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Looming Legal and Political Fights over Preexisting Condition Protections

The Affordable Care Act (ACA) escaped repeal last year, though Republicans have subsequently taken a number of steps to undermine the law. These actions have certainly wounded the ACA, but not struck at the heart of its benefits or protections. Now, however, a seemingly convoluted legal case bolstered by the Trump administration threatens to do what these legislative and administrative actions could not.

Image: Thinkstock/designer491

The case was originally filed by a number of Republican state attorneys general. Their legal argument goes like this:

In 2012, the US Supreme Court upheld the ACA’s individual mandate, based on the argument that it was enforced by a tax penalty and that the federal government has the constitutional power to tax.

Late last year, Congress repealed the individual mandate as part of a massive tax bill, or so it may have seemed to the casual observer. What Congress technically did was leave the individual mandate in place, but set the tax penalty for not maintaining health coverage to zero. (Congress likely took this tortured legislative approach because it was using the budget process to pass the tax bill, and that process has certain procedural restrictions.)

The plaintiffs argue that with a zero tax penalty, the individual mandate is no longer constitutional and should be thrown out. They further argue that the rest of the ACA is not legally severable from the individual mandate, so the entire law should be invalidated.

In a surprising move, the Trump administration is not defending the ACA in court, as would typically be the case when a federal law is challenged. Rather, the Justice Department is largely siding with the plaintiffs.

The Trump administration is, however, making a somewhat narrower legal argument. Instead of arguing that the entire ACA should be overturned, it is instead suggesting only that the law’s protections for people with preexisting conditions be nullified. These protections revolve around guaranteed access to insurance regardless of one’s health and community rating, which requires that insurers charge the same premium to healthy and sick people.

The counterargument, which is being made by a group of Democratic state attorneys general who have intervened in the case, is that Congress voted explicitly to eliminate the individual mandate while keeping the rest of the ACA intact, so Congressional intent is clear.

If the Trump administration’s argument prevails—and, to be sure, a number of legal scholars don’t believe it should—it would truly strike at the heart of the ACA in a way that previous actions have not:

  • The administration has reduced federal outreach by 90% and grants to community-based navigator organizations by 41%. This likely resulted in somewhat reduced enrollment, but 8 million people still signed up for marketplace coverage this year, down only slightly from 12.2 million last year.

  • Last fall the administration terminated payments to insurance companies to compensate them for the ACA requirement that they offer reduced patient cost-sharing to lower-income marketplace enrollees. Rather than the death blow to the ACA that President Trump predicted, insurers raised premiums to compensate, and most did so in such a way as to generally hold enrollees harmless, as federal premium subsidies rose in tandem with the premium hikes.

  • The administration is also calling for an expansion of more loosely regulated short-term and association health plans. This will create a parallel insurance market that can siphon healthier enrollees, leaving the regulated market with a sicker pool and higher premiums. Still, even though regulated insurance plans will get more expensive, they will still be available for people with preexisting conditions and cover benefits like mental health, substance use treatment, and maternity care that the less-regulated plans can and likely would exclude. Also, federal premium subsidies rise dollar for dollar with higher premiums, protecting lower-income people who qualify for them.

  • Repeal of the individual mandate penalty—which takes effect in 2019—will similarly result in fewer healthy people buying insurance and in higher premiums.

  • New flexibility allowed by the Trump administration has enabled a number of states to impose work requirements as a condition for Medicaid eligibility. This will likely result in fewer people qualifying for Medicaid, but the ACA’s Medicaid eligibility expansion still remains in place.

This lawsuit is different. If the Trump administration is successful in court, there would no longer be a guarantee that people with preexisting conditions could get insurance on their own. It would be up to each individual state whether to restore that protection. The ACA’s Medicaid expansion would remain intact, but a main pillar of the law would crumble.

The Kaiser Family Foundation (KFF) estimates that 27% of adults, 52 million people, have a preexisting condition that would have led to a denial of coverage in the individual insurance market before the ACA went into effect. (Employer plans were required to guarantee access to insurance even before the ACA, but could exclude coverage of preexisting conditions for a period of time for people who had not been continuously insured, so the lawsuit could affect access to employer-based insurance as well.)

Protections for preexisting conditions resonate with the public, both personally and politically. In the debate last year over repealing and replacing the ACA, people with preexisting conditions and their families showed up at Congressional town hall meetings to protest. In KFF polling at the time, 70% of people (including 59% of Republicans) said the federal government should continue to prohibit insurers from charging people with preexisting conditions higher premiums.

This is all happening in an election year with many hotly-contested Congressional races. Many Democratic candidates are trying to use Republican efforts last year to repeal the ACA to motivate voters. The Republican repeal effort was quite unpopular, but it was also unsuccessful. With this lawsuit, the Trump administration is giving Democratic candidates new material to attack Republicans on an issue where they are vulnerable.

About the author: Larry Levitt, MPP, is Senior Vice President for Special Initiatives at the Kaiser Family Foundation and Senior Advisor to the President of the Foundation. Among other duties, he is Co-Executive Director of the Kaiser Initiative on Health Reform and Private Insurance. (Image: Ted Grudzinski/AMA)
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