Affordable Care Act

January 20, 2020

Suit Challenging ACA Legally Suspect, But Threatens Loss of Coverage for Millions

A three-judge panel of the Fifth Circuit Court of Appeals will soon announce a decision in Texas v. United States, the lawsuit challenging the constitutionality of the Affordable Care Act (ACA). The appeals court heard oral arguments in July 2019, after a district court ruled in Texas’ favor and invalidated the entire ACA in December 2018. That opinion was stayed (suspended) while the case is under appeal. The appeals court could reverse the district court opinion, or it could affirm the opinion and invalidate all or part of the ACA. Any decision striking down the law would almost certainly be stayed while it’s appealed to the Supreme Court, meaning that the ACA would remain in effect. But if the law were struck down there, 20 million people would become uninsured and millions more could be charged more or denied coverage altogether because they have a pre-existing condition or would lose other important protections.

Lawsuit Background and Trump Administration’s Position

Twenty Republican state attorneys general filed a lawsuit in February 2018 asking the court to declare the ACA’s individual mandate unconstitutional and, with it, to strike down the entire law. The crux of their argument is that the Supreme Court’s 2012 decision in National Federation of Independent Business v. Sebelius upheld the ACA’s coverage requirement under Congress’ taxing power, and the 2017 tax law zeroed out that tax penalty. They claim that without the tax in place, the requirement to have coverage is unconstitutional, making the rest of the ACA also unlawful — an argument that ignores Congress’ choice to leave the ACA intact when it zeroed out the tax penalty.

From the start the Trump Administration has refused to defend federal law under the ACA, an unprecedented move that seems to have led three senior career attorneys to withdraw from the case and one to resign. But the government’s specific position on the case has changed. In June 2018 the Department of Justice (DOJ) largely agreed with the plaintiffs’ reasoning, but it asked the court to strike down not the entire law but two critical consumer protections that it said were inextricably linked to the mandate: the prohibitions on insurers denying coverage to people with pre-existing conditions (guaranteed issue) and on charging people higher premiums because of their health status (community rating).

Then in March 2019, DOJ filed a two-sentence letter (and later a brief) indicating it agreed with the district court’s decision to invalidate the entire ACA. While DOJ attorneys suggested at oral argument that the Fifth Circuit might not have jurisdiction to immediately strike down the entire ACA nationwide (suggesting instead that it should strike down parts or all of the law in only the plaintiff states), DOJ still argues that the entire ACA is unconstitutional.

A group of Democratic attorneys general led by California’s intervened to defend the law in court following the Trump Administration’s refusal to do so.

What Happens if Texas, Trump Administration Prevail?

Striking down the ACA would increase the number of uninsured people by 20 million, or 65 percent, the Urban Institute estimates. (Urban also provides estimates by state and demographic group.) Such a decision would end not only the ACA’s major coverage expansions — such as Medicaid expansion, premium tax credits, and the health insurance marketplaces ― but other important protections as well, which would also harm tens of millions of people who would remain insured. Striking down the ACA would mean:

  • Insurers could once again put annual and lifetime limits on coverage, including for people with employer plans.
  • Young adults would no longer be able to stay on their parents’ plans up to age 26.
  • Insurers could reimpose cost sharing for preventive services, including for people with employer plans and Medicare beneficiaries.
  • Both Medicare and Medicaid would see massive disruption, since striking down the ACA would reverse changes to how Medicare pays plans and providers and how state Medicaid programs determine eligibility.
  • Medicare beneficiaries would face higher costs for prescription drugs, because striking down the ACA would reopen the Medicare “donut hole.”

If the courts threw out only parts of the law, the result would be nearly as devastating. For example, allowing insurers to again discriminate based on health status would put coverage at risk for millions of people who could be charged more, denied coverage for certain diagnoses, or blocked from individual market coverage altogether because they have certain health conditions. Eliminating ACA protections could also allow insurers to charge higher premiums to women and people in certain occupations, allow pre-existing conditions exclusions to return for people with employer coverage, and make premium tax credits nearly impossible to administer, raising questions about how they would continue.

Legal Experts Across Political Spectrum Call Case “Absurd,” “Ludicrous”

Two judges on the Fifth Circuit panel, appointed by Presidents Trump and George W. Bush, appeared sympathetic to the plaintiff states’ and Administration’s arguments. But legal experts — including experts opposed to the ACA and who supported other legal challenges to the law — almost uniformly agree that the arguments in this case are “ absurd” or “ ludicrous.” Two Republican state attorneys general (from Montana and Ohio) submitted an amicus brief stating that “to describe [the plaintiffs’ position] is to refute it.” Republican Senator Lamar Alexander described the Administration’s position as “as far-fetched as any I’ve ever heard.”

While there are various problems with the plaintiffs’ argument, the central one is that it ignores Congress’s unambiguous decision to zero out the individual mandate while leaving the rest of the ACA intact. Texas and the Trump Administration argue that the individual mandate is so central to the ACA or its pre-existing condition exclusion that, without it, some or all of the law must be struck down. But while the Congress that passed the ACA said the mandate was important for the reformed insurance market to function, the Congress that zeroed out the penalty decided to keep the other provisions in place — and longstanding legal principles say that Congress, not the court, gets to make that decision. A group of legal scholars, including some who have opposed the ACA in previous challenges, filed a brief making this point.

States Suing for Immediate End to ACA   

Alabama, Arkansas, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Mississippi, Missouri, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia, Wisconsin.

States Defending ACA

California, Colorado,  Connecticut, District of Columbia, Delaware, Hawaii, Illinois, Iowa,  Kentucky, Massachusetts, Michigan,  Minnesota, Nevada,  New Jersey, New York,North Carolina, Oregon, Rhode Island, Vermont, Virginia, Washington

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Topics: Affordable Care Act

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