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SCOTUS Decision to Review ACA Case Could Undermine Coverage and Access

Summary

On March 2, the Supreme Court (SCOTUS) announced that it will review an appeal of the 5th Circuit Court of Appeal’s decision in Texas v. Azar regarding the legality of the Affordable Care Act’s (ACA’s) individual mandate and other provisions.

Based on the current timeline, a final ruling is expected by June 2021. The Court’s decision has the potential to dramatically alter the healthcare landscape and affect a full spectrum of stakeholders including payers, providers, states, and patients.

Background

In 2018, a Texas-led coalition of Republican attorneys general filed a federal suit claiming that the ACA is unconstitutional. Their claim rests on the effective “elimination” of the individual mandate tax penalty in the Tax Cuts and Jobs Act of 2017, when Congress reduced the penalty to $0. The Republican attorneys general argue that this action nullifies the rationale from the previous 2012 ruling, which upheld the ACA’s individual mandate under Congress’s power to tax. The attorneys general assert that if the mandate is unconstitutional then the rest of the ACA is also unconstitutional and not severable (allowed to stand separate from the mandate), noting that Congress would have refused to originally pass the ACA without a mandate.

Most recently, in December 2019, the 5th Circuit upheld a lower court’s ruling in the case that had declared the individual mandate unconstitutional. The 5th Circuit did not rule on the severability question, however, and asked the lower court to consider what sections of the ACA could remain in force. The 5th Circuit decision was then appealed to SCOTUS. While SCOTUS denied a motion to expedite the case for consideration this spring, they agreed to consider the case in their October 2020 term.

Possible Impacts

A SCOTUS review once again raises the issue of the constitutionality of the ACA’s coverage and access reforms. Since the ACA was signed into law, SCOTUS has reviewed several challenges to the constitutionality of the ACA or parts of the ACA, including of the Medicaid expansion, individual mandate, contraceptive mandates, premium tax credits through Healthcare.gov, and the failure to pay risk corridor payments. It is not clear how the Court will rule or whether they will even address the severability issues in the case. Legal experts generally expect that the chances of SCOTUS invalidating all or part of the ACA are very low. However, it is important to consider that the ACA included several key coverage and access provisions that could be impacted by the ruling, including:

  • Insurance market reforms (guaranteed issue and preexisting condition exclusions, lifetime and annual coverage limits, underwriting limitations, medical loss ratio standards, essential health benefits, preventive services coverage requirement, formulary and care access requirements, expansion of mental health parity requirements, and ability to stay on parents’ insurance to age 26)
  • Support to lower insurance and out-of-pocket costs (premium tax credits, annual cost-sharing limits, cost-sharing reduction plans, and price transparency requirements)
  • Medicaid expansion with enhanced match
  • Center for Medicare and Medicaid Innovation
  • Drug-related provisions (including changes to Medicaid drug rebates, biosimilars, 340B, and Part D coverage gap provisions)
  • Provider payment and delivery reforms (Medicare Shared Savings Program, hospital acquired condition penalties, readmissions penalties, and changes to Medicare provider rates)
  • Medicare Advantage plan payment reforms

Next Steps

Although a SCOTUS decision is not imminent, stakeholders should consider the possible outcomes and prepare to mitigate any potential impacts. In particular, SCOTUS’s decision to hear the case may expedite state-level efforts to codify provisions of the ACA in state law and regulations (e.g., guaranteed issue and renewability, formulary access provisions, essential health benefits, coverage of preventive services, cost-sharing protections).

Avalere has been engaging with a range of providers, payers, suppliers, manufacturers, pharmacy benefit managements, and patient groups to consider the impacts of an ACA ruling and other state/federal policy changes on their product portfolios and longer-term initiatives. These engagements include:

  • Internal strategy planning
  • State regulatory and statutory landscape assessments to explore how certain ACA coverage and access reforms have been integrated into state requirements
  • Exploring how selective severability decisions could impact access to care, reimbursement, patient affordability, delivery systems, and coverage
  • Policy development and education strategies to inform advocacy initiatives at the state and federal levels
  • Modeling of the impacts to specific drugs or therapeutic areas, providers or types of providers, or enrollment under various possible SCOTUS decision

To learn more about the potential consequences of SCOTUS’s pending decision and about how we can inform your advocacy efforts around federal or state responses, connect with us.

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