Posted: 29 Jan. 2019 8 min. read

Health policy, 2020 elections could be affected by recent and future ACA rulings

By Anne Phelps, principal, US Health Care Regulatory leader, Deloitte & Touche LLP

As the latest legal case against the Affordable Care Act (ACA) winds through the federal courts, the law could make its third appearance at the Supreme Court. Once again, there is uncertainty surrounding the fate of the law, which could affect Congressional health policy priorities this year—and be a factor in the 2020 elections.

It has been nearly two months since US District Court Judge Reed O’Connor ruled that Congress’ 2017 nullification of the individual-mandate penalty essentially repeals the penalty and renders the provision unconstitutional. O’Connor further concluded that because the individual mandate is essential to and inseverable from the law, the ACA in its entirety must also be found unconstitutional.

The court’s decision goes back to December 2017 when Congress nullified the tax penalty associated with the ACA’s individual mandate provision, which requires people to pay a penalty if they do not have health coverage and do not qualify for an exemption. Two months after the nullification, 20 states1 filed a federal civil action seeking judgment to find the individual mandate unconstitutional. They argued that by zeroing out the penalty, Congress effectively repealed the individual mandate—making the entire ACA unconstitutional because the provision is inseverable from the law.

Attorneys general from several Democratic-led states have appealed the US District Court’s decision to the Fifth Circuit Court of Appeals. While there is uncertainty around the future of the ACA, O’Connor did issue a stay, which allows the law to remain in effect during the appeals process. Regardless of how the Fifth Circuit rules, it is likely the case will rise to the Supreme Court. In the meantime, I think this ruling could have some significant implications for health care policy and the 2020 elections.

Here are 10 key questions (and answers) that I have been thinking about:

1. How is the individual mandate tied to the rest of the ACA? The ACA was enacted in 2010 with the goal of increasing the number of Americans who have health insurance and reducing the cost of health coverage in general. The individual mandate is widely seen as being essential to achieving both of those goals. That provision requires most Americans to maintain “minimum essential” health coverage2. People who opt not to enroll in insurance, and are not exempt from the rule, must pay a tax penalty.

2. How did the Supreme Court previously rule on the individual mandate, and why was Medicaid considered separately? The ACA made its first appearance at the Supreme Court in 2012 after 26 Republican-led states, several individuals, and the National Federation of Independent Business challenged the constitutionality of the individual mandate and the Medicaid-expansion provision. While the court determined that the individual mandate does not fall within Congress’ constitutional authority to regulate commerce, it did find the individual mandate to be constitutional under Congress’ taxing authority. The court declined to address the question of whether the individual mandate could be separated from other ACA provisions. However, the court did determine that the Medicaid-expansion provision is severable from the rest of the ACA. While there are nuanced differences among the issues in this case (and the current case), the high court has shown a desire in the past to find Congressional intent in favor of supporting the concept of severability within the context of the ACA.

3. How was the individual-mandate penalty eliminated? In 2017, Congressional Republicans led a campaign to repeal the ACA. While this effort fell short of its ultimate goal, Republicans were successful in securing enough votes to zero-out the individual mandate penalty. As of January 1, 2019, the penalty is $0. However, the mandate is technically still on the books because only the penalty was modified. That means Congress could pass legislation to set the penalty to a number higher than zero without having to pass legislation to reinstate the individual mandate.

4. What is behind the latest lawsuit? When the 2017 Tax Cuts and Jobs Act zeroed out the individual mandate penalty, it created a new opening for challenging the ACA. The most recent court case seeks to prevent the US Department of Health and Human Services (HHS) and the Internal Revenue Service (IRS) from enforcing any part of the ACA. The plaintiffs argue that without a tax penalty, there is no way for Congress to constitutionally enforce the individual mandate. Moreover, the plaintiffs contend that because there is no severability clause within the ACA—and because the individual mandate is a vital provision—the entire law must be unconstitutional.

5. How might other provisions of the ACA be affected? O’Connor agreed that without a penalty, the individual mandate is unconstitutional, which means the entire ACA is unconstitutional. As consequence of the ruling, other key ACA provisions would be deemed unconstitutional. Some of these provisions include:

  • Medicaid expansion
  • Accountable Care Organizations (ACOs)
  • Medicare payment provisions
  • All revenue provisions including industry fees and taxes
  • The Center for Medicare and Medicaid Innovation (CMMI)
  • The Physician Payment Sunshine Act (which requires medical product manufacturers to inform CMS about any payments or other transfers of value made to physicians or teaching hospitals)
  • The Prevention and Public Health Fund (a mandatory funding stream dedicated to improving the nation’s public health system)
  • The regulatory pathway for the development and approval of biosimilars 

6. What is the near-term future of the ACA? While O’Connor’s ruling appears to place the ACA on unstable footing, he did not grant the plaintiff’s relief for injunction. That means the law remains in effect. On December 30, 2018—roughly two weeks after his initial ruling—O’Connor issued a stay and final partial judgment in the case confirming that the law can stand while his judgement is under appeal. For the very near-term, the ACA is unchanged and the individual mandate penalty remains at $0 for 2019—and future years.

7. How are other provisions of the ACA affected? As of now, all provisions of the ACA and subsequent regulations remain in place. However, depending on how the Fifth Circuit Court of Appeals rules, and how the Supreme Court rules (should it decide to hear the case), it is possible that the overall law and subsequent regulations will be affected. The issue of severability on appeal will be key to the survival of the ACA. If the Fifth Circuit upholds the District Court’s ruling, the ACA could be immediately impacted. However, I expect we would see a continued stay, which would allow the law to stand through its appeal to the Supreme Court.

8. What are the next steps? Eighteen state attorneys general have already filed an immediate appeal to the Fifth Circuit Court of Appeals in New Orleans. The appeals process at the circuit level, especially in cases that have the potential to impact many Americans, can be a lengthy. Once the appeals process at the Fifth Circuit has been exhausted, it is likely we will see an appeal to the Supreme Court. If the high court decides to hear the case, it probably wouldn’t happen until sometime in 2020…at the earliest.

9. If the case goes to the Supreme Court how might it rule? The ruling at the Fifth Circuit will impact the specific issues that the Supreme Court will be asked to review. While it is difficult to assess exactly what the Supreme Court will rule on, there are some possible scenarios to consider. Assuming O’Connor’s ruling is at the heart of the matter, the Supreme Court could fully uphold his decision, or fully strike it down—meaning the court would find the individual mandate to be constitutional. As a result, regardless of whether it is severable, the ACA would be constitutional. However, it is more likely that we will see some sort of partial upholding and/or partial striking down. For example, the Supreme Court could find in favor of O’Connor’s ruling that the individual mandate is unconstitutional. However, the court might also disagree with the lower-court ruling and find that the individual mandate is severable and therefore the rest of the ACA can stand.

10. What impact might this have on other priorities next year (e.g., Medicare for All)? What impact might this have on the 2020 elections? This case could have an enormous, far-reaching impact on the American health care system. There is some reason to believe that it could alter Congressional health care priorities in 2019 and 2020 as the case makes its way through the appeals process. The fact that the ACA is in precarious standing could foster a sense of urgency among Congressional Democrats to proceed with “Medicare for All” or similar initiatives that could set up a new system to help increase/maintain the number of Americans who are insured. However, the administration and Congressional Republicans have expressed opposition to these types of initiatives. Additionally, there could be shifts in priorities should the individual mandate and the ACA be upheld as unconstitutional. Many provisions of the ACA that have become well entrenched within the health care system (e.g., ACOs, Medicaid expansion in some states, non-discrimination of pre-existing conditions) would no longer be federally mandated or authorized if the ACA is upheld as unconstitutional. In response, Congress might shift its priorities to developing bipartisan policies to protect and maintain these vulnerable provisions to minimize any potential disruption to the current health care system the court rulings could create. Alternatively, states could enact similar provisions through state legislation, as some have already done.

Health care, and in particular the preservation of pre-existing conditions protections within the ACA, was a major campaign issue for both Democrats and Republicans during last year’s mid-term elections. With the appeals process likely to stretch into 2020, I expect the individual mandate and pre-existing conditions—and the ACA in general—will return to the forefront of issues for the 2020 elections.

Endnotes
1. Alabama, Arizona, Arkansas, Florida, Georgia, Indiana, Kansas, Louisiana, Maine (Governor Paul LePage), Mississippi, Missouri, Nebraska, North Dakota, South Carolina, South Dakotas, Tennessee, Texas, Utah, West Virginia, and Wisconsin
2. Affordable Care Act, 26 U.S.C. §5000A

 

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