August 17, 2018


In This Issue
Fast Facts
Suzanne Delbanco of CPR Joins NAHU’s Healthcare Happy Hour
Federal Court Schedules Arguments on ACA Constitutionality
Trump Administration Considering Another Rescissions Package
Senate Returns from Recess as Democrats Establish 2019 Healthcare Priorities
State Spotlight: Hawaii
Open Enrollment: Will States See the Silver Lining?
Did You Miss Yesterday’s Webinar on AHPs?
CMS Releases New Broker FAQs Ahead of 2019 Marketplace Enrollment
Register Now for the Catalyst for Payment Reform’s Virtual Event on Inappropriate Care
HUPAC Roundup
What We’re Reading
Tools
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Visit the NAHU Website
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Federal Court Schedules Arguments on ACA Constitutionality

The U.S. District Court for the Northern District of Texas announced that it would begin oral arguments on September 10 in the case Texas v. United States challenging the constitutionality of the ACA’s individual mandate in light of the December 2017 tax bill that zeroed out the individual mandate penalty. In June, the Trump Administration announced that the Justice Department would no longer defend the ACA’s individual mandate or consumer protection provisions on the basis that, with the individual mandate penalties zeroed out, the law’s consumer protections cannot stand without the enforcement of the mandate. Plaintiffs in the case, led by 20 Republican state attorneys general, are requesting a preliminary injunction to halt enforcement of the ACA. In the absence of the federal government’s defense, Democratic-led states have stepped up to defend the law in the case.

The ACA’s individual mandate was upheld as constitutional in the landmark 2012 Supreme Court case NFIB v. Sebelius on the basis that it complied with Congress’s authority to levy taxes. Republicans are arguing that based on this ruling, with the penalties zeroed out beginning in 2019, that there will no longer be a tax levied, and therefore, the mandate itself is not constitutional and therefore the law’s guaranteed issue and community rating provisions are likewise invalid because the mandate cannot alone be removed from the rest of the ACA. The Trump Administration has slightly differed from this rationale, arguing instead that non-relevant provisions of the ACA, such as Medicaid expansion, should remain in effect if the mandate and consumer protections are found to be unconstitutional.

The administration cites both the NFIB case and the landmark 2015 Supreme Court case King v. Burwell, which noted that the law’s consumer protection provisions of guaranteed issue and community rating are interdependent of the individual mandate and that if the zeroed out mandate is deemed unconstitutional that these linked provisions should likewise be struck. The courts would need to weigh these arguments against the Congressional intent of zeroing out the penalties, which were clearly stated through last year’s tax reform negotiations to not alter Title I of the ACA, which provide for the consumer protections and prohibitions on preexisting conditions.

A ruling by the courts siding with the plaintiffs that the mandate no longer functions as a tax could threaten the very foundation that the law is built upon. Defending the law is a group of 17 Democratic- state attorneys general that have standing in the case and filed a brief supporting the mandate’s constitutionality and severability from the ACA should the court strike down the mandate. The Democratic states argue that the zeroing out of the penalty is akin to a suspension of the myriad of other ACA taxes, such as the Cadillac Tax and health insurance tax, and that it is not repealed but merely not currently generating revenue—a condition which is not required under the Constitution to still be considered a tax. However, they note that if the zeroed-out mandate is deemed unconstitutional, that the courts could simply reverse the Tax Reform act’s provision that zeroed out the penalty and restore the penalty amounts to those under statute of the greater of $695 or 2.5% of income.

The lower courts have already pointed out that it is unlikely that the District Court will enjoin, or not enforce, the ACA while this case makes its way through the court system. The court realizes that harm to the market and disruption to millions of health insurance consumers by enjoining the law would far outweigh any benefit to the plaintiffs for doing so. As such, until any future court decision, the ACA will continue to be enforced along with the zeroing out of the individual mandate penalty included in last year’s tax reform bill. With oral arguments beginning on September 10, it is unlikely that there will be a decision made before the 2019 plan year begins. As always, NAHU will provide updates as this case makes its way through the court system in order to keep you and your client’s in compliance with the latest interpretation of the law.

In other health reform court news, there were two developments this week in lawsuits involving the ACA’s risk adjustment program. New Mexico, which has been the center of a legal challenge that prompted CMS to suspend payments for the risk-adjustment program, is asking a federal judge to overturn the new risk adjustment rule due to failure to adhere to the Administrative Procedure Act’s requirement for public input. CMS reinstated the payments along with issuing an interim final rule in July in response to the February ruling in favor of New Mexico Health Connections that the risk adjustment program be budget neutral.

A separate case on the risk adjustment program was dismissed in New York this week after a federal judge ruled that the ACA does not preempt the state’s risk adjustment rules. New York issued a rule last year that allows that state to decide if federally required payments would adversely impact the state’s insurance market, in which case, insurers could be forced to pay as much as 30% of what they received for the small group market into a state-administered fund and transferred to other insurers. The federal court cited the states as having the primary regulatory authority over their markets in the reason for dismissing the lawsuit.
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