Lawsuit Challenging ACA

Courtesy of Modern Healthcare

Disappointed that the GOP-controlled Congress failed to repeal and replace the Affordable Care Act, red-state lawmakers continue to look for ways to take down the law. But many are finding that they must balance that goal with the need to shore up insurance exchanges and address persistent gaps in coverage.

Twenty state attorneys general filed a lawsuit last week challenging the ACA, adding another twist to a political drama that shows no sign of abating and will play a significant role in this year's midterm elections.

"It would be a decision to destabilize the markets," said George Horvath, health law scholar at the University of California at Berkeley law school. "It is not just the individual market, it is Medicaid expansion and insurance regulations."

Texas Attorney General Ken Paxton led the group of state attorneys general in the complaint filed in a north Texas federal court, where it will be heard by U.S. District Judge Reed O'Connor, who was appointed by President George W. Bush.

The attorneys general are using the recently enacted Tax Cuts and Jobs Act as the basis for challenging the ACA. Since the tax law zeroed-out the individual mandate penalty, they argue the mandate can no longer qualify as a tax. The U.S. Supreme Court upheld the ACA in 2012 as a tax penalty

Wendy Netter Epstein, professor of law and director of the Jaharis Health Law Institute at the DePaul University College of Law, said this argument may very well stand. However, she added, the case likely falls apart on a second point that the attorneys general are making, namely linking the entire ACA to the mandate. 

Timothy Jost, a health law scholar and ACA expert, said the fact the attorneys general want to repeal the entire law regardless of the impact shows a lack of understanding. "Does that mean the donut hole comes back for Medicare?" Jost said. "Do 12 million to 14 million people lose Medicaid coverage? Do 10 million people lose exchange coverage?"

Those broader implications aren't lost on providers. "Our concern is more practical—what happens when hundreds of thousands of marketplace enrollees would lose coverage?" said Dave Dillon, spokesman for the Missouri Hospital Association, whose state joined the plaintiffs in the suit. 

Missouri's hospitals said their uncompensated-care costs continue to rise despite the recent ACA coverage gains, Dillon said. 

And this is where the politics get sticky. On one hand, plaintiff states are suing to end the ACA. On the other hand, governors are publicly espousing the virtues of health coverage for their citizens.

GOP Gov. Rick Scott of Florida, whose state is also among the plaintiffs, wants an immediate "repeal and replace," his spokesperson said in response to a Modern Healthcare query about whether Scott supported the lawsuit or would prefer lesser changes to some ACA provisions, such as insurance regulations. 

However, Scott's "primary focus remains replacing Obamacare with a new healthcare policy that allows Florida families to have access to quality healthcare at an affordable price," said McKinley Lewis, Scott's deputy communications director.

Legal experts see the Trump administration's role as the wild card in the case. Epstein said it's unlikely that the administration will defend the law, even though HHS Secretary Alex Azar is named as a defendant, along with David Kautter, acting commissioner of the Internal Revenue Service. That could throw Democratic attorneys general in the mix as proxy defendants, especially given the precedence of their intervention in the lawsuit over ending cost-sharing reduction payments. 

Horvath noted that the financial implications for stakeholders could motivate private parties such as insurance companies to intervene. Epstein found that unlikely since many of the provisions that carriers would want to defend are gone. Yet the various scenarios and potential fallout of this case, even if the states lose, point to ongoing turmoil over the ACA. 

"We've all known all along the ACA wasn't the end of the process," Horvath said. "In so many ways it's the beginning of the process, and I don't see this radically ending any time soon."

By Susannah Luthi

Susannah Luthi covers health policy and politics in Congress for Modern Healthcare. Most recently, Luthi covered health reform and the Affordable Care Act exchanges for Inside Health Policy. She returned to journalism from a stint abroad exporting vanilla in Polynesia. She has a bachelor’s degree in Classics and journalism from Hillsdale College in Michigan and a master’s in professional writing from the University of Southern California.