The Impact of the Supreme Court’s Pending ACA Decision on Health Plans

^{By Robin Figueroa, consultant, Freed Associates} 

On November 10, 2020, the Supreme Court of the United States heard arguments from both sides on California v Texas which deals with the constitutionality of the 2010 Affordable Care Act (ACA) following the passage of the Tax Cuts and Jobs Act of 2017. Specifically, the crux of this case asks whether there should be an income tax penalty on those who do not have individual health insurance. 

The insurance requirement, known as the individual mandate, is a key provision of the ACA. It’s designed to promote balance within an ACA health plan’s membership to include plan members who are relatively healthy to offset the higher costs of members with multiple care conditions. 

As the Supreme Court deliberates this case, here's what providers of ACA-qualified health plans should know about California v Texas and consider doing in the meantime. The Supreme Court’s options for this case depend on the ACA as originally written and recent legislation and litigation affecting the ACA.

How Did We Get Here?  

In December 2017, President Trump signed a bill reducing the individual mandate tax penalty to $0 in 2019. Afterward, several states, led by Texas, argued that the part of the ACA tied to the individual mandate was no longer valid. The argument continues that the individual mandate was so fundamental to the ACA that the ACA would have never passed in 2010 without it; therefore, the entire ACA should be overturned. Before lower courts could rule on this argument, the Supreme Court stepped in and agreed to hear this case. 

As reported by The Washington Post and others, the Supreme Court can decide to: 

1. Dismiss the case on technical grounds, thus kicking it back to the lower courts (this is unlikely) 
2. Uphold the ACA in its entirety, including the individual mandate and tax penalty  
3. Uphold the ACA, minus the individual mandate (status quo where the tax penalty=$0) 
4. Uphold the ACA, minus the individual mandate, and strike other provisions in the ACA closely linked to the mandate 
5. Strike down the ACA in its entirety (this is also unlikely) 

What if the ACA is Repealed? 

More than 20 million Americans now rely on their ACA-provided health insurance. If the ACA is repealed, that could mean: 

• People who had COVID-19 could be classified as having a pre-existing condition (pre-existing conditions are currently protected under the ACA) 
• In the middle of a pandemic, millions of people could lose their health coverage. This could include people who lost their jobs and health insurance this year because of the pandemic 
• Young adults under age 26 could lose their health coverage 
• People who rely on health coverage for mental health support could find themselves at greater risk 
• Women could pay more for health coverage—something that the ACA prohibited because of its provisions regarding sex discrimination 
• Drug costs for seniors could increase. The ACA lowered drug costs by closing the Medicare Part D coverage gap (the “donut hole”) where seniors who reached a certain level of prescription drug spending faced a coverage gap until their plan’s catastrophic coverage kicked in 
• Hospitals and health care centers would take another financial hit because their uninsured and uncollectable balances would increase – on top of the financial hit they have already taken in 2020 because of Covid-19 spending and cancellation of elective surgeries and procedures to make room for Covid-19 patients  

The Supreme Court heard about two hours of oral arguments over the constitutionality of the individual mandate. Chief Justice John Roberts and Justice Brett Kavanaugh indicated via their questions that the ACA could be upheld, even if the court determines that a tax penalty enforcing the individual mandate is unconstitutional. This is a concept known as severability, which holds that a law may continue to remain effective, even if one or more or more of its terms or provisions are found to be unenforceable.  

In two previous legal challenges to the ACA, the Supreme Court has left the law largely intact. If Roberts and Kavanaugh both join the Supreme Court’s three justices (Stephen Breyer, Elena Kagan and Sonia Sotomayor) who have previously upheld the ACA, then the Supreme Court will also uphold the ACA in California v Texas, in full or in part. 

What to Do While You Wait 

We may not know for some time the fate of the ACA through California v Texas. The Supreme Court has until the end of June 2021 to issue a ruling on this case. 

In the meantime, health plans would be wise to work on what’s within their control. Specifically, to help consumers determine if they qualify for federal subsidies in the form of tax credits to help pay for individual marketplace plans. Health plans could also provide education to consumers to help them select the right coverage, based on individual or family needs. 

Health plans should also continue to work on interoperability, as mandated by the Interoperability and Patient Access final rule (CMS-9115-F). Many of the provisions of the final rule go into effect on January 1, 2021, and will be unaffected by the Supreme Court’s decision on this case.