Late Thursday, the department said the health law’s requirement that most Americans carry insurance will become unconstitutional next year and so will consumer protections forbidding insurers to deny coverage to sick customers or charge them more.
The administration’s legal stance injects profound uncertainty into the political debate and the health-care landscape at a critical moment, just as insurance companies are developing rates for the coming year and as candidates head into a summer campaign season that both parties will try to use to solidify a foothold for their agendas.
The fresh potential that the courts could deliver a significant blow to the ACA arises after a years-long perseverance by Republicans to repeal much of the sprawling 2010 statute ended in failure a year ago, leading GOP attorneys general, governors and the Trump administration to turn to the courts and administrative actions to undermine the law.
Republicans on Capitol Hill had no advance warning that the administration was going to assert that protections for people with preexisting conditions is unconstitutional — a position that defies President Trump’s promises to maintain those protections.
Most Republicans on Friday insisted they continued to support coverage for people with preexisting conditions, such as high blood pressure, diabetes and cancer. The policy, unlike some elements of the Affordable Care Act, has widespread support, affecting approximately 52 million Americans under the age of 65, according to a 2016 analysis by the Kaiser Family Foundation.
Several Republicans expressed bewilderment at the notion that this protection could be declared unconstitutional or overturned. “I certainly do not believe the provision on preexisting conditions is unconstitutional. I don’t even understand what the legal argument would be,” said Rep. Leonard Lance (R-N.J.), one of the most endangered Republican incumbents in the midterms.
“I have always favored coverage for preexisting conditions and will continue to do so,” Lance said, adding he would urge the administration to back off their new legal stance.
But Democrats were already pouncing. “I’m astounded, and it’s not only recklessness on lots of scores in terms of the legal reasoning,” said Rep. Gerald E. Connolly (D-Va.). “But it’s also political malpractice because you’ve handed us an issue we will ride into the sunset.”
Senate Minority Leader Charles E. Schumer (D-N.Y.) released a letter with other top Democratic senators demanding the administration reverse the move, while the Democratic Senatorial Campaign Committee wasted no time blasting out news releases questioning whether Republican candidates agreed with the administration.
Privately, some Republicans involved with midterm races expressed frustration at the move.
“I don’t understand why the White House would do this, and no one is communicating how they want people to navigate this issue,” said one Republican strategist working on Senate races, who demanded anonymity to speak freely. “Preexisting conditions is something everyone agreed we should keep. Picking this fight going into the summer of an election year is mind-boggling.”
In many ways, the political fight over health care during the midterms had started before Thursday night, with Democrats already accusing Republicans of trying to snatch health coverage from American consumers. Republicans, in turn, were focused on calls by liberals such as Sen. Bernard Sanders (I-Vt.) to establish a single-payer health-care system, suggesting that would become the Democrats’ agenda if they were to regain power.
Insurers are now in the midst of deciding whether to participate in the individual marketplaces created under the law in 2019 and, if so, what filing rates with state regulators will be. A central rule of ACA health plans is that they must welcome all customers, healthy and sick, and not charge higher premiums to those with preexisting conditions. The possibility that a Texas judge could, at the administration’s urging, wipe out this rule — with an inevitable appeal to higher courts — introduces a new source of instability that insurers detest.
America’s Health Insurance Plans, the main trade group for the industry, immediately denounced this prospect. “Removing those provisions will result in renewed uncertainty in the individual market, create a patchwork of requirements in the states, cause rates to go even higher for older Americans and sicker patients, and make it challenging to introduce products and rates for 2019,” Matt Eyles, AHIP’s president and CEO, said Friday in a statement.
Eyles said that AHIP plans to file a brief in the case laying out “more detail about the harm that would come to millions of Americans if the request to invalidate the ACA is granted.”
According to health-policy experts, a court ruling in favor of the suing GOP states and the administration would trigger what one called “immediate chaos” in the law’s insurance marketplaces created under the law.
The 2010 law, passed by a Democratic Congress and a signature domestic accomplishment of President Barack Obama, created insurance “exchanges” in every state to sell federally subsidized coverage to individuals who do not have access to affordable health benefits through a job. These marketplaces have had their troubles — with many commercial insurers defecting and prices spiking — but their basic contours have remained intact.
That would immediately change if Judge Reed O’Connor of the U.S. District Court for the Northern District of Texas agrees with the Justice Department argument that the mandates including protections for people with preexisting conditions will become unconstitutional in January, when new tax rules end existing penalties for people who flout the law’s requirement to carry health insurance.
If the judge agrees, “insurers would want to discontinue” health plans that treat healthy and sick customers the same, predicted Larry Levitt, a senior vice president at the Kaiser Family Foundation. This could be tricky, because the ACA’s rules allow health plans to enter or leave a marketplace once a year, in January, which is the only time that rates can change. But the Department of Health and Human Services could, in theory, create exceptions to those rules or rewrite them in way that could upend coverage for some consumers midyear, Levitt said.
In addition, Levitt said, a court ruling that struck down the preexisting conditions protections could cause premium subsidies that the vast majority of ACA customers receive to come unglued. The subsidies for each region within a state are based on a “community rating,” which, in turn, takes into account the cost of covering healthy and sick customers. While the subsidies would not go away, it is unclear how their amount would be determined if insurers could return to the days before the law of charging higher prices to people with previous medical conditions — or refusing to cover them at all.
“This lawsuit is less about altering the law and more about blowing it up,” Levitt said.
Several Republicans said Friday that if the administration did prevail, it would be their responsibility to step in and restore protections for people with preexisting conditions. Yet how they would do so was far from clear, especially given Congress’s inability so far under the administration to pass health-care legislation.
The president last fall ended “cost-sharing reduction payments” to insurers that offset discounts that the law promises to lower-income customers in the out-of-pocket costs for ACA health plans. Health officials halved the sign-up period to buy ACA health plans, cutting from $100 million to $10 million an advertising budget to help encourage consumers to sign up, and slashed funds for grass-roots organizations that helped people enroll.
More recently, the administration is in the midst of rewriting federal rules to make it easier for people to buy two types of insurance that are relatively inexpensive because they bypass the ACA’s requirements for benefits that health plans sold to individuals and small business must include.