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Texas judge Reed O'Connor's decision to declare the entire Affordable Care Act unconstitutional is hard to take seriously but the political opportunity created by threats to the law ensure that it will. The most immediate implications are to the individual market where confusion about the law may exacerbate a deteriorating risk pool, causing the industry to revive concerns about third-party payers, co-pay coupons, discount cards and special enrollment periods. A valuable narrative around threats to the ACA, or more accurately, threats to popular insurance market reforms like community rating and guaranteed issue, may leave other changes to the law by the wayside as House Democrats focus on defending it and forcing votes on "pre-existing conditions." Republicans, in an effort to change the subject, have already abandoned aspirations to address ACA tax provisions on tanning, medical devices and health insurance during lame duck and, having lost control of the House, are not likely to make it a priority in 2019. |
On Friday evening , Federal judge Reed O’Connor, issued a summary judgement declaring the Affordable Care Act unconstitutional. His decision turns on Congress’s December 2017 passage of tax reform which reduced the individual mandate penalty to $0.00, thus eliminating the major argument in the Supreme Court’s decision to uphold the law in 2012.
The Supreme Court declared that the ACA was unconstitutional under the Commerce clause because Congress could regulate commerce but not compel it. SCOTUS preserved the law by concluding that the individual mandate’s shared responsibility payment was a tax and therefore permissible. The court also concluded that the individual mandate was an essential part of the law and that other parts – the taxes, payment reductions to hospitals, demonstration programs, insurance market reforms, etc., - were inextricably linked to it.
Using that SCOTUS precedent, the Texas judge concluded that the individual mandate penalty was not a tax because its penalty was set at zero. Since the individual mandate is an essential part of the law on which all other of its parts rest, its elimination nullifies the rest of the ACA.
On that second point, controvsy has swirled. Severing invalid portions of a law has long standing precedent. Throwing the entire ACA overboard because the individual mandate is unconstitutional seems absurd.
The decision is likely to be overturned by the Fifth Circuit Court of Appeals although we should point out that the Senate’s vigorous confirmation of judges makes that prognostication less certain than would have been the case a couple of years ago. If they do not overturn, it seems pretty improbable that SCOTUS would let the severability issue go unheard.
The judge did not issue an injunction interfering with enforcement or implementation of the law. States that intervened as defendants are going to appeal the decision and a final resolution would not be likely for another 12 to 18 months, if then. The Trump administration has indicated they will continue to enforce and implement the law.
The decision is not without consequences, however.
Confusion. The ACA has been the subject of so much high-profile litigation, unnuanced and sometimes inaccurate reporting and years of partisan bickering, making this court decision another brick on a load of confusion and complexity.
The timing could not be worse. The ACA exchange plans, already suffering from lackluster enrollment in the wake of the effective elimination of the individual mandate, may be negatively affected by yesterday's headlines.
Similarly, utilization of health care services by confused members of the public who are unsure of the future of their health insurance, may be impacted. As debate over repeal of the ACA raged throughout the 2016 campaign and 1H 2017, utilization as expressed through employment data slowed possibly in response to the law's uncertain future.
Politics. The ACA has a political life that exceeds its implications to the insurance and health care systems. The individual market simply did not expand as expected and serves only a tiny fraction of Americans. The Medicaid program grew dramatically but has limited public sympathy, like many poverty programs and inadequate reimbursement. Innovation center models and demonstrations are too wonky for all but dedicated health policy analysts. So, the effective political arguments have been limited to the threat to certain popular insurance reforms like community rating, guaranteed issue, and limits on out-of-pocket expenses.
Most particularly, the threat posed by insurers denying coverage or charging the unhealthy higher premiums hits home in urban and suburban congressional districts, the latter of which will be represented by more Democrats come January. Using the short-hand of the undefined term “pre-existing conditions,” supporters of the ACA have successfully mobilized against legislative efforts to repeal or scale-back the law.
That political mobilization could be deployed in the next Congress to develop a legislative response to the Court’s decision. Certainly, there is some compatibility between House Democrats and Senate Republicans on certain insurance market reforms including preserving guaranteed issue. Sen. Chuck Grassley has already pledged to hold hearings in the next Congress.
The political dynamic that will dominate is whether House Speaker-designate Pelosi will accept any changes to the law ahead of a complete court resolution. She has vigorously defended the ACA and prevented her caucus from considering even those changes on which there is general agreement. Her focus is most likely to be on “strengthening” the ACA and creating political liability for Senate Republicans.
Another challenge the Speaker will have is keeping her caucus intact. Newer members that ran on Medicare-for-all or similar universal coverage programs may not be willing to acquiesce to a compromise on the ACA.
Finally, with 2020 looming, perpetuating the threat to insurance market reforms like guaranteed issue is in Democrats best political interests. The court’s decision establishes a clear and present danger that could be useful in their attempts to take back the White House and the Senate in 2020. Health care was reportedly a top issue in the 2018 election and the ACA’s political life will endure for as long as current Democrat leadership remains firmly in control of the agenda.
This new political dynamic makes it difficult to see how parts of the ACA for which there is broad agreement for change, like the taxes on tanning services, health insurance plans and medical devices, will be repealed. Republicans, seeking to change the subject after the 2018 election, have decided not to pursue these changes in the lame duck session and having lost control of the agenda in the House are not likely to be successful in the next Congress.
The revived threat to the insurance market reforms and the ensuing political dynamic will have the most immediate impact on insurers like MOH, CHC, UNH et al. The one-year suspension of the HIF helped moderate premiums for the 2019 plan year. The combined effects of confusion over the constitutionality of the law, reinstatement of the HIF in 2020 and an effective repeal of the individual mandate will no doubt lead to a deteriorated risk pool and increased premiums.
Premium increases are more a political problem as most people enrolled in ACA individual plans are insulated through subsidies and cost-sharing reductions. Healthy people who are not eligible for government support can depart for non-ACA plans made available through a January 2017 executive order. As was the case in 2015-2016, double digit premium increases will garner headlines and the White House will get the blame.
If the risk-pools deteriorate too much, insurers will again put pressure on HHS, as they did during the Obama administration, to further limit special enrollment, third party premium payments and copay coupons like those made by the American Kidney Fund and others. This pressure could spell more trouble for DVA whose dependency on commercial insurers we discussed last week. The insurance industry has estimated that it takes about 3,600 enrolled and premium paying health individuals to support a single insured ESRD patient.
Call with questions. We will be right here yearning for health care to be boring again.
Emily Evans
Managing Director – Health Policy
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