This afternoon, the Fifth Circuit Court of Appeals did what my favorite Hedgeye court watcher Paul Glenchur said it would do regarding the constitutionality of the Affordable Care Act. In a 98-page opinion the court determined that:
- The elimination of the individual mandate penalty removed from the law the very thing that last saved it from being declared unconstitutional by SCOTUS in 2012; its characterization as a tax.
- The lower court should undertake a more granular analysis of severability and determine which parts of the law should be voided and what relief in the form of injunctions should be offered.
The Fifth Circuit’s decision is likely to be appealed to the Supreme Court, whether it will be in time to make the Spring 2020 session is debatable. We think it is more likely to appear in the October 2020-21 term.
The market reaction is likely – or at least it should be – subdued. The Trump administration has indicated they will not enforce a judge’s order until the case is finally adjudicated and that could take years.
Assuming that SCOTUS is not likely to review the case until the October 2020-21 term, the next step would be a remand to the lower court to determine what parts of the law will stay and which will go. In our review of the July 2019 hearing, we tend to think the part of the law most at risk is Title I. This section of the ACA contained most of the insurance market reforms such as community rating, age bands and guaranteed issue.
Medicaid expansion, probably the most successful part of the law, will likely stay. Although enrollment in Medicaid helps satisfy the now defunct individual mandate, expansion was done at states’ option rendering that connection somewhat tenuous.
The Fifth Circuit’s decision is not without near term influence. Supporters of the law will make it a rally cry for the 2020 election. Calls for court-packing and SCOTUS term limits could be revived. Republicans will try to back into some legislative solution to mute the impact of the courts’ decisions.
Yet, it seems to us that perhaps we are past peak on the ACA debate. Certain aspects of the law have gone mainstream; guaranteed issue, Medicaid expansion, coverage of preventive services, to name a few. Meanwhile, leading Democrat potential nominees have moved on to Medicare for All or Most or Some but seen little in the way of gains in the polls. Perhaps, when weighed against so many other concerns, health care no longer has the political stroke it once did.
Call with questions.
Emily Evans
Managing Director – Health Policy
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