By Ashley Fuoco Antonelli, editor
*Editor's note: This story was updated March 26, 2019
When Republican-led states filed a lawsuit challenging the constitutionality of the individual mandate—and the Affordable Care Act (ACA) itself—few were concerned: Congress had effectively repealed the mandate when it passed a bill that will zero out the tax penalty for remaining uninsured, and the notion that invalidating the mandate would invalidate the law itself seemed too farfetched to legal experts.
But U.S. District Judge Reed O'Connor caused heads to turn last year when he struck down the entire law. O'Connor's argument hinged on whether the entire law could be severed from the individual mandate if that provision is found to be unconstitutional once the tax penalty is eliminated. And now, the Department of Justice is buying in to O’Connor’s ruling that the individual mandate cannot be separated from the entire law.
American Health Line in September 2018 spoke to three experts to get a clearer picture of just how chaotic things could get if this case continues to gain traction and, ultimately, reaches the Supreme Court.
The 3 possible outcomes—from 'status quo' to massive disruption
As of right now, there are three key ways that the 5th U.S. Circuit Court of Appeals—and ultimately the Supreme Court—could rule on the suit.
First, it could rule against the GOP states and uphold the ACA and all of its contested provisions. If so, and if that decision were upheld on any appeal, then we'd remain in very much the same situation as today, with the ACA in full force.
Second, it could rule in the way that the Department of Justice (DOJ) is advocating: that the individual mandate is unconstitutional, and that as such certain key ACA provisions—including its protections regarding pre-existing medical conditions and premium rates—must be struck down. Such a decision would, however, leave the rest of the law intact.
The third possibility is the most potentially disruptive: The court could throw out the entire ACA as unconstitutional.
Either of the latter two possibilities would, experts say, have dramatic consequences for U.S. health policy.
The less-disruptive possibility: No more individual mandate or coverage protections
Let's start with the scenario experts say is more plausible in light of last week's oral arguments: a ruling in line with DOJ's arguments that strikes down the individual mandate and certain related provisions but preserves the rest of the law.
Tim Jost, an emeritus professor at Washington and Lee University and an ACA expert, told American Health Line that such a ruling likely would affect the ACA's community rating and guaranteed access provisions, which ban insurers from denying people health coverage or charging them higher premium rates based on pre-existing medical conditions. The provisions also limit how much insurers can charge people based on gender and age.
According to Katie Keith, an adjunct professor at the Georgetown University Law Center and principal at Keith Policy Solutions, such an outcome essentially would return pricing of and access to health insurance to pre-ACA times, when coverage access was dictated by "a patchwork of state laws" that vary significantly in scope. For example, in an email to American Health Line, Keith said, "Very few states … have comprehensive ACA-like protections on the basis of health status."
Cori Ucello, an actuary and the senior health fellow at the American Academy of Actuaries, noted that some states have laws on the books that would continue community rating and guaranteed access protections, but most states don't. The end result, Ucello explained, would be individuals with pre-existing conditions "having trouble obtaining coverage."
According to Jost, these changes would be especially disruptive if the courts don't stay rulings against the provisions. "There's absolutely no way in which" insurers selling health plans through the ACA's "exchanges could adjust" to a ruling striking down those provisions before the open enrollment period launches in November, Jost said.
The chaotic possibility: A health care system without the ACA
An even more disruptive scenario, and one even DOJ is pushing not to happen, is a final ruling that strikes down the individual mandate and the entire ACA, which could place nearly every policy and program that has been implemented under the law at risk, experts said. That would include, but certainly isn't limited to:
1. The elimination of the ACA's Medicaid expansion
Keith explained, "If the entire ACA is struck down, the provisions on Medicaid expansion would be eliminated," which "would presumably eliminate the new eligibility category."
Ucello noted that without the ACA, the law's "enhanced federal match rate would go away," which could prompt several states to roll back their coverage eligibility limits. While Ucello said it's possible states still could "retain" their expansions, they'd be doing so with significantly less federal funding. And if states can't retain their expansions, "people will lose coverage," Ucello said.
2. The elimination of the federal exchange (although some states might step in to fill the gap)
The federal exchange market would also be eliminated under such a ruling, experts said—as would the law's federal subsidies to help consumers offset the cost of exchange plans.
Over the years, the federal exchange has become a key vehicle to enrolling consumers in health coverage and reducing uninsured rates. Final data from the 2018 coverage year show the federal exchange accounted for 8.7 million sign-ups.
Consumers once again could struggle to afford the cost of coverage without the support of the ACA's federal subsidies. And while some states could choose to run their own exchanges, Keith said they're unlikely to able to foot the cost of subsidies.
Keith said the subsidy funding loss "would be a huge blow to the ACA's coverage gains and health insurance for millions of people." The Congressional Budget Office previously has estimated eliminating the ACA's Medicaid eligibility expansion and federal subsidies for purchasing insurance would increase the number of uninsured U.S. residents to 27 million in 2020 and 32 million in 2026, compared with current law.
Another consideration, Keith said, is that it's "unclear what insurer participation might look like as the system returns to a pre-ACA market."
3. The industry's shift to value-based care potentially falling into jeopardy
It's worth noting here that many other policies and programs created under the ACA, beyond those that relate directly to the individual insurance market, also could be affected. According to the experts, such policies and programs include:
While the Trump administration has shown a commitment to continuing those efforts, it's not exactly clear how the many regulations and policies implemented under the ACA to increase access to drugs and test alternative payment models would be affected by a ruling striking down the law. As Jost notably said, "The Affordable Care Act reaches into every aspect of the American health care system."
Based on the lawsuit's progress so far, many now believe it's likely to reach the Supreme Court. As such, the experts suspect the effects of any ruling are unlikely to be felt soon.
"I think it's very possible [O'Connor's] going to hold the individual mandate as unconstitutional and preliminarily enjoin part of the law," Jost said. But the Democratic AGs defending the ACA in the suit already have signaled they will appeal any ruling against the ACA to the 5th U.S. Circuit Court of Appeals, and Jost said he'd be "amazed" if O'Conner didn't stay his ruling so that it doesn't take affect while the lawsuit progresses.
When it comes to the 5th Circuit Court, Jost said it's possible a panel of the court would uphold a ruling from O'Conner against the ACA—prompting another appeal. This Jost said could put the lawsuit on track to make its way to the Supreme Court within a year or two—but he added, "I can't imagine the Supreme Court would uphold" a ruling against the ACA.
Keith also said "[t]here is a lot of agreement—even among conservative legal scholars—that the ACA should not be struck down based on this case or legal theory." She explained, "Even if one assumes that the individual mandate is now unconstitutional because Congress zeroed out the mandate penalty beginning in 2019 … that should be the end of the inquiry and a court doesn't need to consider the question of severability." However, she added, "ACA litigation is nothing if not surprising, and I expect this case to eventually make its way to the Supreme Court."