ACA Court Rulings: Midterms Hold Health Insurance in the Balance

November 6, 2018

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Over the past year, the courts considered cost-sharing reduction payments, the individual mandate, consumer protections, association and short-term health plans. Below is an overview of where ACA-related court rulings stand, and how the next Congress may address them.  

Cost-Sharing Reductions: One of the longest court battles related to the Affordable Care Act began under the Obama administration, and considered whether the government must pay cost-sharing reduction payments to insurers. On Sept. 4, the U.S. Court of Federal Claims entered a summary judgement in favor of the Montana Health CO-OP in its lawsuit to collect reimbursement for 2017 cost-sharing reduction payments for low-income enrollees.

The issue became a longstanding battle, with the House of Representatives suing the Obama administration, claiming that no money had been appropriated to cover the cost-sharing reduction payments, making any payments illegal. The House of Representatives won the lawsuit at the district court level. The Obama administration appealed, but in October 2017, the Trump administration decided the payments were illegal and terminated them.

The Montana CO-OP then sued, with the court again ruling in its favor, stating that the ACA promised reimbursement and failure to appropriate the funds does not prevent insurers from recovering payments for 2017. Other insurers also have sued, and if the judges agree in those cases, the government may face substantial obligations. 

Individual Mandate Case: The 2017 tax bill zeroed out penalties for the individual mandate, allowing 20 Republican state attorneys general and governors to file a case arguing the constitutionality of the mandate. The Supreme Court originally upheld the individual mandate as constitutional because it was viewed as a tax. The plaintiffs argue that since the penalty is now zero, the mandate should be unconstitutional. They also argue that since the ACA is dependent on the individual mandate, the entire ACA should be declared invalid.

In June, the U.S. Department of Justice agreed with the plaintiffs, but argued that in addition to the individual mandate, the ACA’s guaranteed issue and community rating provisions, as well as its ban on pre-existing condition exclusion clauses must be invalidated as well.

On Sept. 5, arguments were heard in the case Texas v. Azar. In those arguments, the Department of Justice expressed concerns about invalidating the ACA’s consumer protections and pleaded with the court not to enjoin the law before the close of open enrollment in December, to prevent chaos in the insurance markets.

On Sept. 13, the Maryland attorney general filed suit in Maryland federal district court, asking the court to find the ACA’s individual mandate constitutional, or at least hold it severable from the rest of the ACA. The filing notes the refusal of the Department of Justice to fully defend the ACA in the Texas case, and the harm that would be done to the state of Maryland if the ACA were invalidated.

Association Health Plans: On Aug. 23, twelve Democrat state attorneys general moved for summary judgement in a challenge to the association health-plan rule promulgated by the Trump administration. The attorneys general argued that the ACA provided clear rules for differentiating between the size of employers and individuals for purposes of market regulation, as well as rules for aggregating groups of employees. In contrast, the administration’s association health-plan rule impermissibly aggregates individuals and small groups into large groups to reduce consumer protections. They also argued that the rule does not follow the Department of Labor’s long-held understanding of what constitutes an employer, an understanding Congress relied upon when adopting the ACA. They also note that almost all healthcare stakeholders opposed the administration’s rule.

ACA’s Nondiscrimination Provision: In September, two federal district courts ruled that the ACA’s nondiscrimination provision prohibits discrimination against transgender individuals for coverage of health services. One case occurred in Minnesota, where a judge concluded that an earlier nationwide injunction blocking the protections offered under the Obama administration’s regulation was irrelevant since the case was based on the actual statute. In the second case, which occurred in Wisconsin, the judge based his decision on the statute.

These court cases can have a profound impact on both the upcoming congressional agenda and how the next Congress addresses access to health insurance. If Democrats sweep the House and Senate, the response may be very different than if the legislature is divided. In the run up to the midterm elections, many members of Congress are concerned about the impact of removing consumer protections from the ACA. Removing some of the most popular aspects of the ACA, including the guarantee issue, may raise issues for Republicans and make them willing to support some form of consumer protections, regardless of who gains control of Congress.