How an Overturned Affordable Care Act Would Impact Payer Industry

September 29, 2020 - Since the passing of late Supreme Court Justice Ruth Bader Ginsburg, many have questioned whether the Affordable Care Act is at risk of being overturned, a potentiality that would be extremely disruptive for the payer industry.

“I think there are a lot of ways that the ACA can get upheld and there are many fewer ways that the court can rule that would be damaging to the ACA in terms of striking down operative provisions of the ACA,” Michael Kolber, partner at Manatt Health, told HealthPayerIntelligence.

Kolber noted that, thus far, the court has maintained traditional views on the subject of severability, which has led the court to strike down the individual mandate but not the entire law.

Joel Ario, managing director at Manatt Health, agreed with his colleague. He found it unlikely that the court would strike down the entirety of the Affordable Care Act, given the major disruption that this would cause in the healthcare system as a whole.

Payers have been closely watching this court case due to the impacts that it could have on health insurance, specifically.

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“The insurance industry would certainly find this very disruptive, which is why I am not aware of any of the carriers that are supporting this litigation,” Ario said in the same interview. “Really any of the stakeholders in the system that actually work in healthcare day-to-day, they—as far as can I tell—unanimously are hoping to not disrupt the ACA and that changes to the ACA should happen through a normal political process, not through the court process.”

There are numerous paths that the case could take toward its conclusion, which depend on the answers to a couple of key questions. Will the decision be a nine-justice decision or is there a possibility for a four-four, split decision? Will the court strike down part of the law and, if so, what part or parts?

In the event that the Supreme Court does decide to invalidate the entire Affordable Care Act, the impacts to the healthcare industry have the potential to be extremely disruptive, Ario and Kolber agreed.

The law would be struck down when the mandate issues, a matter of weeks after the opinion came out. However, that does not necessarily mean that every person reliant on the Affordable Care Act for coverage will instantly lose her health insurance.

“Health insurance is essentially guaranteed to renew as long as you pay your premium,” said Kolber. “The protections that were in the ACA are all incorporated into the health insurance policies that people have today. So people can keep renewing them certainly for the rest of the year, as long as they pay their premium.”

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That being said, the question remains whether individuals would be able to pay their premiums. If the Affordable Care Act falls, then the law’s federal subsidies would end shortly after the Supreme Court’s mandate, unless Congress were to intervene.

Thus, while states may continue to offer pre-existing conditions protections, the subsidies would be gone. There would then be a nonpayment grace period of about one to three months. If Congress still does not intervene, many Americans would be unable to afford the premium for healthcare coverage and they could lose their health insurance.

It would also strip away protections for those with pre-existing conditions, allowing insurers to deny coverage or raise rates based on health condition. This would have serious implications for the 45 percent of American families that have at least non-elderly one adult with a pre-existing condition.

“There are a large number of provisions in the ACA that work together to protect people with pre-existing conditions,” said Ario. “It would not be possible to restore protections for people with pre-existing conditions without getting into a much more complex piece of legislation than simply saying, ‘people with pre-existing conditions are protected again.’”

This would be a particularly disruptive time to overturn the law due to the coronavirus pandemic, which has already caused a great deal of churn in the health insurance space. Factors like the upcoming open enrollment period for the Affordable Care Act marketplaces, which starts nine days before the Supreme Court make sits decision, also weigh heavily.

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If the court does not overturn the law, there are a couple of different legal avenues that the court may take, including a decision upholding the law’s constitutionality or a decision that invalidates one or more parts of the law.

In the event that the court strikes down part of the law, Kolber said that the court likely will not need to send the decision back to the district court which originally declared the entire Affordable Care Act unconstitutional.

When the Fifth Circuit Court of Appeals found the individual mandate to be unconstitutional, it remanded the decision to the district court to decipher what the impacts of that decision would be.

However, Kolber noted that this was a strange outcome and he did not expect that the Supreme Court would pursue a similar strategy unless the justices foresaw potential impacts requiring further investigation.

One possible instance in which the case would return to the lower courts would entail an eight-justice decision and the court being split four-four. If that happened and the decision returned to the lower courts, then it could take a couple of years’ worth of more litigation before a final decision surfaced, Ario explained.

“At any point, Congress could amend the statute to make more clear what it meant. It could either add a small penalty to the mandate and thereby eliminate the constitutional issue, or they could repeal the mandate in its entirety,” Kolber noted.

If the Supreme Court decision was four-four and the legal process could be extended to a couple of years, then Congress might make such a move which would end the case.

Given the unlikelihood of an overturned Affordable Care Act, however, the messaging to current beneficiaries and potential enrollees continues to be the same as in previous Affordable Care Act legal showdowns: keep your healthcare coverage.

“The best way to protect yourself is to continue to keep your coverage in place now, and then sign up for coverage for next year,” said Ario. “If there's anybody who's going to be protected from disruption, it will be the people that took those actions.”