The Trump administration seems to have reverted to a harder line on the Affordable Care Act (ACA), urging the 5th US Circuit Court of Appeals to uphold a lower court ruling that strikes down the ACA in its entirety (Texas v. United States (N.D. Tex. Dec. 14, 2018)). This is a change in direction for the US Department of Justice, which had argued only certain parts of the ACA should be struck (like the ban on pre-existing condition exclusions), after originally declining to defend the case at all.
The case arose shortly after Congress failed to repeal and replace the ACA, but enacted 2017 tax reforms that cut the individual-mandate penalty for not having health coverage to $0 starting in 2019. Texas and 19 other Republican-led states sued, arguing the individual mandate is unconstitutional if it no longer imposes any tax. The Supreme Court had upheld the constitutionality of the ACA's individual mandate in 2012 based on Congress' power to tax (National Federation of Independent Business v. Sebelius (567 US 519)).
The GOP states further argued that because the individual mandate is integral to the ACA, if that mandate is unconstitutional, then the entire law must fall. If this argument ultimately prevails, the effects would include repealing Medicaid expansion, halting government subsidies for individuals to purchase health insurance on the public exchanges, and eliminating many group health plan mandates — such as the ban on denying coverage of pre-existing conditions and the prohibition of lifetime and annual dollar limits on essential health benefits.
The lower court sided with the GOP states, ruling that if the individual mandate's penalty is $0, the mandate is unconstitutional. The court also agreed with the GOP states by holding that mandate can't be severed from the rest of the ACA, so the entire ACA is invalid. However, the judge stayed the ruling, so it won’t take effect unless upheld on appeal. Whichever way the 5th Circuit rules, many observers believe the case will likely head to the Supreme Court, which would mean a final judgement would have to wait until sometime in 2020.
The House of Representatives has filed a brief defending the ACA, along with a group of 16 states and the District of Columbia that are appealing the ruling. Four states recently joined that effort: Colorado, Iowa, Michigan and Nevada.
Democrats — many of whom ran on protecting the ACA last year — are treating the Justice Department’s latest stance in this case as a new attack on the ACA from the Trump administration. They are introducing legislation to strengthen the ACA and undo recent policy changes, such as the final rule expanding short-term, limited-duration health plans that do not have to comply with any of the ACA’s consumer protections (like the ban on denying coverage of pre-existing conditions). Democrats also are holding hearings on various ACA issues and planning to make protecting the ACA part of their platform during the 2020 elections.
Unless and until this case is upheld on appeal, employers should continue to comply with all aspects of the ACA, including the employer shared-responsibility requirements, IRS assessments and related reporting obligations. Employers should monitor further developments in the courts and in Congress.
Mercer Law & Policy Resources