The Trump administration’s request Thursday that a Texas federal court invalidate three key Obamacare mandates for insurance coverage has jolted the healthcare industry as all eyes home in on a case that until now has drawn little national attention or interest.
The U.S. Justice Department on Thursday not only refused to defend the Affordable Care Act against a lawsuit filed by 20 Republican state attorneys general, but echoed the state litigators’ arguments that Congress rendered major provisions of the law invalid when it zeroed out the individual mandate penalty in the 2017 tax bill.
In particular, the Justice Department said the court should overturn the ACA’s individual mandate along with provisions requiring insurers to cover people with pre-existing conditions and to use a community rating to set premiums instead of basing rates on a person’s health condition because they were specifically tied to the mandate’s implementation.
The move shifts the defense of the law to Democratic state attorneys general who have already intervened.
The Justice Department pushed back on the plaintiffs’ request to immediately invalidate the ACA, since the tax penalty is still in effect until January 2019. Instead, the administration asked the court to nix the provisions when the tax cut begins. Paul Larkin of the conservative Heritage Foundation said he believes this request was made to set up the case for a Supreme Court hearing.
Legal scholars largely panned the Justice Department’s argument for lacking merit, but the industry and some analysts are already on alert for what the administration’s stated position on the Affordable Care Act’s most popular aspects could mean.
The legal questions boil down to the point of “severability,” an argument brought in Obama-era litigation against the ACA.
The Justice Department argued in its brief that most of the ACA could stand except the individual mandate, pre-existing conditions and community rating provisions. The Obama administration had said these measures go hand-in-hand and cannot survive without each other and the tax penalty.
“It’s pretty bad,” libertarian law professor Jonathan Adler said of the underlying case merits. “It reflects poor understanding of severability doctrine, you see that in the state’s brief, and you see it implicitly in the DOJ brief insofar as they accept those arguments.”
Abbe Gluck, a Yale University law professor, noted that the doctrine of severability is based on congressional intent, but the legal question in this case shouldn’t focus on Congress’ intent in 2010 when lawmakers passed the ACA. Instead, the court should focus on 2017 when Congress zeroed out the individual mandate penalty but did not touch the pre-existing condition and community rating provisions.
“A court doesn’t now have to guess whether Congress wanted the rest of the statute to remain standing,” Gluck said. “Congress told us that by leaving it intact. The intervening and dispositive action of the 2017 Congress itself is why the whole severability argument has no basis in law and also why the 2012 litigating position isn’t relevant any more.”
Melinda Hutton, general counsel for American Hospital Association, also weighed in on the severability issue, arguing that “as it stands today, the individual mandate is clearly severable from the rest of the (ACA).”
Hatton warned that a legal ruling otherwise “would devastate this nation’s hospitals and health systems and the patients they serve.”
“Nothing requires that catastrophic result,” Hatton said.
America’s Health Insurance Plans, the trade group representing a swath of carriers who offer plans on the exchanges, is planning to file an amicus brief against the plaintiffs’ request for a preliminary injunction—the first signal of stakeholder involvement in the lawsuit.
AHIP also issued a forceful statement against the Justice Department’s petition to invalidate the consumer protection clauses.
“Zeroing out the individual mandate penalty should not result in striking important consumer protections, such as guaranteed issue and community rating rules that help those with pre-existing conditions,” AHIP said Friday in a statement. “Removing those provisions will result in renewed uncertainty in the individual market, create a patchwork of requirements in the states, cause rates to go even higher for older Americans and sicker patients, and make it challenging to introduce products and rates for 2019.”
Ceci Connolly, president of the Alliance of Community Health Plans, called the legal position “troubling” and warned it could spark fresh market instability.
“At the very least it adds uncertainty at exactly the moment when plans are trying to set rates for next year,” Connolly said in a statement. “At the worst, it could strip away guaranteed coverage for those with pre-existing conditions. We don’t want to return to the days when people who needed the care the most could be turned away because of their health status.”
Jost also worried that as the case gets tangled in court, the Trump administration’s position could reverberate in HHS’ decisions as some states seek greater authority to skirt some ACA regulations.
Although he conceded it is unlikely, Jost wondered whether the Justice Department’s stated belief that the consumer protections are unconstitutional means the executive branch will stop enforcing them. He pointed to at least one outstanding case: HHS’ so-far delayed decision over Idaho’s request to offer exchange plans that don’t comply with the Obamacare requirements. The state is in discussions with the department over its proposal, with a decision expected later this month. Other states, including North Dakota, are watching how HHS responds before proposing their own coverage mandate changes.
For Jost, that leads to more complications for such major issues as setting tax credits that subsidize coverage for people with lower incomes.
“Once you start to invalidate those provisions, the problem is how does the rest of the statute work?” Jost said. “How do you set tax credits if everyone has different rate based on status?”
Gluck said, however, that the Justice Department brief shouldn’t affect HHS’ action.
“The guaranteed issue and community rating provisions are the law of the land until a court or Congress says otherwise,” Gluck said. “And in fact it was Congress that left those provisions on the books. For HHS to try to undermine those provisions before a court rules, which I wouldn’t expect it to do, would be unconstitutional sabotage.”
The case is being heard in a north Texas federal court by U.S. District Judge Reed O’Connor, who was appointed by President George W. Bush. Historically, O’Connor has been an outspoken opponent of Obamacare and observers expect him to skew in favor of the plaintiffs.
If O’Connor rules in Republicans’ favor, the case could move forward to the 5th U.S. Circuit Court of Appeals. Adler predicted the appellate judges won’t accept the merits of the plaintiffs’ case and that the litigation will end there rather than heading to the Supreme Court.
But Larkin, who has not yet studied the Justice Department’s severability argument, said he believes the case will get to the Supreme Court.
