SPECIAL – Implications of Supreme Court Case: Texas v. California

How the outcome of Texas v. California could affect the U.S. health care system and how Amy Coney Barrett’s confirmation could change previous outlooks.

After fast-tracking the confirmation process, the U.S. Senate confirmed Judge Amy Coney Barrett to the Supreme Court across party lines. (Republican Senator Susan Collins of Maine voted with Democrats in opposition.) Barrett’s placement on SCOTUS has far-reaching implications on a number of issues, such as abortion, gun access, protections against discrimination—and most pressingly, health care.

The Supreme Court will hear a case on November 10 regarding the Affordable Care Act and its constitutionality. Outlooks before Barrett’s confirmation were already glum. Expectations of a 4-4 split would validate a lower court ruling that the ACA’s individual mandate is unconstitutional. But with her confirmation, speculation on the outcome is less uniform.

The intricacies of this case, as well as comments Barrett made during her confirmation hearings, does offer some additional things to consider. So in anticipation of this case, let’s walk through the case, the impacts of invalidating the ACA, and three “what abouts.”

The Case before the Supreme Court

The latest case, Texas v. California, is just one in a string of court challenges to the ACA since its passage in 2010. Still, this one looks more likely to carry out opponents’ mission due to its focus and some underlying conditions.

To understand those conditions, we need to first rewind to a 2012 case, National Federation of Independent Business v. Sebelius, in which a 5-4 Supreme Court decision preserved the ACA’s individual mandate. Challengers argued the mandate, which required every American to purchase health insurance, was unconstitutional. However, Chief Justice John Roberts, siding with the four liberal justices, agreed with the defense that the individual mandate was basically a tax—making it within Congress’ purview.

This specification by Roberts is key. In 2017, Republicans in Congress (along with their more direct attempts at repealing the ACA through legislation) included a provision in their 2017 tax cuts that lowered the individual mandate’s penalty to $0.

Then, a group of Republican state attorneys general, led by Texas’, argued that the absence of this tax meant the individual mandate was now unconstitutional. (This case was Texas v. United States.) Here’s how health care advocacy and research organization Kaiser Family Foundation explains what happened next:

In December 2019, the U.S. Court of Appeals for the 5th Circuit affirmed the trial court’s decision that the individual mandate is no longer constitutional because the associated financial penalty no longer “produces at least some revenue” for the federal government. But, instead of deciding whether the rest of the ACA must be struck down, the 5th Circuit sent the case back to the trial court for additional analysis. However, the Supreme Court has now agreed to review the case.

In other words, a federal court agreed with the GOP AGs but said there were some outstanding details about whether or not this invalidated the entire ACA. Some other developments followed, namely a separate case, House of Representatives v. Texas, and the addition of a separate group of AGs led by California’s. But eventually the Supreme Court decided to consolidate these into one case: Texas v. California.

With Texas v. California, the Supreme Court will consider a few questions, namely whether or not the lower court ruling on the individual mandate holds up and whether or not this makes the entire ACA unconstitutional.

I should point out here that there’s some significant criticism of the argument presented in Texas v. California—including from conservative legal experts and policy analysts. Still, here we are.

Impacts of Invalidating the ACA

Objectively speaking, the Affordable Care Act has become an integral part of the U.S. health care system. Erasing it without something in its place will be catastrophic. Here are the biggest potential impacts, according to the Urban Institute, the Center for Budget and Public Policy, the Kaiser Family Foundation, and think tank Center for American Progress:

  • Right off the top, loss of health insurance for roughly 20 million people. This would particularly affect states that saw the biggest increases in insurance rates following the ACA’s passage, like Arkansas, Louisiana, Pennsylvania, and West Virginia. (Those are states that expanded Medicaid through the ACA.) Still, we’re talking significant loss of coverage across the 50 states since the health insurance tax credit many need to afford coverage will no longer exist. That also includes those who are covered through their jobs.
  • Loss of coverage for an additional 3 million if the ACA is eliminated during the pandemic. The initial 20 million estimate was calculated before the pandemic, when unemployment was much lower and fewer out-of-work Americans needed the ACA’s tax credit to afford coverage.
  • Spikes in health care costs and discrimination for those with preexisting conditions. The ACA instituted several new protections for those with preexisting conditions regarding health coverage. Without it, those protections would also vanish and providers could raise costs or even deny coverage based on those conditions. (Keep in mind, “preexisting condition” now includes the long-term health impacts of COVID-19.)
  • Elimination of requirements to cover preventative care—like vaccines.
  • Spikes in prescription drug costs for some elderly individuals.
  • Loss of funding for (and maybe existence of) the Indian Health Service. As KFF put it, “Among other little-known features of the ACA is a provision that permanently authorized the U.S. Indian Health Service, which provides health coverage for more than 2.5 million American Indians and Alaska Natives. An overturn of the law could leave in doubt the legality of some of the program’s operations.”
  • A financial crisis for providers and hospitals that could endanger the general U.S. economy. This might be a bit technical, but stick with me here. With the ACA gone and millions of people losing coverage, that’s also a huge loss of revenue for providers. Moreover, a reversal of the state-by-state Medicaid expansion would erase billions of dollars of revenue for the hospitals administering care—potentially as high as $1.3 trillion over ten years. Additionally, this would lead to an increase in uncompensated care (since fewer people would have coverage), potentially doubling over ten years. All of this could spell doom for the entire health care system, an industry of huge consequence in our economy.

The ACA is not the necessary panacea to our mess; many are still uninsured or underinsured and hospitals still operate with razor-thin budgets. But the very idea of erasing it—during a global health and economic crisis—is infuriatingly irresponsible.

Three ‘What Abouts’ to Consider

This brings us back to Texas v. California itself. As mentioned earlier, there are some additional things to keep in mind about how the case will go and what either side can do in response to its outcome. So let’s ask the question, “What about…”

…Severability?

One of the biggest responses to the alarms sounded regarding this case involves severability, that a large statute or law can remain in place even if one of its components is found invalid.

In this particular case, this would mean the individual mandate’s invalidation wouldn’t mean the entire ACA would be unconstitutional.

Experts and lawmakers of all stripes support this; a group of legal minds wrote to SCOTUS saying as much. Justice Amy Coney Barrett also implied she agrees.

During her confirmation hearings, Barrett signaled several times that she might find the individual mandate severable from the rest of the law, going so far as to say, “The presumption is always in favor of severability.” This would make it appear the majority of the ACA would remain intact following the case, even if the court’s majority says the individual mandate is unconstitutional.

But don’t hold your breath. As stated earlier, one of the primary arguments in the case is explicitly that the mandate is not severable from the rest of the ACA—a point that wasn’t struck down by a lower court that is ideologically conservative like SCOTUS.

Plus, Justice Barrett wrote in 2017 that she disagrees with Chief Justice Roberts’ initial take on the mandate being a tax. Considering this, it’s hard to say how she (or the other conservative justices including Roberts) will respond to the specific arguments made before them on November 10.

President Trump’s Executive Orders?

If you remember, President Donald Trump released his long-talked-about health care plan in September. Instead of a comprehensive strategy or piece of legislation, it was a set of executive orders regarding coverage for those with preexisting conditions and surprise billing. So wouldn’t these tend to some of the concerns over the loss of the ACA?

Not at all, really. These weren’t new laws the President signed into existence. These EOs are practically just Trump saying to Congress, “Hey we should look into better health care laws.” That’s something that half of Congress (mostly the Democratic half) has been trying to address for years. The other half—Trump’s half—is far less inclined to look into this. After all, they’re the half that tried to repeal the ACA without a replacement ready.

Make no mistake, Trump’s executive orders are not a solution to health care in general or this case specifically. (They’re just a campaign ploy.) They do nothing to cushion the blow of eliminating the ACA.

…Democrats if they win the Senate and White House?

Democrats have been much more specific and unified in their messaging on health care; they’re the “health care party” at this time. Preserving or improving upon the ACA has been a priority of theirs for several years. So, if they win in November, what could they do if SCOTUS strikes down the ACA in its entirety?

For starters, they could undo the 2017 tax cuts provision on lowering the individual mandate penalty, making the mandate constitutional again by SCOTUS’ standards. Doing this would also be a necessary action for Joe Biden, as his health care plan uses the ACA as a foundation to introduce a public option.

But this would almost definitely be challenged by GOP state attorneys general. Plus, Democrats would need to wait until January when the new Congress (and potentially president) are sworn in. In the meantime, two to three months of health care chaos will pass, and that’s assuming this ACA fix is the first thing they would do in the new session.

___

Make no mistake—the threats posed by Texas v. California to the U.S. health care system are very real. Unless the Supreme Court agrees the individual mandate is severable from the ACA, the outlook is incredibly bleak. All this, during a pandemic.

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