Key Takeaways on the Ruling Declaring the Affordable Care Act Unconstitutional

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Avalere experts discuss the implications for a recent decision ruling the Affordable Care Act is Unconstitutional.
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“In terms of impact, that’s a question frankly worth about 16 of the US economy, because the ACA as it is touches every major commercial coverage market plus all of the public payer markets that are out there.” Chad Brooker


Chris Sloan , Principal, Policy

Chris Sloan advises a number of clients, including pharmaceutical manufacturers, health plans, providers, and patient groups on key policy issues facing the healthcare industry.

Chad Brooker , Associate Principal, Policy

Chad provides strategic advice to health plan, life sciences, and advocacy organizations on the complex legislative and regulatory policy environments at both the state and federal levels.

This interview was originally published as a podcast. The audio is no longer available, but you can read the transcript below. For updates on our newly released content, visit our Insight Subscription page.


Chris: Hello and welcome to a special “the legal challenges against the Affordable Care Act never end” Avalere podcast. We are holding this as a follow-up to the decision on Friday by a judge in the North District of Texas that the entire Affordable Care Act is unconstitutional.

My name is Chris Sloan, I’m a Director with our Federal and State Policy group here at Avalere. I’m joined by Chad Brooker, also a Director with our Federal and State Policy group, and former employee of the Connecticut Exchange, who is here to help us break down what happened in the ruling and implications for the market as a whole.

Chad: Hey, good to be here.

Chris: So Chad, can you just give a brief overview of what happened in the ruling?

Chad: Right so, I’m going to go very quick here. I think we need to go back a little bit to 2012 to understand this. This is part of the most recent challenges to the Affordable Care Act(ACA). In 2012 the supreme court ruled that the individual mandate that was part of the law was only legal as a tax. However, the most recent Tax Cuts and Jobs Act that just recently passed last year removed that tax by lowering it to 0. The most recent challenge effectively is saying now that the tax is 0 it is no longer a tax and that the law shouldn’t be able to stand by itself because the entire law is unconstitutional.

I think the real important takeaway here and we can get into impacts in a second is that this decision doesn’t really have any impact right now. Everything is going to stand as it is likely for some time but certainly it causes a lot of confusion in the marketplace and could cause some instability for the next couple years while we try to figure out what happens through this legal process.

Chris: Just to add a little bit of context here on the numbers we’re dealing with. The ACA in 2020 is projected to directly impact around 26 million people in the United States. We have around 8 million getting subsidies to purchase individual market coverage. Another 6 million purchasing individual market coverage without the subsidies and benefiting from the market rules like essential health benefits and pre-existing condition protections. We have another 12 million receiving coverage under Medicaid as part of the Medicaid expansion, all adding up to 26 million people.

In terms of financing, we’re looking at a lot of money here. CBO projects to be sending $63 billion in funding to states for Medicaid expansion in 2020, with another $61 billion to states for the individual market subsidies. That is $124 billion, money that states aren’t going to be able to paper over if this law goes away.

Chris: What is next? Where does this go from here?

Chad: Right so, in terms of impacts I mean that’s a question frankly worth about 1/6 of the US economy because the ACA as it is touches every major commercial coverage market plus all of the public payer markets that are out there. So, you’re have everything from larger group and individual market coverage all the way down to Medicare and Medicaid coverage. They’re all impacted by the ACA either directly or indirectly in some fashion. So this is going to have a potentially impact when we do see a final decision in this case but I think it’s always important to realize that this is the first step in a fairly long legal process. Everyone is speculating that we won’t see probably any real knowledge about what the culmination of this case is until at the earliest 2020 or 2021 so we are far away from knowing exactly what the impacts will be here but nonetheless they could be significant when we do figure them out.

In terms of next steps, we’ve already seen some of that just in the recent days. There certainly will be an appeal to the case. This is like I said just the first step. The first appeal will be to a higher federal court the 5th circuit court of appeals. The circuit will take up the case potentially within the next 6 months to a year. After that depending on how that court decides the next step either could be to a larger number of judges on the 5th circuit which is called an en banc ruling or directly to the Supreme Court. There is a little bit of an interplay as well because there is a companion case that is pending in the Maryland district court. The attorney general of Maryland filed suit against the Department of Justice for effectively failing to support the ACA and defend the ACA. And so, if the Maryland District Court actually sides with the state of Maryland and says the Department of Justice should have defended the ACA because the ACA is constitutional that could allow the case to move much quicker to the Supreme Court for consideration but even then I think in all likelihood we’re looking at no earlier than 2020 for this case going to the Supreme Court.

Chris: How is the Administration responding to this decision? How about the states?

Chad: Right so that’s an interesting question because it really does depend on where you’re looking. Certain states, I mean there’s 20 republican attorney generals in republican states that were parties to the suit that filed against the ACA. And on the other side you have 17 attorney generals from Democratic states that actually entered the case in June in order to defend the ACA when the Department of Justice decided it was only going to selectively defend the law. So you really do have a difference of opinion in a lot of states depending on whether that state is a blue state or a red states in terms of party leadership. On the federal landscape I think it’s also kind of an interesting point because you actually have the administration officials that are governing the ACA so CMS administrator Seema Verma and other officials from HHS coming and very clearly stating the ACA is the law of land and that this won’t impact anything this year or anything in 2019 frankly. They’re making it very clear that individuals should continue as they were, enrolling in plans, and making sure that they’re enrolled for 2019. Whereas on the other hand you have Donald Trump and certain members of Congress using this as an opportunity to reignite discussions over the future landscape of healthcare whether that be changing the ACA as we know it or potentially transitioning to different kinds of healthcare including potentially an increased focus on alternatives like a Medicare for All type approach with the Democrats now taking control of the House.

Chris: One other thing to note is that this takes down the entire ACA. So, we all spend a lot of time talking about Medicaid expansion and the market rules, but the law did a lot more than that. There are substantial changes in payment in Medicare Advantage, there was the coverage gap discount program in Medicare Part D, biosimilar approval pathways, Centers for Medicare & Medicaid Innovation (CMMI), and a host of other provisions, so the impacts are really quite dramatic if this ruling is upheld as it moves through the courts.

Chad: I think it really does depend on how quickly we move along the legal process here. I think ultimately the ACA will probably or the vast majority of the ACA will stand no matter what happens in this case. I think even on the most cautious of approaches, the only parts of the ACA that could at jeopardy and this is probably very limited. It could be some the commercial market reform changes, some of the guaranteed issues, and the medical underwriting changes which is what the doj has argued in its case. However, I think the chances that we even move to an actual decision on the legality of the ACA is fairly slim. I think there’s a number of reasons why this lawsuit could be thrown out even without getting to the underlying question of whether the ACA is constitutional or not. So, if I had to do a gut check assumption here I would say the ACA is likely not only here to stay but here to stay for some time because I don’t think the Supreme Court even wants to take up this case again frankly. But even if it was to take it up, I think the important thing to consider is all five of the original judges who supported the original mandate decision in 2012 still remain on the court including Justice Roberts who was the deciding voice in that one so assuming there isn’t a change in makeup of the Supreme Court over the next 2 years prior to when they’re likely to hear this. I think we’re likely to either not have the Supreme Court hear it at all of come to the same result as what we saw.

Chris: Well with that, we will wrap up yet another edition of Avalere’s “there was a court ruling on the ACA” never ending podcast series. As always, watch for more updates and analysis from Avalere on these developments and fell free to reach out with any questions. You are listening to Avalere podcasts.

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