California Attorney General Xavier Becerra has acknowledged that the fight over the Affordable Care Act could go to the Supreme Court. | Josh Edelson/AFP/Getty Images California vows to fight Obamacare ruling, fears impacts at home

California will challenge the ruling of a federal judge in Texas who late Friday struck down the Affordable Care Act as unconstitutional, with state Attorney General Xavier Becerra arguing that the federal health care law can remain in place even without a tax penalty for Americans who forego health coverage.

Though Obamacare remains in place — Californians have until Jan. 15 to enroll in Covered California plans — it could be in jeopardy, threatening health care for 5 million people in the state. The closely-watched case is likely headed for the 5th U.S. Circuit Court of Appeals in New Orleans and, potentially, the U.S. Supreme Court.


Leading the legal battle will likely be California, which intervened in the Texas case to defend the Affordable Care Act. Becerra plans to vigorously defend the federal health care law.

“The courts essentially left it to the Trump administration and states to decide how to respond and with the health of millions of people at risk, we won’t stand for this backwards and dangerous determination,” Becerra said in a statement to POLITICO. “Every American could be impacted this decision — adults, whether they have employer-sponsored care or get covered through Medicaid, seniors who benefit from prescription drug discounts, young people age 26 or under on a parent’s plan and more.”

Becerra's argument is that the Republican-controlled Congress, when it passed the federal tax overhaul in late 2017, never intended for its zeroing-out of the tax penalty associated with the individual mandate to invalidate the entire health care law.

On Friday, Judge Reed O'Connor ruled that the individual mandate is unconstitutional and that it cannot be severed from broader provisions in Obamacare, which include a prohibition on denying coverage to people with pre-existing conditions and federal subsidies for those without employer-sponsored plans.

Without a tax penalty, O'Connor argued, the mandate can't be upheld and without the mandate, the entire law is unconstitutional.

Becerra has acknowledged the case could wind up at the Supreme Court. He believes that even if judges strike down the mandate, the rest of the law should survive.

“Why, whether Congress puts a dollar in or doesn't put a dollar in, does that mean that every other aspect of the Affordable Care Act collapses?” Becerra said in an October interview. “Why would you now allow any insurance company to discriminate on pre-existing conditions because the tax revenue coming in under the personal responsibility part of the Affordable Care Act is now down to zero?”

The ruling prompted immediate backlash Friday night from California Gov. Jerry Brown and Gov.-elect Gavin Newsom.

"California will vigorously fight this wanton and cruel action," Brown said in a statement. "This Texas judge has no right to deprive millions of Californians of their health care by invalidating the Affordable Care Act."

Newsom, who takes office Jan. 7, echoed Brown, calling the ruling "outrageous and misguided."

"Have no doubt — CA will fight back," Newsom wrote on Twitter.

Their comments suggest the state's immediate action would take place in the courts, but the ruling no doubt has elected officials scrambling behind the scenes to identify possible actions the state could take should the law be invalidated, said Larry Levitt, senior vice president of the Kaiser Family Foundation, a nonprofit think tank.

"Given the breadth of this judge's decision, it makes sense for state officials and interest groups to step back and figure out what the implications would be for California," Levitt said in an interview. "California is at the front and center in defending the Affordable Care Act in court, so the political and policy [effects] are huge."

Levitt said the judge's ruling could throw a wrench into any of Newsom's health care plans, as he readies to unveil his budget in early January.

"There are high health care expectations for the new governor, but I also think there are a lot of forces pushing for him to go slow, and this may be one more reason why we shouldn't expect much action quickly on health care," Levitt said. "It introduces a big element of uncertainty into the health care environment, which may make it difficult for Sacramento to move fast on any changes.

"There's a lot of ideas floating around in Sacramento to expand coverage and build on the Affordable Care Act, but if the entire law is now potentially threatened, it'll complicate the whole debate," he added. "Any new initiatives to expand coverage cost money, and there may be some hesitation now to spend that money if the underlying funding of the Affordable Care Act is now threatened."

Coverage for at least 5 million Californians who have gained coverage under Obamacare is in peril. That includes about 3.5 million people who have received coverage under the expansion of Medi-Cal, the state's low-income health program, and roughly 1.4 million people who purchase insurance on the exchange, according to Covered California, the state-based marketplace.

It also poses far-reaching threats to coverage for millions of Californians covered by employer-sponsored plans, which also must comply.

"The unfortunate thing about this ruling is so much of the nation had moved beyond the Affordable Care Act being a political football, and this in many ways puts that ball back in play," said Covered California Executive Director Peter Lee in an interview with POLITICO. "It's far from perfect, but the improvements needed are to expand subsidies and make it better, not to kneecap it."

Covered California is "working closely" with the state Department of Justice to identify its next steps, said spokesperson Amy Palmer. She emphasized that nothing would change immediately, saying open enrollment is open in California through Jan. 15.

"Our main effort at this time is reassuring people that their coverage is valid, and they can sign up without hesitation," Palmer said.

Lee said Covered California is working on a report due to the Legislature by Sept. 1 analyzing options to make health care more affordable, but if the law is overturned, the state would likely backslide. California's uninsured rate has dropped roughly 10 percentage points since Obamacare took effect, to about 7 percent today — with about 3 million people remaining uninsured.

"We are not creating models based on what if there is not Medicaid expansion dollars. Also what do we do if there is not the $5 billion in federal tax credits that make health care affordable for middle-class Californians?" Lee said.

"The idea that California could go it alone is a pipe dream," Lee said.