|
Last Friday, District Court Judge Reed O’Connor released a ruling on the first of five counts in Texas v. United States. The case challenged the constitutionality of the ACA’s individual mandate in light of the Tax Cuts and Jobs Act of 2017, which zeroed out the individual mandate penalty. Judge O’Connor’s ruling was that the individual mandate, with no accompanying tax penalty, is unconstitutional. The decision also determined that the individual mandate is such an essential part of the ACA that the law cannot function without the individual mandate in place. As a result, his ruling finds the entire ACA invalid.
The sweeping ruling to invalidate the ACA would affect all provisions of the law in all states. This includes protections for people with preexisting conditions (guaranteed issue, community rating, essential health benefits), ban on annual and lifetime limits, coverage of preventive services without cost-sharing, permitting dependents on a parent’s health insurance plan up to age 26, federal subsidies to purchase health insurance, and Medicaid expansion, as well as provisions that may not be as directly applicable, such as closing the Medicare prescription drug donut hole and restaurant menu labeling.
However, this ruling is not final and is expected to be engaged in appeals for the next several months which will likely culminate in a hearing before the Supreme Court. This means that the ACA continues to be the law of the land and compliance with the ACA is still being enforced. Coverage for the 2019 plan year remains unaffected by the ruling. Judge O’Connor has asked both the plaintiffs and defendants for advice on the timeline for appeals and how the remaining issues in the case should be resolved.
O’Connor’s ruling makes several references to the 2012 landmark Supreme Court decision in National Federation of Independent Businesses (NFIB) v. Sebelius, which upheld the individual mandate as a tax in a 5-4 vote. O’Connor noted the decision’s distinctions between the mandate and the penalty, and that the zeroed-out penalty does not meet any of the factors to be construed as a tax under NFIB. These were: 1) the penalty was paid to the Treasury department when taxpayers filed their tax returns; 2) the amount owed was determined by “familiar factors” and assessed and collected in the same manner as taxes; and 3) the penalty resulted in “the essential feature of any tax” by producing at least some revenue for the government.
He argues that on the basis of the NFIB reasoning that upheld the mandate as a tax, that the individual mandate without a penalty can no longer be construed as a tax. Therefore it is no longer constitutional and that as earlier cases argued that the mandate cannot be removed from the rest of the ACA, then the rest of the law should also be considered unconstitutional. He further argues that the mandate is unconstitutional under the Commerce Clause power, the same finding of the Supreme Court in NFIB.
Additionally, the ruling attempts to discern Congressional intent from both the 2010 Democratically led Congress that passed the ACA and the 2017 Republican-led Congress that passed the TCJA to zero out the mandate penalties. O’Connor pointed to the 2010 Congress as being unambiguous in declaring the mandate as “essential” to creating effective health insurance markets and inseverable from the entire ACA. He adds that the 2017 Congress further entrenched the mandate to the law in their effort to repeal the penalty by zeroing out the tax, but not the mandate itself.
Therefore, if the mandate cannot be excluded from the ACA, Judge O’Connor argues that the ruling should strike the entire law, even portions with no relation to the mandate, as it is not the court’s role to determine which items Congress would have wanted to retain if there wasn’t a mandate in effect. This conclusion is likely to face considerable scrutiny in the appeals process as courts weigh the powers of subsequent legislatures to effectively undo the laws of preceding Congresses by passing narrow changes to those laws, which could fundamentally change the legislative process.
Should it stand, the ruling effectively satisfies a core plank of President Trump's agenda that called for repealing the ACA, which had been largely abandoned after legislative attempts faltered in summer 2017. President Trump celebrated the ruling, tweeting shortly after it was announced, calling it “Great news for America!” and renewing his push for Congress to “pass a STRONG law that provides GREAT healthcare and protects pre-existing conditions.”
However, the ruling to overturn the ACA could simultaneously complicate significant portions of the administration's healthcare agenda that are contingent on the ACA remaining in place. Many of the administration's healthcare priorities cite federal rulemaking powers granted by the ACA. This includes their “America First” initiative to reduce prescription drug prices, respond to the opioid crisis, expand biosimilars, and powers granted by the establishment of the CMS Innovation Center such as additional drug pricing reforms and moving to value-based care through physician payment models.
Additionally, the administration would face new policy challenges, such as ensuring protections for pre-existing conditions and responding to millions of newly uninsured Americans who were covered through either the marketplaces or expanded Medicaid programs—the largest payer of addiction treatment amid the opioid epidemic—as well as seniors who would face upwards of $2,000 annually in new prescription drug costs by re-opening the donut hole that had been closed under the ACA.
None of these challenges have simple or quick fixes, but would likely need the cooperation of the newly divided Congress to pass legislation mirroring language that had already been in the ACA. With the unified Republican Congress unable to pass even the skinny repeal/replace legislation by simple majority vote last year, it does not bode well for a cooperative solution to come amongst House Democrats, Senate Republicans, and the Trump Administration to respond in this potential scenario. The ACA itself was initially passed when Democrats had 60 votes in December 2009, and any new comprehensive legislation would also need the support of 60 Senators for passage, meaning at least seven Democrats would need to join with the 53 Republicans. Administration officials have said they have contingency plans in place if the ruling stands, but thus far have not offered any specifics.
NAHU is closely monitoring this ongoing legal challenge and is working with policymakers for various outcomes. We are concerned that should this ruling be upheld by the higher courts that it could be enormously disruptive to the entire healthcare system, well beyond the scope of the major reforms and provisions under the ACA. We have long advocated efforts at all levels of government to bring more stability to the healthcare system, and a complete reversal of the ACA has the potential to lead to widespread chaos throughout the healthcare system. Additionally, it could potentially upend much of the progress being made at the regulatory level on issues like reducing drug costs and payment reform, which are only tangentially-related to core provisions of the ACA, but would be overturned under this ruling. Regardless of the final outcome, we will be working closely with legislators and regulators to ensure as little disruption as possible and to advocate for solutions to stabilize the healthcare system.
|
