The Affordable Care Act at Risk: American Health Policy at a Crossroads

Faegre Drinker Biddle & Reath LLP

We are at a major crossroads in U.S. health policy. The direction for American health care in 2021 and beyond will depend in large part on events that are unfolding now, and that will come to fruition in the first half of 2021. Foremost among those events are the U.S. Supreme Court’s decision on the validity of the Patient Protection and Affordable Care Act (ACA), which the Court is considering now and will hand down in the first half of 2021, and the final results of the general elections to determine the political dynamic in the Congress come January 2021.

Supreme Court Decision

Foremost on the minds of many health policy watchers is California v. Texas, the pending lawsuit on the ACA before the Supreme Court. On November 10, 2020, the Court heard oral arguments on whether the ACA’s individual mandate became unconstitutional when Congress amended it in 2017 to reduce the penalty for noncompliance to $0. If the Court determines that the mandate is unconstitutional, it will also consider whether some or all of the ACA’s other provisions must be struck down along with the mandate.

The ACA has proven resilient in the face of prior challenges, but this time could be different. In many ways, California v. Texas offers the Supreme Court an opportunity to reconsider the 2012 Court’s 5-4 ruling in NFIB v. Sebelius, which upheld the ACA’s individual mandate. The reconsideration would be based on a revised set of facts, and of course it would follow the distinct rightward shift on the Court that has culminated with the recent confirmation of Justice Amy Coney Barrett. In NFIB, the plaintiffs alleged that the individual mandate was unconstitutional because Congress’s power to regulate interstate commerce does not extend to requiring people to engage in commerce (by buying health insurance). Although the Supreme Court agreed with that argument, Chief Justice John Roberts’s opinion famously upheld the ACA by holding that the individual mandate can be construed not as an illegitimate attempt to exercise the commerce power, but as a permissible tax on people who do not enroll in health insurance.

In 2017, however, Congress amended the ACA to change the amount of the “tax” to zero, but it left the individual mandate nominally on the books. The California v. Texas lawsuit followed — with the plaintiffs arguing that, since the mandate can no longer generate any tax revenues, it cannot be construed as a tax any longer and so is unconstitutional. The plaintiffs further argue that, if the mandate is struck down, the entire ACA must be invalidated along with it because the ACA statute did not contain a severability clause. Those are the questions before the Supreme Court.

How might the Court’s ruling change the health care policy landscape? There are several potential outcomes. As an initial possibility, the Court might find that the plaintiffs in the case lack standing to bring their challenge at all. Since the premise of the suit is that there are no longer any legal consequences for violating the individual mandate, the Court could decide that no one is harmed by it and so no one has standing to sue about it. That would avoid any ruling on the merits and would continue the status quo. However, Texas and other states challenging the mandate appear to have good arguments that, even though the amount of the “mandate tax” has been lowered to zero, they still have to bear certain administrative and paperwork costs related to it. That may well be enough to give them standing.

If the Court reaches the merits, it of course might uphold the now-toothless individual mandate provision as a valid exercise of Congress’s authority under either the Commerce Clause or its power to levy (and suspend) taxes. Such an outcome would solidify the current health care landscape and likely provide momentum for further maturation of the ACA exchanges and associated enrollment periods.

But if, as many expect, the Court finds the amended individual mandate provision unconstitutional, things will change. They will change only modestly if the Court concludes that the individual mandate is “severable” from the rest of the ACA. There is a presumption in favor of severability, and this would be the least disruptive (hence arguably the most conservative) outcome. A number of commentators find this to be the most likely decision for the Court to reach. Under this outcome, opponents of the individual mandate could declare victory, but as a practical matter the most important aspects of the ACA would remain in force. Experience since 2014 has shown that the ACA exchanges can very likely function and deliver a stable risk pool without an individual mandate.

The Court could go further, however, and seize upon certain Congressional “fact findings” from the 2010 ACA legislation to hold that the individual mandate is not severable from the ACA’s guaranteed issue and community rating provisions, but is severable from the rest of the statute. The argument for such a holding would be that, when Congress enacted the ACA, it regarded guaranteed issue, community rating and the mandate as a “three-legged stool” of insurance reforms, each of which was necessary to make the others work properly. (The counterargument would be that Congress must have changed this view by the time it reduced the mandate tax to zero, while leaving guaranteed issue and community rating in place.) If the Court took this route, it would likely cripple the ACA exchanges as they currently operate, demanding prompt legislative action to address the situation. But it would save the vast array of health care reforms and other programs and policies in the ACA that have no direct relationship (and often no relationship at all) to the individual mandate.

Finally, the most unlikely — but possible — outcome: The Court could strike down the ACA in its entirety, on the theory that the individual mandate was so central that, in its absence, Congress would have preferred no ACA at all to an ACA without an individual mandate. When people talk about the ACA, they usually think of the health insurance regulations that are commonly referred to as “Obamacare”: the exchanges, protections for patients with preexisting conditions, limits on out-of-pocket expenses, allowing young adults to remain on their parents’ insurance until age 26 and similar coverage reforms. So it’s easy to forget that the ACA includes much more than that. To give just some examples, other provisions of the ACA created the accountable care organizations/the Medicare Shared Savings Program, numerous public health programs, and the Center for Medicare and Medicaid Innovation (CMMI), eliminated the Medicare Part D “donut hole,” and made changes to Medicaid, drug rebates, health insurance subsidies and tax credits, Medicare Advantage and Medicare payments. It would be possible, albeit unlikely, for the Supreme Court to hold that striking down the individual mandate requires striking down all these provisions as well.

If that were to occur, all bets are off and major disruption would follow, with policymakers on both sides of the aisle under pressure to address the fallout. A flurry of legislative and regulatory activity likely would occur, and once again the American health care system could be in for fundamental changes.

During oral arguments, both Chief Justice Roberts and Justice Brett Kavanaugh made comments suggesting that they were skeptical about striking down other parts of the ACA because of the alleged infirmity of the amended individual mandate. Justice Roberts commented that it is “not our job” to strike down provisions of the ACA that Congress in 2017 left intact. Justice Kavanaugh noted his view that it was “pretty clear” that the individual mandate should be deemed severable under the Court’s precedent. If that view holds, and Justices Sonia Sotomayor, Elena Kagan and Stephen Breyer join that view, the ACA will survive largely intact. Notably, all of the justices seemed interested in the standing issue as well, suggesting a possibility that the Court may decide not to reach the merits.

A decision is expected by June 2021.

Election Outcome

In the last decade, a new political truism has developed among federal government watchers: If the governing party messes too much with health care, it typically gets clobbered in the next election. It started in 2010, when the ACA was enacted in March and the Democrats’ congressional delegations were sharply reduced in the November midterm election. Then, in 2017 and 2018, the Republicans tried to eliminate many health care protections — and they lost badly in the 2018 midterm. This is a cautionary tale for any politician who wants to tackle health care: Tinkering at the edges generally has been a much safer approach politically than wholesale change.

As of this writing, the path for Democratic control of the Senate is slim. However, final determination of Senate control will not be decided until the two Georgia runoff races in January. As such, this alert assumes the incoming Biden-Harris administration faces a divided Congress, with Republicans controlling the Senate and Democrats controlling the House.

With Sen. Mitch McConnell (R-KY) still running the Senate, the likelihood of significant legislative action on the health care front will depend almost entirely on how the Supreme Court rules in California v. Texas. If the Court does not strike down any significant portion of the ACA, Senate watchers predict that Sen. McConnell likely will be focused on thwarting President-elect Joe Biden’s judicial nominees and possibly his cabinet picks or other political appointments, as well as ensuring that the Senate fills its traditional role of being “the saucer that cools the tea” in the legislative process. Therefore, House Democrats and President-elect Biden would have limited legislative options on health care. Most changes therefore would come in the form of regulatory actions and executive orders.

In the immediate future, the outgoing Trump administration may seek to finalize health care-related rules that it favors before leaving office. If these rules are issued before January 20, 2021, they would have at least some staying power before the new administration could review and potentially reverse them (and such reversals could be subject to court challenges that might delay their implementation).

The incoming Biden administration is expected to take action to undo health policy regulations with which it disagrees. As an initial step, a newly inaugurated President Biden likely will issue a freeze on the promulgation of any pending or new regulations. Then, he likely would start shepherding his own regulatory priorities through the administrative process. These probably would include limitations on health plans that do not meet the ACA’s requirements, such as short-term plans that President Trump allowed; an expansion of the ACA’s enrollment period, outreach and advertising to get people enrolled; reversing Medicaid work requirements; and generally increasing the pace and volume of regulation above even pre-2017 levels, including reinstating some Obama-era rules.

On the other hand, if the Supreme Court does strike down all or a major part of the ACA, the picture could be very different later in 2021. In that scenario, many Americans might lose coverage, or lose legal protections that are popular with Democratic and Republican voters alike, and the entire health care system could even be in danger of spinning out. Depending on the final ruling and the ensuing disruption, Senate Republicans might be pushed to come to the negotiating table. What form the legislative action would take is hard to predict at this point — it would depend on the precise terms of the Supreme Court’s ruling, and how the health care market and public opinion reacted to it, as well as to the political judgments — and dynamics — of Congress and the president.

With respect to non-ACA-related health policy, there are a number of other issues of interest and priority to the incoming Biden administration.

Outlook for Other Health Care Issues

Although the upcoming Supreme Court decision and election result cast the longest shadows over the current health policy landscape, there still are a number of remaining health policy issues in the near term that do not depend as directly on those outcomes. For most of these issues, there is bipartisan support for addressing a problem, but often partisan disagreement about how to address it — leaving the ultimate outcome subject to political compromise and the legislative process.

First is the possibility of legislative action to address “surprise billing.” A bipartisan, bicameral compromise bill was crafted by the chairs and ranking members of the House Energy and Commerce Committee and the Senate Health, Education, Labor and Pensions Committee. However, an alternative proposal was proffered by the chair and ranking member of the House Ways and Means Committee and a third was put forward by the chair and ranking member of the House Education and Labor Committee. Some observers believe that a deal on this issue could emerge in the lame-duck session of Congress or during 2021.

Both parties also support changes to the Medicare Part D benefit, but again, there is some disagreement on the scope of what should be modified. There is consensus in favor of capping annual out-of-pocket expenses and smoothing out the seasonality of out-of-pocket spending. But there is disagreement about virtually everything else. Democrats want to allow the federal government to negotiate drug prices for both Part B and Part D, just as the Veterans’ Administration currently does. Republicans generally oppose that approach, arguing that it interferes with the free market. Narrow legislation to “cap and smooth” Part D out-of-pocket spending could see some action, more likely in 2021 than during the lame-duck session.

No matter the outcome of Senate control, there likely will be continued support for telehealth programs. Many of the current expansions of telehealth are associated with the federal declaration of a public health emergency, and the current declaration expires on January 21, 2021, the day after the presidential inauguration. It seems overwhelmingly likely that the emergency will be extended, either as one of the last actions of the Trump administration or as one of the first of the Biden administration.

There is bipartisan support for the CMMI and also bipartisan interest in reviewing and assessing its alternative payment models and determining how it should operate in the future. Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma and CMMI Director Brad Smith recently indicated that they feel many CMMI programs were not saving enough money and that mandatory models would be a significant component of the future model portfolio. If President Trump had won a second term, significant change would have been expected for the CMMI. The incoming Biden administration, by contrast, likely will take time to conduct its own review and evaluation of the CMMI before undertaking major change. It remains to be seen if the Biden administration will move forward with initiatives that have been announced but are not set to launch until after the inauguration, including the Direct Contracting model and the Community Health Access and Rural Transformation (CHART) model.

Under President-elect Biden, CMS likely will review the Medicare Advantage changes and flexibilities allowed under President Trump and potentially increase federal oversight of Medicare Advantage plans. Without a Senate majority, other changes to Medicare, such as lowering the eligibility age, are currently out of reach.

Conclusion

As this discussion has made clear, late 2020 and early 2021 mark a major inflection point for U.S. health care policy. While the range of directions in which things could go from here has somewhat narrowed due to the possibility of divided Congress, there are many health policy shifts that can be anticipated, particularly in the executive branch.

Whatever policy direction the future brings, however, one thing is certain: Developments in the next few months will result in a big wave of follow-on litigation in 2021 and beyond. Lawsuits against the Department of Health and Human Services (HHS) and CMS have already become the “new normal,” with the courts being asked to rule on issues ranging from site neutrality to transparency regulations to 340B cuts to Medicaid work requirements, and much more.

As is typical in this area, however, the kind of health care litigation that 2021 will bring depends largely on the Supreme Court’s upcoming decision and on the final outcome of the two runoff Senate races. The Faegre Drinker team of attorneys, and government relations and public policy professionals and lobbyists is here to help you navigate the legal, policy and political waters in the months ahead.

Written by:

Faegre Drinker Biddle & Reath LLP
Contact
more
less

Faegre Drinker Biddle & Reath LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.