All About the New ACA Challenge Before the Supreme Court

November 10, 2020 by Kate Michael
Outside the U.S. Supreme Court building. (Photo by Dan McCue)

WASHINGTON — This morning, the Supreme Court will hear oral arguments on a legal challenge seeking to overturn the Affordable Care Act. 

This third major challenge to the ACA heard by the Supreme Court, Texas v. California seeks to decide whether Congress, by eliminating the penalty for not having health insurance, made the entirety of the Affordable Care Act unconstitutional.

“A court decision to invalidate the ACA would lead to rapid and widespread chaos in the health care system,” warned Larry Levitt, executive vice president for Health Policy at KFF (formerly Kaiser Family Foundation) during a web briefing of the health policy news outlet, which spoke to potential ramifications if the Court ultimately invalidates all or most of the law.

Related | Supreme Court Appears Likely to Preserve Most of Affordable Care Act

Eighteen typically-conservative states are challenging the ACA, with 17 states defending the law in absence of the Federal government defending the constitutionality of its own mandate, which KFF’s MaryBeth Musumeci, associate director of the Program on Medicaid and the Uninsured, says is “unusual.”

As Musumeci describes it, the main issue at hand is severability, or removing one portion of the law from all others. There is currently no penalty for not having health insurance, yet the law still requires — mandates — everyone to buy insurance. “If the mandate is unconstitutional, is it severable from the rest of the law, or should all of it be struck down?” she asks. “Can the mandate be removed from the law without damaging insurance protections?” 

The case, which many regarded as weak before the induction of Justice Amy Coney Barrett, actually has several questions to be decided, Musumeci explained. First it must decide, procedurally, if at least one state or party has standing. If so, it will need to determine if that party was injured, legally, by having to purchase marketplace coverage. It can also look at the constitutionality of the mandate.

“Watch for the areas Justices focus their questions on, like procedural standing, to get an idea of how this could go,” said Musumeci. “Still, nothing is certain about the outcome of the case until the Court submits its written opinion,” which she expects in June. 

“A new Biden administration could let the Court know that they have changed [the Federal Government’s] position, but a new administration with a new position won’t moot the case out,” Musumeci explained. 

All aspects of the ACA will remain in effect until this decision is reached.

In 2012, the Court upheld the constitutionality of the ACA’s individual mandate as a taxing power, but the Tax Cuts and Jobs Act of 2017 set the penalty at $0, effectively nullifying its taxing power, zeroing out the mandate’s penalty effective January 2019.

Many worry that if the individual mandate is deemed unconstitutional, the rest of the ACA would not be able to survive without it. But others argue that the elimination of the penalty, the mandate’s enforcement arm, hasn’t hurt insurance marketplaces or undermined coverage protections. In fact, what was seen as being essential to the law “may not be as essential… as a lot of people might have thought it was,” according to KFF Vice President and Director of the Program on the ACA Cynthia Cox. 

“ACA subsidies are doing the heavy lifting and the market is doing just fine without the penalty being in place,” she said, with the effect over the last two years since penalty elimination being increased marketplace enrollment with premiums that have stayed flat or dropped in many states. 

Conversely, the ACA marketplace has seen big decreases in enrollment among people that don’t qualify for subsidies, according to Levitt. “[So, it does appear] the carrot for subsidies is stronger than the stick of the mandate.”

Levitt suggested three “simple legislative fixes” to deal with the issue outside of the Court. First, he said Congress could repeal the individual mandate entirely. If not that, then legislators could make the individual mandate constitutional based on the Supreme Court’s previous decision in 2012, by adding back a small penalty. “[Adding back a tax] could be done through budget reconciliation requiring a simple majority vote,” Levitt offered. As a third option, Congress could clarify that the rest of the law is severable from the individual mandate, should it be deemed unconstitutional. This would require 60 votes, and may be the hardest to achieve, especially with the balance of the Senate undeclared.

“Georgia’s Senate runoffs could affect both the composition of the Senate and the future of the ACA,” said Levitt. 

Highlights of the ACA are the creation of state insurance marketplaces with tax credits and subsidies for lower-income Americans, federal funding for states to expand Medicaid to cover low-income adults, and provisions that bar insurers from discriminating against people with pre-existing conditions.

Pre-existing conditions get a lot of attention as 27% of non-elderly adults, or greater than one in four Americans, have pre-existing conditions that would have left them uninsurable pre-ACA.

“We have seen some shift in how Republican leaders talk about pre-existing protections under ACA, though so far… no detailed replacement plans,” said Levitt. 

But it is the implications for Medicaid as a result of overturning the ACA that are most concerning for KFF Vice President and Co-Director of the Program on Medicaid and the Uninsured Robin Rudowitz. 

“Before ACA, people had to meet both income standards and eligibility requirements for specific groups to qualify,” Rudowitz explained. “Under ACA, eligibility was extended for incomes up to >138% poverty level,” and with enhanced federal matching dollars, the expansion helped narrow disparities in coverage. 

Thirty-nine states, plus DC, adopted this Medicaid expansion. Half of the states bringing the suit (nine out of 18) even adopted it. “Despite this, they are taking the position that the entire ACA should be struck down,” Rudowitz said.

She is watching Texas v. California closely because she believes that 15 million adults currently covered by Medicaid could lose their federal pathway to Medicaid eligibility should the ACA be overturned; states will lose nearly $80 billion in enhanced federal matching funds for Medicaid expansion; and most adults who lose Medicaid coverage would likely become uninsured. She also worries that if the ACA overturned, this may have dire implications for the solvency of the Medicare Trust Fund. 

The ACA affects nearly every American in some way, from fundamentally changing private insurance marketplace plans, making preventative services (birth control) free of co-payment, reducing much of the out-of-pocket liability for older Americans, and even affecting calorie labeling.

With Texas v. California, what started as a “legal long shot” (Levitt), now has an outcome completely up in the air with the addition of Justice Amy Coney Barrett to the bench. 

And, said Cox, “the timing is such that this could all happen while the pandemic is still raging on.”

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