ACA survives cut in penalties but courts will have final say

By Dana Beezley-Smith, Ph.D.
July 20, 2019 - Last updated: February 22, 2020

Affordable Care ActIt may be hard for psychologists to believe, but there was a time when the topic of healthcare wasn’t politically charged.

So claims Julie Rovner, chief Washington correspondent at Kaiser Health News. She recalls past conversations as “not just bipartisan, but nonpartisan,” often flavored with policy consensus.

The 1992 presidential election of Bill Clinton changed that, Rovner told an audience at the University of Michigan’s Institute for Healthcare Policy and Innovation. That’s when the Clinton administration undertook a controversial effort to overhaul the healthcare industry.

Passed unilaterally by Democrats, the 2010 Affordable Care Act (ACA) further entrenched the right-left divide on health reform.

The Obama administration learned from the failure of the Clinton proposal by working with the Congressional Budget Office (CBO) regarding its treatment of Americans’ mandated premium payments.

“This bill was written in a tortured way to make sure the CBO did not score the mandate as taxes,” claimed ACA architect and MIT economist Jonathan Gruber in late 2013. “If CBO scored the mandate as taxes, the bill dies.”

In 2012 the Supreme Court found that the individual mandate to purchase health insurance was not a valid regulation of interstate commerce and the penalty for failure to do so was constitutional under the power of Congress to tax.

The individual mandate is once again the subject of ACA litigation in the case of Texas v. Azar. Twenty GOP-controlled states, along with two Texas constituents, are squaring off against 22 blue states (acting as intervenor defendants) in a suit against the federal government.

“The entire Affordable Care Act is at stake in this case,” Rovner told attendees.

The 2017 Tax Cuts and Jobs Act neutered the ACA’s individual mandate by zeroing out the noncompliance penalty, called the “Shared Responsibility Payment.” Plaintiffs in this lawsuit argue that with the removal of the fine, the mandate no longer is a constitutional function of Congress’ taxing power, the basis on which the 2012 Supreme Court upheld it. They further contend that the mandate to buy coverage is integral to the functioning of the remainder of the ACA.

A Texas federal district judge sided with the plaintiffs and invalidated the entire statute last December. Judge Reed O’Connor ruled that because the mandate was unconstitutional – and considered inseverable from the remainder of the ACA – so was the entire law.

ACA proponents long viewed the law’s coverage requirement, insurance reforms and subsidies, described as a three-legged stool by Gruber, as inextricably linked. “Removing the Affordable Care Act’s mandate would eviscerate the law’s coverage gains and greatly raise premiums,” Gruber wrote in mid-2010.

Now, however, many analysts believe the individual mandate was not as necessary as thought. “Repeal of the tax penalty has had little impact,” writes David Savage, law reporter for the Los Angeles Times.

The Trump administration has made subsidized ACA policies more appealing by ending cost-sharing reduction payments to insurance companies and, paradoxically, boosting premium subsidies. The move is expected to increase subsidies by nearly $200 billion over 10 years.

The Fifth Circuit Court of Appeals will hear oral arguments in early July. The case could ultimately be heard by the Supreme Court, but in the interim “nothing changes,” says University of Michigan professor Nicholas Bagley. The administration continues to implement the ACA pending a final verdict.

If the entirety of the ACA is invalidated, psychologists seeing patients under the law’s provisions would see dramatic changes. The Urban Institute projects that 19.9 million people would lose coverage, including exchange enrollees, young adults covered by their parent’s policies and those receiving expanded Medicaid. Insurers could be empowered to once again limit coverage based on preexisting conditions for those in the individual and small group markets, as well as some with employer-sponsored plans.

Premium and cost-sharing subsidies would end, as would free preventive services, and insurers could remove out-of-pocket cost ceilings. Mental health parity would be limited to levels established by the 2008 Mental Health Parity and Addiction Equity Act.

However, some Americans could experience state-based relief, as ACA-like provisions have already been legislated across the country. Massachusetts, New Jersey, Vermont and Washington, D.C., have implemented coverage mandates, and seven more are considering the option. According to the Common-wealth Fund, at least 14 states are considering legislation to codify some of the ACA’s consumer protections.

While Texas v. Azar is a highly political lawsuit, it has received bipartisan condemnation from health policy and legal experts, who note several flaws in the plaintiffs’ reasoning.

First, because the insurance mandate now has no financial consequences, it may no longer violate the commerce clause. Second, the plaintiffs may have failed to meet conditions for a concept called “standing.” In other words, is any party now harmed by the coverage mandate? Third, the 2017 Congress apparently didn’t intend to strike down the entire ACA – just the noncompliance penalty – or it would have done so.

Law professors Jonathan Adler and Abby Glick, who held opposing views during previous Supreme Court challenges to the ACA, panned the suit in an editorial for The New York Times.

The legal principle of severability “presumes that, out of respect for the separation of powers, courts will leave the rest of the statute standing” unless Congress clearly intends that the entire law be invalidated…. We are skeptical a majority of the court would sustain this weak analysis.”

After O’Connor’s ruling last December, Bloomberg court reporter Greg Stohr attempted to comfort his Twitter followers. “This is your occasional reminder that the five justices who voted to uphold Obamacare in 2012 are still on the Supreme Court.”

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Dana Beezley-Smith, Ph.D., is in private practice serving children, adults and families in Green, Ohio. Her email is:

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