Trump's Team Asks Court to Let ACA Underwriting Rules Die in 2019

President Donald Trump's legal team has made a move that could kill a key part of the Affordable Care Act, disrupt the individual major medical market in 2019, and leave most of the ACA intact.

U.S. Department of Justice lawyers launched that attack on part of the ACA Wednesday, by asking a federal court in Texas to let the governments of Texas and other states that oppose the ACA win part of a suit they have filed — but only part of their suit.

Texas and its allies have asked the court, in Texas et al. v. USA et al. (Case Number: 4:18-cv-00167-O) to grant a preliminary injunction that would nullify the ACA individual mandate.

Texas and its allies want the court to then use the nullification of the individual mandate to kill the ACA as a whole, based on the proposition that killing any part of the ACA will kill all of the ACA.

The Justice Department lawyers representing Trump's U.S. Department of Health and Human Services and Trump's Internal Revenue Services have asked the court to narrow the scope of the suit, and then to grant a ruling in favor of Texas and its allies on the narrower version of the suit.

The Justice Department wants the Texas court to hold that the ACA individual mandate is essential to the ACA "community rating" system, or medical underwriting restrictions. Those are the ACA rules that keep health plans from considering personal health factors other than age and tobacco use when deciding whether to sell people coverage, or what premiums to charge.

If the court takes that action, "the ACA's provisions containing the individual mandate as well as the guaranteed-issue and community-rating requirements will all be invalid beginning on Jan. 1, 2019," the department lawyers write in a memorandum addressed to the court.

In that scenario, other ACA provisions would stay in place.

The ACA Individual Mandate

The ACA is a package made up of two separate laws: the Patient Protection and Affordable Care Act of 2010 (PPACA) and the Health Care and Education Reconciliation Act of 2010 (HCERA).

Parts of the package created the ACA public exchange system and set underwriting and benefits rules for health coverage. Other parts established rules for major medical plan benefits summaries, provided funding for geriatric care provider education programs, and moved to lower out-of-pocket costs for people who have Medicare Part D prescription drug plan coverage and high prescription bills.

The ACA individual major medical insurance mandate provision originally required people who failed to get covered to pay a penalty.

ACA opponents argued even before the legislation creating the ACA was drafted that a mandate would be the equivalent of Congress requiring people who hate broccoli to buy broccoli.

In 2012, the U.S. Supreme Court ruled that opponents of the ACA individual coverage mandate could not win a preliminary injunction blocking the mandate, because the ACA individual mandate was a tax, and a federal law prohibits parties from seeking preliminary injunctions to block new federal taxes.

How the Tax Cuts and Jobs Act May Have Changed Things

In December, Trump signed the Tax Cuts and Jobs Act.

The TCJA sets the ACA individual mandate penalty for 2019 and later years at zero.

Texas and other states that oppose the ACA have responded by filing a suit in the U.S. District Court for the Northern District of Texas. The states argue that, because the TCJA has eliminated the individual mandate penalty, the ACA individual mandate is no longer a tax law.

If the mandate provision is no longer a tax provision, the 2012 Supreme Court ruling should no longer protect the individual mandate provision from legal challenges, the states say.

The states want the court to declare the mandate to be unconstitutional.

Because the ACA contains no severability clause protecting the rest of the law from the effects of the nullification of part of the law, a ruling killing the individual mandate should kill the rest of the ACA, the states say.

Intervenors

The Texas district court judge, Judge Reed O'Connor, still has to rule on the request Texas and Texas' allies have made for the preliminary injunction.

O'Connor has said that, once he has issued his ruling, the parties will have 30 days to respond.

One wrinkle that could keep the case alive, even if the states that oppose the ACA and the Trump administration want to resolve the case in favor of Texas and its allies, is that California, New York and other states that support the ACA have asked to intervene.

O'Connor issued an order on May 16 that grants California and other states that support the ACA official intervenor status. O'Connor has told those states they can submit pleadings to the court along with the other parties.

Health Insurers React

Analysts at Standard & Poor's and Moody's Investors Service have said that large health insurers' remaining individual major medical operations look stable right now, but that uncertainty about ACA rules and subsidies could cause problems in the future.

Health insurers are trying to lock in individual and small-group major medical policy language, benefits and rates for 2019 now.

America's Health Insurance Plans (AHIP), a trade group for health insurers, today put out a statement arguing that eliminating the current underwriting rules for 2019 would lead to major disruption in the individual major medical market.

"Initial filings for 2019 plans have shown that, while rates are higher due to the zeroing out of the individual mandate penalty, the market is more steady for most consumers than in previous years, with insurance providers stepping in to serve more consumers in more states," AHIP says in the statement.

"We agree with the [Trump] administration that a preliminary injunction should not be granted to the plaintiffs. We also agree that the Affordable Care Act's (ACA) provisions affecting Medicaid, Medicare Advantage, and Medicare Part D should remain law. However, we believe that a declaratory judgment would have the same destabilizing effect as a preliminary injunction, and therefore should not be granted.

"Zeroing out the individual mandate penalty should not result in striking important consumer protections, such as guaranteed issue and community rating rules that help those with pre-existing conditions. 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. Instead, we should focus on advancing proven solutions that ensure affordability for all consumers.

"Final resolution of this case will take time, given that the litigation is in its preliminary stages at the district court, and any ruling will be subject to appeal. AHIP will file an amicus brief that opposes the state plaintiffs' request for emergency relief, and provides more detail about the harm that would come to millions of Americans if the request to invalidate the ACA is granted in whole or in part."

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