By Matthew Albright
On Monday, February 26, 2018, twenty states submitted a suit against the U.S. Government asking a district court in Texas to rule that the Affordable Care Act (ACA) is unconstitutional.
Although there have been many constitutional challenges to the Affordable Care Act since it was passed, this lawsuit, Texas et.al. v. United States of America et. al., includes crucial elements that were not factors in previous attempts:
- President Trump signed the Tax Cuts and Jobs Act into law at the end of 2017, which included a provision that zeroed out the penalty on the individual mandate; i.e., the requirement that citizens have health insurance; and
- The Trump Administration is now charged with managing the defense of the ACA.
Understanding the Basis of this Recent Lawsuit
In order to understand the states’ argument, one needs to look at the precedent set by the Supreme Court in 2012 in their National Federation of Independent Business v. Sebelius (NFIB v Sebelius) decision. Much like the recent Texas lawsuit, the plaintiffs in NFIB v. Sebelius also sought to overturn the ACA by arguing that the individual mandate was unconstitutional. In NFIB v. Sebelius, the Court decided that the individual mandate was constitutional because, together with its penalty, the mandate could be considered a tax by the federal government, and the federal government is constitutionally authorized to tax its citizens.
What this Lawsuit Seeks to Accomplish
- Declare the Individual Mandate as Unconstitutional – The plaintiffs in Texas, et.al. v United States of America et al argue that since the NFIB v. Sebelius decision was based on the fact that the individual mandate can be considered a tax, making it constitutional, the Tax Cuts and Jobs Act zero out this penalty and it can no longer be considered a tax and is, therefore, making it and ACA unconstitutional.
- An injunction on the government from implementing, regulating, and enforcing the ACA – The states argue that all of the ACA should be invalidated because the individual mandate is not “severable” from the rest of the law. The states rely on a dissenting opinion in NFIB v. Sebelius which said the individual mandate is central to the ACA’s design and operation.
What is this Lawsuit’s Chance of Succeeding?
While the likelihood of success in this latest attempt at ACA repeal is hard to predict, the suit has some discernable factors in its favor as well as obstacles.
Unlike recent legislative attempts to repeal ACA supported by the Trump Administration, the lawsuit now puts the Trump Administration in the position of the Defendant and, subsequently, in the position of defending the ACA. As of this writing, the administration has yet to comment on the suit, and it is anyone’s guess what the administration’s approach might be.
Another foreseeable (and likely the largest) obstacle for the case may be the courts’ general reluctance to push back on a law which was passed by Congress and one that Americans have lived under for almost eight years. The bar is set high for the states to prove that the judicial branch should take action to roll back the ACA when the legislative branch has already attempted and failed to do so. In the words of Chief Justice John Roberts in NFIB v. Sebelius, “It is not our job to protect the people from the consequences of their political choices.”
Impact to Payers if the Lawsuit Succeeds
Even if the states win their basic argument that the individual mandate is unconstitutional, it is questionable whether the courts would throw out the ACA in its entirety; that is, the states may lose the argument that the individual mandate is not severable from the rest of the law. The courts may decide simply that the individual mandate is unconstitutional but not touch the rest of the law, as was done in NFIB v. Sebelius when the ACA’s Medicaid expansion was found unconstitutional, but the rest of the law was left alone.
In this case, the only change for payers may be that some of the reporting that is associated with the individual mandate may be removed, but agency-level actions are currently being considered by the Trump Administration that would accomplish this already.
The plaintiffs in Texas et. al. v. USA et. al. are mostly concerned with the ACA provisions that directly regulate the insurance market. The lawsuit specifically calls out the law’s guaranteed issue and community rating requirements as not being severable from the individual mandate. If the court agrees that the insurance market regulations are dependent on the individual mandate and rule them unconstitutional as well, payers would no longer have to comply with the most contentious aspects of the law.
However, the ACA is a complex law which covers many different areas of healthcare reform. It would be difficult to argue that all of ACA provisions, outside of those that directly regulate the insurance market, are dependent on the individual mandate to meet their intent.
For example, Zelis has continually tracked ACA Section 1104 and its regulations which include the mandate for all health plans to offer electronic transactions such as ACH EFT claim payments to providers. This section of the ACA has deep roots in other pre-existing mandates. The federal government has been requiring health plans to use electronic transaction since 2000; it would be hard to prove that the government does not have authority to enforce the EFT mandate simply because the Individual mandate was declared unlawful.
The next significant phase in this case will be the Trump Administration’s announcement of how it will handle the suit as the named Defendant. In the meantime, the states in the suit aren’t betting their future on the case’s success: Some of the plaintiffs are working to implement fixes in their respective states under the assumption that the ACA is here to stay.