Uncertain Fate for the Affordable Care Act

A Texas district court invalidated the entire Affordable Care Act (“ACA”) just last month on December 14, 2018. However the ruling isn't a final determination and the decision will be appealed. This ruling includes the Individual Mandate, Employer Penalty, mandated benefits such as the prohibition against preexisting condition exclusions, taxes such as the PCOR fee, the establishment of the Marketplace and offering of subsidies, and reporting such as Form 1095-C reporting. There is no immediate impact however, it is clear that there is still a push for changes to the ACA as it stands now.

The ACA has always faced controversy over it's provision that Americans must have health insurance be subject to penalty come tax time. The supreme court challenged that provision on June 28, 2012, ruling that the Individual Mandate is not a valid exercise of Congress’ power under the Commerce Clause (i.e., the federal government cannot force individuals to buy insurance), however it was upheld due to Congress’ power under the Taxing Clause (i.e., the federal government has broad authority to monetarily penalize individuals). Texas Attorney General Ken Paxton and 19 other Republican state attorneys general filed a lawsuit on February 26, 2018, which charged that Congress’ changes to the law in last year’s tax bill rendered the entire ACA unconstitutional. They reasoned that if the Individual Mandate, per the Supreme Court, is only constitutional because it constitutes a tax, and if that tax has effectively been eliminated, then the Mandate sans tax that remains on the books is therefore unconstitutional. Invalidating the Mandate should invalidate the whole ACA because the law cannot function the way Congress intended without the Mandate in place.

On June 7, 2018, then U.S. Attorney General Jeff Sessions indicated in a brief that it would not participate in the defense of this lawsuit. While the Administration did call on the court to invalidate the Individual Mandate, guarantee issue requirement, and community rating requirement, it indicated that the remaining provisions should stand. It also asked the court to hold off on a broad ruling until after December 15, the end of this year’s Marketplace open enrollment period, to avoid introducing “chaos in the insurance markets.”

In May 2018, the court allowed the attorneys general from Democratic-leaning states to “intervene” in the case and defend the law. California Attorney General Xavier Becerra led the challenge with 15 other states and the District of Columbia. They refuted the Republican attorneys’ general claim, noting that the ACA and its Individual Mandate have already survived two reviews by the Supreme Court and over 70 unsuccessful repeal attempts in Congress.

The December 14, 2018 Decision

In Texas v. Azar, Judge O’Connor, a George W. Bush appointee who sits in the Northern District of Texas, came to three conclusions:

• the plaintiffs had standing to sue so the case was properly before the court;

• with the penalty at $0, the Individual Mandate is no longer permissible under Congress’ taxing power and is unconstitutional; and

• the Individual Mandate is essential to and inseverable from the entire ACA, meaning the entire ACA is invalid.

Judge O’Connor’s ruling does not enjoin the ACA which means that the ACA’s provisions remain in effect for the time being. From here, the case will likely move to the Fifth Circuit Court of Appeals and then the Supreme Court where a final decision might not be made until 2020 or later.

Next Steps

The final outcome is not one we can predict, and Judge O’Connor’s has been met with criticism over his arguments. In King v. Burwell (the most recent case before the Supreme Court challenging the validity of the ACA), Chief Justice Roberts lead to the thought that the Court’s current majority favored keeping the law intact:

Congress did not pass the Affordable Care Act to destroy health insurance markets, it's aim was to improve them. We must interpret the Act in a way that is consistent with the latter, and avoids the former.

If the ACA is made invalid, the consequences are going to be sweeping, with the ACA touching nearly each facet of the American health care system (e.g., community rating and Medicaid expansion). It may even considerably impact employers who would not need to evaluate affordability, outline full-time workers as those performing at least thirty hours per week, limit their waiting periods to ninety days, or file Forms 1095-C.

We will be watching this legal proceeding and supply updates of any developments.

Source: Emerson Ried