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The Affordable Care Act – What is at stake?

November 23, 2020 | Lindsay Lowe

The U.S. Supreme Court’s decision in California v. Texas poses a threat to the healthcare system as millions of Americans could lose health insurance coverage if the Affordable Care Act (the “ACA”) is struck down. 

The main issues before the Court are as follows: 

  • Does the coalition of states led by Texas have standing to challenge the ACA?
  • Is the individual mandate, with a $0 penalty, unconstitutional?
  • If the individual mandate is unconstitutional, is it severable from the rest of the ACA? If not, which other ACA provisions should be struck down alongside the mandate?

There is a lot at stake if the Court finds in favor of the following: the challengers have standing, Congress intended to invalidate the entire ACA when it zeroed-out the tax penalty for noncompliance with the ACA’s individual mandate, and the district court acted correctly when it ruled the ACA was invalid in its entirety without the tax penalty. 

The American Medical Association has identified seven major downsides if the ACA is overturned by the Supreme Court, which are included below: 

  1. Patients would no longer have guaranteed coverage for pre-existing conditions, including COVID-19.
  2. Young adults who are 26 years old and younger would no longer have coverage under their parents’ health insurance plan. 
  3. Insurers would be allowed to generate higher profits and provide even less coverage for patient care.
  4. 100% coverage for certain preventive services would cease.
  5. Individual marketplace and premium subsidies based on income would be eliminated.
  6. Medicaid eligibility expansion would end, along with federal funding for Medicaid expansion.
  7. Annual and lifetime caps on coverage could be reinstated, leading to more bankruptcies due to health care costs.

It could not be a more inopportune time for a case of this caliber to be pending amidst the coronavirus pandemic and the upcoming open enrollment period for health insurance coverage.  According to the Kaiser Family Foundation (“KFF”), continued widespread economic dislocation during COVID-19 could mean millions of people may lose insurance coverage as we head into 2021. KFF has estimated that as many as 85% of individuals at risk of becoming uninsured due to loss of job-based coverage could be eligible for Medicaid or subsidized marketplace coverage. 

Health insurance coverage is particularly crucial, as individuals with ACA-compliant private insurance are protected by out-of-pocket maximums, which limit how much enrollees pay for hospitalization. There is currently no guarantee that hospitals will waive COVID-19 treatment costs for uninsured patients, meaning that individuals without coverage could be on the hook for large medical bills.

Physician practices and hospitals will also be impacted by the Supreme Court’s ruling, as it will directly impact the financial viability of an already economically distressed healthcare system. If the ACA is struck down, over 20 million Americans will lose health insurance coverage, which will in turn impact the healthcare market and financial returns to providers.

At the Supreme Court’s oral argument on November 10th, key Supreme Court justices appeared to signal support for the ACA. At least five Supreme Court justices, including two members of its conservative majority, indicated they would reject attempts to eradicate the ACA. Specifically, both Chief Justice John G. Roberts Jr. and Justice Brett M. Kavanaugh noted striking down the individual mandate did not require the rest of the law to be struck down as well.

While it is hard to determine the outcome of the instant case based on the recent oral argument, a decision is expected in the spring of 2021 (earliest) or by the summer of 2021 (latest). Most of the nation is in suspense as we await the Supreme Court’s final ruling.