The U.S. Court of Appeals for the Fifth Circuit could strike down the Affordable Care Act (ACA) as unconstitutional any moment. Several states are preparing for the impact.
In April 2018, Texas, 19 other states, and two individual plaintiffs filed a complaint in the U.S. District Court for the Northern District of Texas, arguing that the ACA, as amended by more recent legislation, is unconstitutional. They won—the district court held in Texas v. U.S. that the individual mandate is unconstitutional, and that the rest of the law cannot be severed from that provision, so it also must fall. The Fifth Circuit heard oral arguments in July of 2019 and may hand down a decision at any time. Rather than waiting for the possible results of that decision, many states are acting now to soften the blow.
As discussed below, if the district court’s decision is upheld and ACA is struck down, the effects likely would be widespread and dramatic. Nearly 20 million people with insurance under the ACA would be at risk of losing such coverage, markets would be disrupted, and popular consumer protections would be ineffective, including those for persons with preexisting conditions and coverage of dependent children up to age 26. As we have discussed in this space before, the sudden absence of some less-talked-about provisions of the ACA could have serious impacts on the authority behind innovative payment models, several of which have states as direct participants. In addition, billions of dollars in federal Medicaid funding would be removed from states’ budgets.
To address these possible outcomes, different states have taken steps like creating high-risk pools, enacting state-level individual mandates, and other approaches.
Some states may give subsidies to insurers that cover high-cost consumers. For example, Louisiana—a plaintiff state in Texas v. U.S.—recently passed an act directing the state’s insurance commissioner to set up a “high-risk pool,” akin to the devices that existed in states prior to the enactment of the ACA in 2010, where insurers would get subsidies for covering people with expensive medical conditions who cannot otherwise secure health insurance coverage. It also guarantees essential health benefits consistent with the ACA, continues coverage for dependent children, and prohibits exclusions based on preexisting conditions. A competing bill supported by the Governor would also have prohibited preexisting condition exclusions or other discrimination based on health status in state-regulated insurance plans. The recently passed Healthcare Coverage for Louisiana Protection Act only goes into effect if the ACA is repealed but the advanced premium tax credits (APTCs) authorized under the ACA remain intact.
Similarly, the Texas legislature passed an act this year that would establish a temporary high-risk pool as a stopgap to provide some coverage if the ACA is overturned at the same time that the state led the charge in this lawsuit. Democratic lawmakers in Texas have also weighed calling an emergency legislative session depending on when a decision comes down.
State-Level Individual Mandates
California lawmakers enacted a state-level insurance requirement and tax penalty, much like the individual mandate of the ACA, following the examples of Massachusetts, New Jersey, Vermont, and the District of Columbia. Unlike the federal mandate, which drew scrutiny under Congress’s limited powers under the Constitution’s commerce and taxation clauses, these state enactments have not been subject to similar challenges.
Colorado has taken a more comprehensive approach. In May 2019, the state enacted House Bill 19-1004, pursuant to which the Governor tasked the Colorado Division of Insurance and the state Medicaid agency with developing a proposal to the legislature for a “State Option” that will offer affordable health coverage to Coloradans. The plan is similar to a public option that would provide insurance to people on the individual market. The state would set the rates, which could help lower premium costs if the ACA ends.
In Nevada, the governor is developing a patient-protection commission make recommendations for protecting coverage if the ACA is eliminated, as outlined in a bill lawmakers passed last year. Several states, including Connecticut, Indiana, Maryland, New Hampshire, and Washington, have enacted laws that require insurers to provide coverage to people with pre-existing conditions.
If the Fifth Circuit upholds the district court’s decision in Texas v. U.S., the impacts likely will touch all facets of health care. With many of the ACA’s insurance and Medicaid reforms being implemented at the state level, state insurance markets and Medicaid programs may be hardest hit if the law is ultimately struck down. In that case, these recent proposals and enactments provide a possible preview of the patchwork of health care regulation that would remain.