Suit Challenging ACA Legally Suspect But Threatens Loss of Coverage for Tens of Millions

The Supreme Court will decide, likely this spring, whether to strike down the Affordable Care Act (ACA) as unconstitutional, as the Trump Administration and 18 Republican state attorneys general urged. The Biden Administration has reversed the Justice Department’s (DOJ) position under its predecessor. The ACA remains the law of the land for now and legal experts across the political spectrum view the case against it as extremely weak. But if the Supreme Court decides to “terminate” the ACA, as former President Trump called for, some 21 million people would become uninsured and millions more could be charged more or denied coverage altogether because they have a pre-existing condition or would lose other important protections.

Lawsuit Background

The state attorneys general, led by Texas, filed their lawsuit with a Texas district court in February 2018. The crux of their argument is that the Supreme Court’s 2012 decision in National Federation of Independent Business v. Sebelius upheld under Congress’ taxing power the ACA’s requirement that individuals have coverage or pay a penalty, and the 2017 tax law zeroed out that penalty. Without the tax, they claim, the coverage requirement is unconstitutional, making the rest of the ACA also unlawful — an argument that ignores Congress’ choice to leave the ACA intact when it zeroed out the penalty.

From the start the Trump Administration refused to defend the ACA, an unprecedented move that seems to have led two senior career attorneys to withdraw from the case and one to resign. But the government’s specific position on the case has changed. In June 2018 DOJ largely agreed with the plaintiffs’ reasoning, but it asked the court to strike down not the entire law but two critical consumer protections that it said were inextricably linked to the mandate: the prohibitions on insurers denying coverage to people with pre-existing conditions (guaranteed issue) and on charging people higher premiums because of their health status (community rating). Later, the Trump Administration endorsed striking down the entire ACA, in line with its many legislative and executive attempts to repeal or undermine it.

A group of Democratic attorneys general led by California intervened to defend the law in court given the Trump Administration’s refusal to do so. The district court judge ruled in favor of the plaintiff states and invalidated the entire ACA in December 2018 but stayed the decision. In December 2019 the Fifth Circuit concurred that the individual mandate was unconstitutional but sent the case back to the district court to determine which, if any, portions of the ACA could remain and whether the decision should apply nationwide.

Following the Fifth Circuit decision, California appealed to the Supreme Court, where again Texas and DOJ urged the Supreme Court to institute a total nationwide repeal. The case, now called California v. Texas, was argued on November 10, 2020, with a decision likely coming this spring. 2020. The Biden Administration informed the Court of the government’s change in position on February 10.

What Happens if Texas Prevails?

Striking down the ACA would increase the number of uninsured people by 21 million, or 69 percent, the Urban Institute estimated in October 2020. (Urban also provided estimates by state and demographic group.) And striking down the law would end not only the ACA’s major coverage expansions — such as Medicaid expansion, premium tax credits, and health insurance marketplaces ― but other important protections as well, harming tens of millions of people.

  • Insurers could once again put annual and lifetime limits on coverage, including for people with employer plans.
  • Young adults would no longer be able to stay on their parents’ plans up to age 26.
  • Insurers could reimpose cost sharing for preventive services, including under employer plans and Medicare.
  • Reversing the ACA’s changes to how Medicare pays plans and providers and how state Medicaid programs determine eligibility would cause massive disruption.
  • Medicare beneficiaries would face higher prescription drug costs due to the Medicare “donut hole” reopening.

Higher-income households, meanwhile, would receive very large tax cuts from repeal of the ACA’s revenue measures, worth an average $42,000 per year for those with incomes over $1 million.

If the courts threw out only parts of the law, the result would be nearly as devastating. For example, allowing insurers to again discriminate based on health status would jeopardize coverage for millions who could be charged more, denied coverage for certain diagnoses, or blocked from individual market coverage altogether — a particularly dire consequence in a pandemic. Eliminating ACA protections could also let insurers charge higher premiums to women and people in certain occupations, reimpose pre-existing condition exclusions in employer coverage, and make premium tax credits nearly impossible to administer.

Case Is “Absurd,” “Ludicrous,” Say Experts Across Political Spectrum

Legal experts, including experts opposed to the ACA and who supported other legal challenges to the law, almost uniformly agree that the arguments in this case are “absurd” or “ludicrous.” Two Republican state attorneys general (from Montana and Ohio) submitted an amicus brief stating that “to describe [the district court’s position] is to refute it.” Fifth Circuit Judge Carolyn King’s dissent called the district court opinion striking down the ACA “textbook judicial overreach.” And Republican Senator Lamar Alexander called the Trump Administration’s position that the 2017 tax bill effectively repealed the ACA “flimsy” and “as far-fetched as any I’ve ever heard.”

There are many problems with the arguments that Republican state attorneys general have made in calling for repeal. Chief among them is that they ignore Congress’ unambiguous decision to zero out the individual mandate but leave the rest of the ACA intact. They argue that the mandate is so central to the ACA or its pre-existing condition exclusion that, without it, some or all of the law must be struck down. But while the Congress that passed the ACA said the mandate was important for the reformed insurance market to function, the Congress that zeroed out the penalty decided to keep the other provisions in place. Longstanding legal principles say that Congress, not the court, gets to make that decision — as even a brief from past litigants against the ACA noted.

Major Stakeholders Have Highlighted Catastrophic Effects on the Health System

Those filing Supreme Court briefs opposing the Trump Administration and Republican states’ arguments include:

States Suing for Immediate End to ACA States Defending ACA
North Dakota
South Carolina
South Dakota
West Virginia
District of Columbia
New Jersey
New York
North Carolina
Rhode Island

Note: Strikethrough indicates states that have removed themselves from the lawsuit. Italics indicate states joining after the initial filing. Republican attorneys general from Montana and Ohio filed an amicus brief arguing that the mandate is unconstitutional but severable.