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The Affordable Care Act Goes to Court

The Supreme Court is scheduled to hear arguments on November 10 in California v Texas, and render a decision early next year that will determine the future of the ACA. What are the potential outcomes, and how should payers prepare for each? Our managed care experts weigh in.

Hardly a day goes by without some mention of the future of the Affordable Care Act (ACA), given that the Supreme Court is scheduled to hear arguments on November 10 in the case that has come to be known as California v Texas. A decision that would either uphold the ACA or render all or parts of it unconstitutional is expected in early 2021. Adding to the case is the recent passing of associate-justice Ruth Bader Ginsburg, the subsequent nomination of Amy Coney Barrett as Justice Ginsburg’s replacement, and the timing of Coney Barrett’s installation on the court. Coney Barrett’s confirmation hearing was scheduled to begin October 12, but even that remains uncertain as a number of US Senators have tested positive for COVID-19, which could delay the proceedings. 

Against this backdrop sits a case that most legal scholars agree is less than solid. For this reason, it is not outlandish to believe that the ACA in its entirety will not be ruled unconstitutional. But this is 2020, a year that has seen the emergence of a once-in-a-hundred-years pandemic; the death of a Supreme Court justice 46 days before a presidential election; a tumultuous election season; and the president of the United States admitted to the hospital with COVID-19 barely a month before the nation decides if he should continue in the position. Given the year’s unpredictable nature,
it is probably unwise to assume the ACA remains untouchable. 

If Coney Barrett is not confirmed by the November 10 hearing, eight justices would hear the case, meaning there could be a 4 to 4 deadlock, which means the lower court’s ruling would stand. Alternatively, regardless of the timing of Coney Barrett’s confirmation, the court could affirm that part of the law—specifically the individual mandate—be kept at $0. Or it could overturn the entire law, reasoning that a $0 mandate renders the rest of the law invalid. This is the least likely scenario, but the one fraught with the most uncertainty. 

As usual when faced with uncertainty, we turn to our managed care experts to analyze each potential outcome, and to tell us how payers and other stakeholders should prepare for each. 

IF THE COURT LETS THE ACA REMAIN INTACT 

The ACA would remain intact if the court decides to either dismiss the case on technical grounds or affirmatively uphold the law. This is most likely how things will play out. Chief Justice John Roberts and Associate Justices Samuel Alito and Brett Kavanaugh are on record in other cases as affirming that entire laws should not be struck down if one part of them is changed. Additionally, although Coney Barrett has publicly criticized the ACA, it was recently reported that she participated in a mock trial of the Supreme Court case one week before Ginsburg’s death. Every judge in the faux hearing—including Coney Barrett—let the law stand for various reasons. 

Under this scenario it would mostly be status-quo for payers and providers, according to several of our experts. 

“I was just on a call today with one of my payer clients and they told me it would likely be business as usual,” noted Arthur Shinn, PharmD, president, Managed Pharmacy Consultants in Lake Worth, FL. David Marcus, director of employee benefits, National Railway Labor Conference in Washington, DC, concurred. “There would be no pressing need to take action now.” 

Larry Hsu, MD, medical director, Hawaii Medical Service Association in Honolulu, advised payers to stand by but be prepared. “Think about budgeting for consults, software upgrades, and the like to manage any potential changes.” 

Gary Owens, MD, president of Gary Owens Associates in Ocean View, DE, added: “Insurers may need to consider the possibility of some increased enrollment if people remain unemployed due to COVID19.  Price will be a big determining factor as to whether [these individuals] sign up for an ACA plan” versus an alternative.

IF THE JUSTICES ARE DEADLOCKED

If an eight-member court ends up in a tie after hearing the case, the lower court ruling will stand. In this case, the appellate court agreed with only part of the lower court ruling: that a $0 individual mandate is unconstitutional. It did not render a decision on the validity of the entire law, deciding instead to send it back to the lower court’s trial judge for further deliberation. Since this judge had previously ruled the entire law unconstitutional, it would
stand to reason that he could potentially side this way again. If he does, the case would have to work its way through the legal system and eventually back up to the Supreme Court. This would not occur anytime soon, meaning the ACA would remain intact for the foreseeable future. 

All of our panelists agreed that if it plays out this way, there would be no immediate need for major contingency planning. However, stakeholders should be aware that such a ruling may offer up “additional legal angles to try and dismantle ACA,” said Dr Owens. “New arguments may come into play, presenting potential complexities.” 

All in all, however, a deadlocked Supreme Court would give payers and other stakeholders time to breathe, noted Melissa Andel, principal with CommonHealth Solutions in Washington, DC. “If you send the case back down and require the states to essentially try again, it would introduce some stability. Maybe they will try again, but it will take several years. During that time, Congress and the White House may come to a solution, especially if Democrats are able to run the table—or at least narrow their deficit in the Senate.” 

IF THE ACA IS PARTIALLY STRUCK DOWN

The court could uphold the overarching law but find the individual mandate void without its penalty. In this case the status quo would be maintained. The court could also decide to void the individual mandate and certain elements tied to it.  For example, it might determine that the provision to prevent insurers from varying premiums within a geographic area based on age, gender, health status, or other factors cannot be separated from the mandate. 

Edmund J Pezalla, MD, founder and CEO, Enlightenment Bioconsult in Hartford, CT, said he believes that payers should prepare
for a partial strike down of the law. “This will leave some provisions intact. Patients will likely still be enrolled in exchange plans, and the requirements to cover preventive services, children to age 26, and preexisting conditions will remain intact. Insurers should continue planning for all of these [provisions] across all of the plans subject to the law. Additionally, there may need to be changes to some plans. Payers will have to evaluate whether it makes sense to create addendums to filings or to accept what has already been filed for next year. This means that insurers will need an understanding of cost issues.” 

Depending on which part or parts of the law are struck down, Mr Marcus said, “Payers could start evaluating whether any of the mandates
that expanded coverage under [the ACA] should be rolled back.  Some of those changes were costly, but over time, they have become very popular.” Meanwhile, “employers might be able to revert back to pre-ACA eligibility rules and stop distributing annual tax forms related to health care coverage. To plan for the absence of an employer shared responsibility mandate, employers and other coverage providers should consider what payroll/HR changes should be made. Keep in mind that several states have enacted individual mandates that require employer reporting, so employers
may need time to develop processes for state-by-state compliance.”

IF THE ENTIRE LAW IS OVERTURNED 

Although legal scholars say this is highly unlikely, there is precedent for such a decision, explained Ms Andel. “The court could overturn the law, but at the same time recognize that a straight reversal would be incredibly disruptive to the marketplace, and, therefore, [call for] delayed implementation of the ruling in order to give affected parties time to work out details.” Doing otherwise would cause the “market to just completely fall apart.”

Dr Shinn agreed. “It is going to take a while to unwind the ACA. Payers need time to figure out how to proceed and how to prepare for what would be included and what would not be. For instance, will preexisting conditions be covered, and to what extent? What other mandates might be instituted?”

As for precedent, Ms Andel pointed to the lawsuit challenging Medicare cuts to 340B reimbursement for physician-administered drugs. “The courts have ruled that CMS [Centers for Medicare & Medicaid Services] overstepped the agency’s authority, but allowed the cuts to continue while the parties work out how to reconcile the back payments.”

She explained that if the court decides to strike down the entire ACA, it will likely do so with similar conditions. “The court has little choice but to somehow maintain [the status quo] until Congress or CMS could work out a solution.” Many individuals with exchange plans receive subsidies, and still others qualify for Medicaid under expansion provisions. Moreover, with the federal government picking up 90% of costs related to Medicaid expansion, “I don’t see how states can quickly come up with the funds to fill the gap. To just rip the rug out from under those folks would be not only inhumane but also incredibly disruptive to the market itself.” 

Still, if the proverbial rug is ripped out from under those who have come to rely on the ACA, what happens then? That may depend on who would be there to catch them: Joe Biden or Donald Trump. Both promise to take care of the health needs of Americans, but in different ways (see our September 2020 cover story, “Health Care on the Ballot: Four More Years or a New Direction” for details).

Under Biden and a Democratic Senate Majority

If elected, Biden and a Democratic Congress would aim to create a seamless loop back to something that resembles the ACA, noted our experts. “Congress and Biden would likely work together quickly” to put an alternative plan in place, said Mr Marcus, adding that they would have to address the elements that led to the law being struck down. “If budget reconciliation legislation is not available, Senate Democrats could end the filibuster in order to get the new law passed.” This might also be an opportunity for Biden to get one of his campaign promises—the public option—passed as part of the new law, he noted. “Most of the changes would have little impact on payers,  except for increased coordination with Medicare and Medicaid.”

Dr Owens agreed that Biden and Congress would quickly restore ACA measures and “perhaps even improve upon them based on experience to date.” Dr Pezalla added that he believes Democrats would prefer not to rush, but will if pressed by a court ruling against the ACA. They will have “a contingency plan that holds up the key elements of the law that impact coverage overall, including preexisting condition protections. Congress will also try to keep some form of the insurance exchange alive.” This could have an indirect impact on Biden’s plans to lower the age of Medicare eligibility to age 60, delaying such an initiative until 2022, he said. 

While the consensus is that Biden leadership would be largely business as usual regarding ACA-type provisions, Ms Andel raised a potential wild card, asking: “What if the more liberal wing of the Democratic party tries to flex its muscles and see if it can implement additional changes under this ACA 2.0” that brings the country closer to single payer? 

Under Trump and a Republican Senate Majority

As of early October, the electorate had yet to see the Trump Administration’s alternative plan to the ACA. Many question whether such a plan even exists. This makes it difficult to speculate what will happen if Trump is re-elected and the GOP holds onto power in the Senate. In our September cover story, Dr Pezalla took his best guess. “Certainly, the exchange plans will be dropped. Still, Trump and the GOP are aware that the most popular part of the ACA is the coverage of people with preexisting conditions, so we might see a new law that retains this and a few other provisions. States will likely petition to keep Medicaid expansion but it is possible that no new expansions will be authorized.”

How should payers prepare for such a scenario? Dr Pezalla suggested these three priorities: 

  • Prepare alternative “skinny plans” to offer those without coverage if they lose the exchange plans
  • Discuss alternatives with small business regarding insurance coverage and stop-loss since some businesses will want to cover their employees
  • Plan to keep the preexisting condition rules in place

Dr Owens agreed that preexisting condition protections will remain, meaning insurers will “need to offer individual coverage that mimics ACA plans, using their experience from the ACA to develop and rate them.” Dr Hsu concurred. “Prepare for having your plans dropped from the exchange. Develop a process to enroll members into alternative plans.” 

In a year full of surprises, prepare for the unpredictable, suggested Mr Marcus. 

The Most Important Stakeholders

What about the most important stakeholders of all—individuals and families who rely on coverage? Dr Owens brings it back to price. Those who lost jobs this year “will be looking for ACA-type coverage, and price will be a big determining factor.” Dr Pezalla added that depending on what the administration and Congress do, the harsh reality is that those who have come to rely on ACA subsidies may need to apply for Medicaid. Those who do not qualify for Medicaid need to “prepare for the need to purchase a ‘skinny’ plan, which means they will need either a line of credit or savings to cover deductibles and other out-of-pocket expenses.”

There are enough actual and perceived uncertainties to warrant a public education campaign, suggested Ms Andel. Such an effort “should clearly explain what any decision other than upholding the law actually means. There is a significant portion of the public who believes the ACA has already been overturned. This is how they internalized the change in the individual mandate penalty. Even knowledgeable people refer to the ‘individual mandate repeal’ when that’s not what happened. Congress simply reduced the penalty to $0. The individual mandate still technically exists. This underscores the need for public outreach, especially for more vulnerable populations for whom health care coverage is critical.” 

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