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Health care industry braces for challenge to 2010 ACA law

Justices have been urged to uphold the law, with insurance coverage for 20 million Americans at stake

The U.S. Supreme Court building at sunset.
The U.S. Supreme Court building at sunset. (Bill Clark/CQ Roll Call file photo)

The 2010 health care law will come before the Supreme Court for a third time Tuesday, with the potential to shake up a health care industry already dealing with the COVID-19 pandemic and preparing to work with a new administration.

The health care industry, which bought into the 2010 law during its enactment, continues to support it and has urged the justices in amicus briefs filed earlier this year to uphold it. If the court does strike down the law — also known as the Affordable Care Act — or significant parts of it, the industry, including insurance plans, hospitals and other providers, would have to readjust.

“Right now, most health industry leaders would like this to go away,” said Benjamin Isgur, the health research institute leader at the tax and consulting firm PwC US. “Trying to even contemplate the ACA being struck down is very difficult for them right now because they have so little bandwidth to deal with change.”

If the law is eliminated, some 20 million people in the United States would lose their health insurance coverage, which would have the effect of increasing the amount of uncompensated care provided. Isgur said the industry likely hopes any decision to strike the law down would have a transition period to allow Congress to respond, rather than end its programs immediately.

“I would say most of them don’t really have a clear idea of what Plan B would be, so to speak, if the ACA was completely struck down,” Isgur said.

The legal challenge in the case, now known as Texas v. California, hinges on the so-called individual mandate, a provision of the law requiring most Americans to have health insurance coverage or pay a fee. In 2017, Republicans effectively ended that provision by zeroing out the penalty as part of a tax overhaul.

A coalition of Republican state attorneys general sued to strike down the law, saying it had previously been upheld because the Supreme Court considered the individual mandate to be a tax. The Trump administration declined to defend the law and is backing the lawsuit. Several Democratic state officials intervened to defend the law, and the Democrat-led House is also defending it.

A ruling in the case is not expected until this winter or spring, before the Supreme Court’s term ends in June.

Legal experts have been skeptical of the argument in the case, but acknowledge that the addition of Justice Amy Coney Barrett to the court last month could put the law at greater risk. During her confirmation hearings, Senate Democrats focused on the legal challenge, and Barrett offered few hints as to how she would rule on the case. She did note that the lawsuit centers around the concept of severability — the theory that if one part of the law is unconstitutional, the rest of the law may still stand.

Impact on industry

Depending on the decision’s details, the health care industry could find that state regulations vary even more than they do now. While some states have sought to counter Trump administration actions meant to weaken the health care law, policy experts warn differences could be exacerbated if states seek to shore up the safety net in case the law is struck down.

Jennifer Schultz, co-director of the Health Care Management Program at the University of Minnesota, said the health insurance marketplace might become more segmented if the law is struck down.

Schultz, who is also a member of the Minnesota House of Representatives, said Democratic state lawmakers there introduced legislation that could serve as a backstop to some policies within the health law if it is struck down. Their bill would require that insurers cover the law’s essential health benefits; protect rights for LGBTQ people, residents with disabilities and those with chronic health conditions; and require that people with preexisting conditions not be denied coverage.

“It’s going to be more segmented and dividing up pools of people, which is the completely wrong way to go from a health economist perspective,” she said.

Another challenge for states would be a loss of federal funding, which could be felt even more acutely as many states’ budgets are pinched because of the pandemic.

The increase in uncompensated care that hospitals would likely provide without the health law in place could cause financial problems, Schultz added. Already this year, hospitals have lost revenues as patients delayed elective procedures because of the pandemic, although the federal government provided emergency funds.

Congressional response

While the lawsuit has been the subject of a handful of votes on Capitol Hill, lawmakers have not considered legislation to amend the health care law that would invalidate the lawsuit. Some health industry officials and lawmakers have floated ideas such as reinstating a nominal fee — like $1 — for people who do not have insurance coverage; adding a severability clause to the law; or fully repealing the mandate.

John Baackes, the CEO of the LA Health Care Plan, the nation’s largest publicly operated health care plan, said if Democrats control Washington next year, he would recommend that the group lobby to reinstate a small tax as a way to nullify the lawsuit.

Several Republican lawmakers have said they don’t expect the law to be struck down in full, but expect the Supreme Court to consider whether the mandate is severable from the rest of the law.

“I would think that a majority on the court would recognize that that’s unconstitutional, but there’s no reason why that means the rest of the act has to fail,” Sen. Patrick J. Toomey, R-Pa., told reporters last month. “I think actually the right decision is to strike down the individual mandate and the rest of the law stays in place.”

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