ACA court case causing jitters in D.C. and beyond

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For months, congressional Republicans have ignored the Texas-led lawsuit seeking to overturn the Affordable Care Act. With the midterm elections looming, talk of the case threatened to reopen wounds from failed attempts to repeal the law. Not to mention that legal experts have been panning the basis of the suit.

But that’s all changing as the ACA faces its day in court … again. The queasy feeling of uncertainty that surrounded the law just one year ago is back. The level of panic setting in for the industry and lawmakers is pinned to oral arguments set for Sept. 5 in Texas vs. Azar. Twenty Republican state attorneys general, led by Ken Paxton of Texas, are seeking a preliminary injunction to halt enforcement of the law effective Jan. 1. Their argument is built around the Supreme Court’s 2012 ruling in which Chief Justice John Roberts said the law is constitutional because it falls under Congress’ taxing authority. The AGs have seized on the congressional GOP’s effective elimination of the individual mandate penalty in the 2017 tax overhaul as grounds to invalidate the law. 

They have the Trump administration on their side, in part. The Justice Department in June filed a brief arguing that the individual mandate as well as such consumer protection provisions as barring insurance companies from denying coverage to people with pre-existing conditions are unconstitutional. But the department stopped short of suggesting that the entire law be vacated.

Conservative U.S. District Judge Reed O’Connor will hear the case in Austin, Texas. O’Connor has already ruled against an ACA provision that prohibited physicians from refusing to perform abortions or gender-assignment surgery based on religious beliefs, and he is considered a wild card.

Even ACA supporters who downplay the legal standing of the case are bracing for the possibility that O’Connor will side with the plaintiffs, who ultimately see a path to the Supreme Court.

Republicans, meanwhile, are trying to head off a potential political storm. A coalition of Senate Republicans led by Sen. Thom Tillis of North Carolina introduced a bill to codify guaranteed issue for people with pre-existing conditions into HIPAA laws. But they left out the key mandate that insurers can’t exclude coverage of treatment for pre-existing conditions. That omission left health insurers scratching their heads and Democrats came out swinging, with Democratic Sen. Claire McCaskill of Missouri dubbing the measure “a cruel hoax.”

The politics around coverage protections will really start to matter for Republicans should O’Connor signal support for the plaintiff states, according to Rodney Whitlock, a Washington healthcare strategist and former GOP Senate staffer. “It ups the pressure considerably,” he said. “There’s no question it complicates things for Republicans if a decision comes down in October.”

Insurers are on the lookout for signs of what could happen next. If O’Connor’s decision comes down before open enrollment starts on Nov. 1, the GOP will feel increasing pressure to do something substantive, according to an industry official who asked not to be identified.

Although a ruling striking down the law wouldn’t necessarily impact the individual market in 2019, it would spark the kind of massive uncertainty that insurers hate and complained of last year during the GOP repeal-and-replace efforts.

America’s Health Insurance Plans filed an amicus brief urging the court to deny the request for a preliminary injunction, citing the massive impact such a move would have on insurers in the individual market, Medicaid managed care and Medicare Advantage plans.

“It creates a lot of impetus for federal or state action,” the insurance official said, noting that insurers would have to rely on HHS to interpret how the law’s regulations would apply going forward. If mounting court decisions start to drastically affect the law’s mandates, it would fall to HHS how to manage complicated questions around how to follow ACA rules.

HHS and Justice Department officials declined to comment. CMS Administrator Seema Verma in August told McCaskill when pressed at a Senate committee hearing that she would support legislation to protect pre-existing conditions, but she declined to specify how the CMS would respond administratively if the suit succeeds.

For now, lawmakers aren’t showing any willingness to take a bipartisan approach. The House GOP plans to introduce a companion bill to the Senate measure, Tillis told Modern Healthcare last week. Meanwhile Democrats have made hay over the fact that the protections in his legislation are incomplete. Tillis said leaving out the prohibition of coverage exclusions was not intentional and GOP senators would look again at the bill if the lawsuit advances.

He added that he envisions the legislation as just one piece that could build into a bigger overhaul effort, and wants to see protections of other popular provisions such as allowing people up to age 26 to stay on their parents’ health insurance.

“It’s similar to what we talked about last year,” Tillis said, referencing the 2017 repeal-and-replace efforts. “Any sort of court challenge that would cause a precipitous voiding of Obamacare would leave a lot of people in the lurch, and one of those areas is pre-existing conditions.”

Sen. Bill Cassidy (R-La.), who spearheaded the last major GOP effort to repeal and replace the ACA last year, also said he would want to look at more comprehensive legislation if the lawsuit advances. “I certainly would,” Cassidy said. “I can’t speak for all, but I do think there would be a drive to.”

How Republicans will move past messaging and into action remains to be seen, Whitlock said.

“If you think of the seminal moments of 2017, you think of pre-existing conditions and the Jimmy Kimmel test,” Whitlock said, referencing the talk show host’s attack on the repeal-and-replace effort following emergency heart surgery for his newborn son. “This was a big deal because people were concerned. It is a very important issue, and it’s also one that Republicans have tried to say in every bill that they’re trying to protect. They have been successful to varying degrees in making that case. But with the Texas lawsuit, there’s no protecting it. It says, throw out the entire ACA root and branch.”

And as nomination hearings for Supreme Court nominee Brett Kavanaugh get underway Sept. 4, Democrats will keep using the GOP’s dilemma as a cudgel. McCaskill, for instance, is leveraging the issue in her neck-and-neck race against Missouri Attorney General Josh Hawley, who is part of the lawsuit.

“How do you have a pre-existing conditions bill that says we’re not going to protect someone with a pre-existing condition?” she told reporters last week. “It’s embarrassing, it’s the Potomac two-step. Do they think nobody’s paying attention? They’re just trying to cover themselves politically, isn’t it obvious?”

And then there’s the other political dilemma for Republicans who want to show they can secure Obamacare’s protections: convincing their base that they still fundamentally oppose Obamacare even if they don’t want to talk about repeal-and-replace anymore.

“You can be sure there are folks out there who really desperately don’t want to see the Texas side laughed out of court,” Whitlock said. “It destroys the whole narrative about the lawsuit. It’s this bizarre dynamic where an obscure lawsuit that has no legal basis whatsoever leaves the opportunity to talk about” repeal.

He added: “There are people who are flat-earthers on ACA, still preaching complete and total repeal.”



Two Lawsuits with Implications for the Coverage of Millions of Americans

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Significant legal challenges have marked the history of the Affordable Care Act (ACA) since its passage in 2010, and have largely determined the outlines of the law’s current structure. Similarly, as Sara Rosenbaum argues in a brief published this week, the courts have substantially shaped the Medicaid program over its 53-year history. Two recent legal challenges have potentially far-reaching implications for both the Affordable Care Act and the Medicaid program, and the millions of Americans who depend on them for their health insurance. While the plaintiffs take different positions regarding the ACA and Medicaid, the cases and the Trump Administration’s responses to them reveal an executive branch that is consistent in its efforts to reduce the federal government’s role in guaranteeing health insurance coverage for Americans.

Stewart v. Azar

Oral arguments in U.S. District Court for the District of Columbia begin today in a class action lawsuit brought by 15 Kentucky Medicaid enrollees. The case challenges the legality of several aspects of Kentucky’s 1115 Medicaid demonstration waiver, which allows the U.S. Department of Health and Human Services (HHS) and states to test time-limited innovations in Medicaid and other public welfare programs without congressional action. Set to go into effect on July 1, the Kentucky waiver’s most controversial provision is the requirement that Medicaid beneficiaries work or perform community service for at least 80 hours per month to retain coverage. The suit also challenges the authority of HHS, now led by Secretary Alex Azar, to both encourage and approve Medicaid work demonstrations generally and the approval of Kentucky’s demonstration in particular.   The suit also challenges the legality of other aspects of the waiver, including the imposition of premiums, the use of six-month lock-out periods for beneficiaries who don’t comply with work requirements or pay their premiums on time, and the elimination of Medicaid’s requirement that new beneficiaries receive three months of retroactive coverage. Three other states have received approval for similar waiversseven states have applications under review at the Centers for Medicare and Medicaid Services, and several others are developing them. Because the case challenges both the Kentucky waiver and HHS policy, it has implications for these states, as well as the future of the Medicaid program.

A critical issue highlighted by the case goes to the heart of the entitlement nature of the Medicaid program. Under the Medicaid Act and subsequent amendments, Congress has determined certain groups of people to be eligible for Medicaid coverage by virtue of their age, income, or health needs. These mandatory coverage groups include children, pregnant women, and the elderly, blind and disabled. Because working-age adults with low incomes were the least likely to work in a job that comes with health benefits, the ACA created a new mandatory eligibility category for adults with income less than 138 percent of the federal poverty level. The Supreme Court decision in 2012 effectively made this optional for states. But once a state elects to cover people who fall into this group, individuals at this income level become a mandatory coverage group. Kentucky expanded eligibility for this group in 2014, and most, but not all, of its waiver provisions apply only to this group. The lawsuit argues that suspending a beneficiary’s coverage for failure to comply with the new waiver requirements would be in violation of their entitlement to coverage under the Medicaid Act. In public speeches, Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma, also named as a defendant in the suit, has maintained that Congress’s decision to expand eligibility for Medicaid to “able-bodied” adults was a departure from the historical mission of the program and that states should have the opportunity to alter that through work and other requirements. While the vast majority of adults who have coverage through the ACA’s Medicaid expansion have jobs, work requirements will likely impose significant administrative barriers that could trigger eligibility losses even among those working full time. Estimates of coverage losses range from 95,000 to nearly 300,000 people in Kentucky. Because low-income workers remain the least likely group in the U.S. workforce to have coverage through their jobs, many will likely become uninsured.

Texas v. Azar

Secretary Azar is also the defendant in this case, brought by Texas and 19 other Republican-led states. So-called amici, or friend of the court briefs, are due today and several groups have filed briefs. The suit claims that Congress’s repeal of the individual mandate penalty renders the individual mandate — still part of the ACA — unconstitutional. Because the mandate is essential to the operation of the law, the case argues that the entire law is invalid. In an extraordinary departure from executive branch precedent — and as noted by Tim Jost — Attorney General Jeff Sessions notified Congress last Thursday that the administration agreed with the plaintiffs that the individual mandate was unconstitutional. Because of this, the administration argues that insurers selling policies in the individual market can no longer be banned from denying people coverage or charging higher premiums because of their health, gender, or age. However, the administration maintains that other parts of the law, including the Medicaid expansion, are not affected.

Looking forward

Taken together, these cases underscore the Trump Administration’s ongoing interest in reducing the number of people covered under the Affordable Care Act by withdrawing federal support for the law. Today’s oral arguments in the Stewart case will provide early indications as to how the courts will view the administration’s actions. The insurance coverage of millions of Americans and the future of the Medicaid program are at stake.