Although the litigation raises renewed concerns regarding the ACA's future, for now the ACA remains good law.

In related developments, the U.S. House of Representatives, under Democratic control as of January 3, submitted a motion to intervene in the litigation – as to the plaintiffs' claims other than Count I. In an accompanying filing, the House set out its bases for intervening and defending the ACA's validity. Regarding Count I, the House indicated that it would also seek to intervene in the Fifth Circuit appeal and would file a motion to intervene in that appeal as soon as possible. On January 4, the federal government requested a stay on briefing concerning its opposition to the House's motion to intervene – owing to a of lack of funding to work on the litigation due to the federal government shutdown.

In response, Judge O'Connor:

In addition, citing a "lapse of appropriations" related to the government shutdown, the Fifth Circuit on January 11 stayed proceedings in the appeal of Judge O'Connor's ruling on Count I.