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Dec 20, 2018

Affordable Care Act Declared Unconstitutional: What Does It Mean?

On Dec. 14, U.S. District Judge Reed O’Connor declared the Affordable Care Act (ACA) unconstitutional. The case, Texas v. Azaar, was brought earlier this year, arguing that the U.S. Supreme Court ruling of the law as consitutional relied on Congress' power to tax, and the designation of the penalty for the individual mandate as a tax. However, Congress has since removed the penalty for the individual mandate, allowing the plaintiffs to argue that the invididual mandate is no longer constitutional.

The case presented five challenges to the law. The Trump administration, in an unusual decision, did not defend the law. That action gave rise to another case filed by the Maryland attorney general claiming the administration was not properly enforcing the law and asking for a declaratory judgement that the law was constitutional. A hearing on that case was held Dec. 19.

When Judge O’Connor released his declaratory judgment, he was responding to only one of the claims in the case. While most observers expected him to rule the individual mandate and the consumer protections unconstitutional, few expected the entire law to be found unconstitutional. While much attention has focused on the ACA’s insurance component and Medicaid expansion, the law also included a number of Medicare changes, such as the creation of Accountable Care Organizations, as well as the Biologics Price Competition and Innovation Act, which provides the framework under which the Food and Drug Administration approves biosimilars and interchangeable biologics. The Center for Medicare and Medicaid Innovation, upon which the administration is relying to develop alternative payment models, would also fall.

Where are we in the legal process?

Although the judge declared the law in its entirety unconstitutional, nothing changes. Sixteen states led by California’s attorney general have asked the judge for permission to immediately appeal the decision. Part of the rationale is that the other challenges, which the judge did not address, are now not as significant since the judge’s sweeping ruling. The judge has asked all parties for guidance and is expected to make an announcement Dec. 21. The judge could permit an appeal to move forward, or he could hold the case until he addresses the other challenges made.

Regardless, eventually it would be appealed to the 5th U.S. Circuit Court of Appeals and then presumably to the Supreme Court. Most observers do not see it getting to the Supreme Court before 2020.

What will Congress do?

It is expected that Democrats, once in charge of the House, will follow precedent and intervene in the case, just as Republicans intervened in the suit concerning cost-sharing reduction payments. A similar effort in the Senate was blocked by Republicans on Dec. 19.

With one party controlling the House and the other the Senate, and given the partisan battles fought over the ACA, it is not likely that legislation affecting the ACA will pass in 2019; however, the ruling provides fodder for hearings on every aspect of the law in both bodies. Most in Congress expected the ruling to go against the individual mandate and consumer protections, but what has caused uncertainty about what can be accomplished is the ruling invalidating the entire law. Even in the repeal-and-replace efforts, most of the Medicare provisions were left out of the debate. Medicaid, at times, was in and out of the debate. 

In 2017, there was a bipartisan effort to develop legislation to stabilize the markets. The leaders of that effort expressed interest in doing the same in the next Congress. However, some of the issues, such as flexibility in Section 1332 waivers, have moved on and seen action by the administration.

What will happen in 2020 if there is no final solution to the case?

Uncertainty once again will be the context surrounding how plans make decisions about participating in the 2020 plan year including whether to participate in 2020 and what rates will be charged. However, uncertainty was factored into the 2019 plan year and states were able to cope with this either by allowing some flexibility in their processes by letting plans change rates, or by submitting two rates. 

What will states do?

States may take any of several actions. Several have already adopted their own, individual mandates or have discussed doing so. More states may look at that option. States also either have mirrored the federal law in consumer protections or have keyed their laws off the federal law. Some states will have to examine how they have created consumer protections to determine what they would need to do if the law were struck. 

As important, however, is the debate over Medicaid expansion. The 2018 election results put Medicaid expansion back in the public eye in some states as an option legislatures and governors might consider. Some states may be more reluctant to move forward if they cannot determine what the future might be for Medicaid expansion after 2020.