Focus on High Court Seat Fuels Uncertainty for Employer Health Plans

The fate of the Affordable Care Act (ACA) is again in the spotlight with Republican senators lining up to support President Trump’s nominee for the Supreme Court just weeks before the court is set to hear arguments on the law’s future. Legal experts had been confident that a court with Justice Ruth Bader Ginsburg would uphold the law, but her passing now makes the outlook more uncertain.

Senate Majority Leader Mitch McConnell (R-KY) intends to begin and possibly complete the nomination process for President Trump’s pick before the Nov. 3 elections. Two Republican senators have asked the party to hold off on a vote until after the election, but with a 53-seat majority, McConnell has apparently clinched the votes needed to move forward immediately. The nomination process is expected to kick into full gear next week after several days of honoring Justice Ginsburg.

It remains to be seen whether a vote would be possible before Election Day. If so, the new justice could join the court in time to hear oral arguments in the case of California v. Texas set to begin just a week later on Nov. 10. The case arose shortly after Congress failed to repeal and replace the ACA, but enacted 2017 tax reforms that cut the individual mandate penalty to $0 starting in 2019. Texas and other Republican-led states and two private citizens sued, arguing the individual mandate is unconstitutional if it no longer imposes any tax, and further argued that because the individual mandate is integral to the ACA, if it’s unconstitutional then the entire law must fall. The Supreme Court had upheld the constitutionality of the ACA's individual mandate in 2012 based on Congress’ power to tax.

If the court proceeds with a new conservative-leaning justice on the bench, the justices could potentially issue a 5-4 or 6-3 ruling that invalidates the entire law, though many legal and health policy experts think that is unlikely given the severe disruption to the healthcare system such a ruling would create. A more likely decision from the newly constituted nine-member court, experts say, is a ruling that strikes down just the individual mandate, or the individual mandate along with certain consumer protections in the law — most notably guaranteed issue requirements, community rating standards (which prohibit carriers charging more to people with adverse medical history) and protections for people with preexisting conditions — that are closely tied to the law’s original mandate to obtain coverage.

It is not at all clear, however, that a new justice will be confirmed in time to hear oral arguments in the case, and justices typically don’t cast a vote in cases where they don’t hear arguments. The court’s current eight justices could choose to delay oral arguments in the case until the new justice is seated. But more likely, the court will stick to the current schedule and hear and decide the case before a new justice can weigh in. In that case, it’s possible that the court's three Democratic-appointed justices and Republican-appointed Chief Justice Roberts (who has twice voted with the liberal wing to save the law) would vote to uphold the ACA, while its other four Republican-appointed justices would vote to strike down some or all parts of the law, resulting in a tie. A tie would leave in place the 5th US Circuit Court of Appeals decision striking down the individual mandate.

However, that appeals court did not render an opinion on whether some or all of the ACA should also fall, meaning that the case could potentially return to the US District Court for Northern Texas for assessment of unanswered “severability” questions, which would essentially restart the lawsuit. It is also possible that if the Supreme Court rules that the individual mandate is unconstitutional, or ties on the issue, the court could nevertheless be prescriptive in detailing which other ACA provisions, if any, must also fall, instead of leaving that important analysis to the Texas district court.  

A ruling on the case isn’t expected until next spring or early summer. Should the Supreme Court change the law or extend the legal fight, that would almost certainly put pressure on the next Congress and President to act. A longer shot scenario is a new Congress preempting a ruling unfavorable to the ACA, and proactively preserving some or all of the consumer protections highlighted above, such as the ban on preexisting condition exclusions. Similarly, a new Congress and administration could enact legislation that reinstates an individual mandate penalty, presumably making the entire case moot.

Employers will be wise to give some thought to how they might react to different outcomes. For example, if some common provisions eliminated by the ACA like annual/lifetime dollar limits on essential health benefits, ending dependent coverage at age 19/23, or the previously mentioned preexisting condition exclusions were permitted again, would an employer reshape their plan design to curb costs? If the employer ‘play-or-pay’ mandate (the 30-hour rule) were struck down, would an employer move full-time eligibility back to 40 hours? There is much to consider with these possible ACA changes, and what might come from the policy platforms in a Trump or Biden presidency.

What comes next year will truly depend on the outcome of the November elections. And we’ll examine more of the potential scenarios in an upcoming post. But health policy is very much in limbo, and if trying to predict the Supreme Court’s path forward, the election, and potential Congressional action, there are certainly no sure bets.

As for this year, the nomination fight means that serious talks on COVID-19 relief legislation, already on life support, will most likely be delayed until the lame-duck session. The substance and tenor of those negotiations will also depend on election results but will likely touch on a number of employer priorities including additional financial support for employer COVID-19 testing, eased restrictions on cafeteria plans and flexible spending arrangements (FSAs), and reinsurance for certain COVID-19 costs. Potential new mandates for health plans are also in the mix, including a requirement that plans cover items and services related to COVID-19 treatment without any cost sharing. A short-term spending bill passed by Congress this week will keep the government funded through Dec. 11 — the battle over extending funding into 2021 and what might catch a ride on that measure will provide a fitting end to the turbulent politics of 2020. 

Geoff Manville
by Geoff Manville

Partner, Mercer’s Law & Policy Group

Wade Symons
by Wade Symons

Leader, Regulatory Resource Group, Mercer

Dorian Z. Smith
by Dorian Z. Smith

Partner, Mercer’s Law & Policy Group

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