Will the New ACA Lawsuit Wreak Havoc on Healthcare?

Leigh Page

Disclosures

September 05, 2018

In This Article

Court Challenge Could Bring Down Some--or All--of the Law 

When a lawsuit against the Affordable Care Act (ACA) comes up for oral arguments this week, District Court Judge Reed O'Connor could rule against the law in one of two different ways:

  • He could undo the whole law; or

  • He could remove provisions that are popular with the public and important to keep the ACA operating, such as the protections for people with preexisting conditions and some community rating provisions.

In addition, he could take either of these actions against the law before a trial could start. The effective date for these actions would be January 1, 2019, but they could be overturned on appeal.

The plaintiffs, Republican attorneys general (AGs) from 20 states, seek to terminate the whole law—a move that could affect the entire healthcare system, well beyond the ACA's health insurance marketplaces, or exchanges.

Removing the law would end the ACA's Medicaid expansion, stop funds for such projects as accountable care organizations, tinker with Medicare Part D drug coverage, and drop changes in regulations for Medicare Advantage plans, among other things.

But a more likely result, according to many observers, is a proposal by the Trump Administration, named as the defendant in the lawsuit but now functioning more like a second plaintiff. (A group of 17 Democratic AGs has taken the role of "intervenor-defendants" in the lawsuit.)

The Trump Administration, represented by the Department of Justice (DOJ), proposes to remove the ACA's most popular provision—protecting people with preexisting conditions—along with some other important parts that protect other groups of consumers and standardize premiums.

In the inevitable appeal of the case, the DOJ's more limited approach might be palatable to the Supreme Court, which refused to reject the whole ACA in 2012, the thinking goes.

Both the DOJ and the Republican AGs are asking Judge O'Connor to take action before a trial, which might last a year or more. They have somewhat different requests.

A Decision May Come Sooner Rather Than Later

  • The Republican AGs want the judge to issue a preliminary injunction, effective January 1, to set aside the entire ACA, and then move on with the trial.

  • The DOJ, on the other hand, wants the judge to do away with a trial and simply issue a declaratory judgment. This means that the lawsuit would be settled on the lower court level, and opponents of the decision would have to appeal it, which they are expected to do anyway.

If the judge issues a declaratory judgment and removes the protection on preexisting conditions and rate setting, it would probably go into effect on January 1. If that decision is overturned on appeal, however, these provisions would be reinstated as soon as that decision is made.

O'Connor could wait weeks or months after the oral arguments to make his decision, but more likely the announcement will come within days, says William G. Stuart, an insurance consultant in Manchester, New Hampshire, who has been following the case.

"I think he's going to rule fairly quickly," Stuart predicts. "He wants the spotlight."

O'Connor is said to have been chosen to preside over the suit because he's an outspoken conservative and has already overturned an Obama healthcare regulation, although one that wasn't part of the ACA.[1]

Many observers are predicting that the ACA won't come out of this process intact.

"Even though I believe this case borders on being frivolous, there's a good chance that it will be upheld by Judge O'Connor," says Timothy Jost, an ACA supporter and emeritus professor at the Washington and Lee University School of Law in Lexington, Virginia. "This is a dangerous lawsuit."

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