Recent activity in Washington underscores extreme differences of opinion about the future of the Affordable Care Act. On March 25, the Department of Justice (DOJ) urged a federal court to strike down the Affordable Care Act in entirety. The next day, the Democratic leadership in the U.S. House of Representatives unveiled new legislation designed to expand the Affordable Care Act and to remove some of the changes made by the Trump Administration.

The Department of Justice’s Position on the Affordable Care Act

Last December, hours before the end of the 2019 open enrollment season for coverage on the Affordable Care Act’s federal Marketplace, a district court judge in Texas ruled that the law’s individual mandate is unconstitutional and, therefore, the entire law is invalid. However, that decision did not take effect and the matter is now on appeal in the Fifth Circuit Court of Appeals. For more information on the background of this case, see Segal's December 18, 2018 hot topic.

In its briefs filed in the district court, the DOJ agreed with the state attorneys general from Republican states (and the lower court) that the Affordable Care Act’s individual mandate was unconstitutional. However, the DOJ initially took the position that only provisions in the Affordable Care Act that are closely linked to the mandate had to be struck down.* Under this previous view, the employer shared responsibility provisions, Medicaid expansion and various insurance mandates are separate and would not be struck down merely because the individual mandate penalty was removed.

The new DOJ position is entirely in accord with the position of the attorneys general from Republican states and the lower court: the entire Affordable Care Act must be invalidated if the individual mandate is declared unconstitutional. The change by the DOJ is important because it signals that the Trump Administration will not defend any aspect of the Affordable Care Act in the case.

Many legal experts predict the overbroad decision of the district court will be overturned by the Fifth Circuit. Others think the issue of whether the Affordable Care Act is constitutional will return to the U.S. Supreme Court once again.

It will be several months before a decision is handed down by the Fifth Circuit. The litigants are still filing briefs with the court, which will not render its decision until after oral arguments are held.

The New House Bill

The House bill introduced by Democratic leadership would:

• Expand premium assistance tax credits** to all people (regardless of household income) and increase the amount of subsidies available to all who qualify for them;
• Address the “glitch” in the law that keeps an employee’s family members from getting a premium assistance tax credit if the cost of employee-only coverage is considered “affordable”;
• Create a federally funded reinsurance program to help insurers in the individual market with high-cost claimants;
• Prohibit the Departments of Labor, Treasury, and Health and Human Services (HHS) from implementing recent rulemakings on short-term limited duration insurance and Association Health Plans***;
• Require HHS to fund the federal Marketplace outreach and the navigator program that assists people trying to enroll in Marketplace plans;
• Prohibit HHS from allowing states to relax Affordable Care Act rules by using the Administration’s state waiver rules;
• Provide federal funding to states that initially declined to set up their own Exchanges but would like to do so now.

While this bill (or parts of it) are likely to pass the House of Representatives, its prospects in the U.S. Senate are less clear.

No Immediate Implications for Plan Sponsors

Plan sponsors are not required to take any action now. The case will continue in the courts for some time and Congress is far from enacting legislation affecting the Affordable Care Act.

Segal will provide updates as needed.

^{* Those provisions concerned guaranteed issue, community rating and the limitations on preexisting conditions, among others.}

^{** As a reminder, individuals who purchase coverage through the federal Marketplace or a state Exchange are eligible for a premium assistance tax credit (also known as a “subsidy”) if their household income is least 100 percent of the federal poverty line for their family size, but is not more than 400 percent of the federal poverty line. In general, a person who is eligible for employment-based health coverage will not qualify for the premium assistance tax credit, unless the group coverage is unaffordable or does not meet the 60 percent minimum value test. A plan meets the 60 percent minimum value test if it is expected to pay, on average, at least 60 percent of claims costs and provides substantial coverage of inpatient hospital services and physician services.}

^{*** An Association Health Plan is a type of Multiple Employer Welfare Arrangement.}