December 15, 2018

Gist Alert: Judge Rules That ACA is Unconstitutional

by Chas Roades and Lisa Bielamowicz MD

BREAKING NEWS

A Federal judge rules that the ACA is unconstitutional

In a Texas-sized move that seemed ripped from the pages of Friday Night Lights—down six, end of the fourth quarter, with a playoff berth on the line, a Hail Mary pass spiraling into the end zone—a judge in the Lone Star state once again put the future of the landmark 2010 healthcare reform law into question.

Last night, ruling in the case of Texas vs. Azar, Judge Reed O’Connor of the Federal District Court in Fort Worth, TX held that the entire Affordable Care Act (ACA) is unconstitutional because of a change made to the individual mandate by Congress as part of the tax overhaul of 2017. In the judge’s opinion, once Congress reduced the penalty for not having health insurance to zero, the individual mandate could “no longer be sustained as an exercise of Congress’ tax power,” and thus violates the Constitution. The judge further held that the individual mandate portion of the ACA is “inseverable” from the remainder of the law, rendering the entire piece of landmark healthcare reform legislation invalid. In a previous challenge to the ACA, the Supreme Court held that the law was constitutional because the individual mandate penalty was in fact a tax levied by Congress.

The case was brought by 20 Republican state attorneys general, and in recent months the Trump administration chose not to defend the existing law in court, a break from customary practice by earlier administrations. Sixteen other Democratic state attorneys general, led by California’s Xavier Becerra, instead took up the defense of the law. Department of Justice lawyers, directed by former Attorney General Jeff Sessions, took the position that the individual mandate and other insurance market reforms should be overturned by the court, but that the rest of the ACA should remain in force. Last night’s ruling goes further than that, essentially throwing the future of the entire law into question.

Reaction to the ruling was swift, with President Trump taking to Twitter to praise the judge’s action, but many other policy and legal experts on both the left and right questioning the logic of the opinion—in particular the notion that the individual mandate, already unenforceable and with zero penalty, is integral to the viability of the entire ACA. Several lobbying groups, including those for hospital, health plan, physician, and other interests, also quickly condemned the ruling. In a statement, Becerra said that the group defending the law would seek an immediate appeal in the Fifth Circuit Court of Appeals, a process eventually likely to land the case before the Supreme Court. There, newly-appointed Justices Gorsuch and Kavanaugh will have their first opportunity to weigh in on the ACA, although the five-Justice majority that previously upheld the law is still in seat.

The ruling came on the evening before the deadline for individuals to enroll in coverage for 2019 on the ACA marketplace and could further dampen signups, which were already trending down during this open enrollment period. With an eye toward that, Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma tweeted that “the exchanges are still open for business…There is no impact to current coverage or coverage in a 2019 plan.” Beyond imperiling the ACA exchanges, the judge’s ruling stands to disrupt many other facets of the 2010 law, including Medicaid expansion, protections for people with pre-existing conditions, value-based reforms to provider payment, the activities of the Medicare Innovation Center, and scores of other measures. The ruling is also likely to inject a new dose of uncertainty into the healthcare industry, which has been fundamentally reconfigured by the ACA.

We’re no legal experts, but the fact that both liberal and conservative legal experts seem to agree that last night’s ruling is both technically flawed and a huge overreach of judicial authority provides some reassurance that the opinion will not survive the appeals process. It’s certainly too early to write obituaries for the ACA, and payers, providers and others should press ahead on the assumption that the forces at work in healthcare—the focus on value, the imperative to constrain cost growth, the need to improve consumer access, and so forth—will continue unabated. Healthcare leaders will once again, however, need to keep a careful eye on the courts, a depressingly familiar posture. We’ll continue to analyze the ruling, and reactions to it, and will provide further thoughts.

In the meantime, our deepest apologies for having jinxed last night’s ruling by saying, in Friday’s Weekly Gist, that the ACA had become “boring”. Those were the good old days.