Blog | Healthcare Reform

Analysis: The July 9 appeal of the lower court’s decision overturning the ACA

Blog | Healthcare Reform

Analysis: The July 9 appeal of the lower court’s decision overturning the ACA

  • A three-judge panel on the Fifth Circuit Court of Appeals heard an appeal July 9 of Judge Reed Connor’s ruling that found the Affordable Care Act unconstitutional.
  • The challenge originates from Congress’s zeroing out of the individual mandate as part of the 2017 tax reform bill.
  • During the last week of June, the Fifth Circuit requested a supplemental briefing on whether the 20 state attorneys general and House of Representatives have standing to challenge the ruling. 

A three-judge panel on the Fifth Circuit Court of Appeals heard an appeal July 9 of Judge Reed Connor’s ruling that found the Affordable Care Act unconstitutional. The Hill is reporting that panel includes Carolyn King (Jimmy Carter appointee), Jennifer Elrod (George W. Bush appointee) and Kurt Engelhardt (George W. Bush appointee). 

The challenge originates from Congress’s zeroing out of the individual mandate as part of the 2017 tax reform bill.

The rationale is that the individual mandate is essential to the law’s functioning and, even though the legal requirement for insurance coverage remains intact, because the penalty is $0, it can no longer be considered a tax, rendering the entire law unconstitutional (a position supported by the Administration, according to a Health Affairs blog “Trump Administration Asks Court to Strike Down Entire ACA”).

If the ruling is ultimately upheld (through an appeal through the Supreme Court), not only would this roll back the coverage expansion through Medicaid and the marketplaces and increase taxes for some individuals, but it would also eliminate a range of other changes brought about by the ACA. Examples of provisions that would be eliminated include:

  • Protections for people with pre-existing conditions
  • Reductions to the Medicare market basket update for hospitals and other providers
  • Funding for The Center for Medicare and Medicaid Innovation, the various hospital quality payment programs (value-based purchasing, hospital readmissions reduction program, HAC penalty),  the hospital chargemaster-posting requirement

While the merits of the case are questionable (see below for detail), like anything associated with the ACA, the case has more plot twists than the movie “The Usual Suspects.”

During the last week of June, the Fifth Circuit requested a supplemental briefing on whether the 20 state attorneys general and House of Representatives have standing to challenge the ruling.

If neither has standing, neither one can appeal the ruling, leaving the Fifth Circuit to decide whether to vacate the lower court’s decision or leave the ruling in place.    

At press time: The Hill and other news outlets are reporting that the three judge panel of the Fifth Circuit “hinted that it would strike down ObamaCare’s individual mandate as unconstitutional, but the three-judge panel was not as clear about whether they would overturn the entire law.” While it’s often difficult to divine how a judge will rule based on their line of questioning, if the lower court ruling is upheld it will likely trigger yet another trip to the Supreme Court for the Affordable Care Act. Similar to repeal efforts in 2017 this could have a significant impact on the 2020 election given the case, if it is heard, would be litigated during an election year.

Takeaway

It’s worth unpacking both the merits of the case and the issue of standing. 

  • The Merits: Although it is difficult to predict the outcome of any court case, it is likely this decision will be overturned at some level of appeal (assuming there’s standing to appeal), as legal scholars on both the right and the left quickly identified flaws in the legal reasoning underpinning Judge Connor’s decision.

    My only hesitation in saying that the ruling will be overturned at the Fifth Circuit is it is one of the more conservative circuits in the country as may have been evidenced by the questioning in Tuesday's case. This probably had a part in the decision by the state attorneys general as to where to file their suit.

    If it does make it to the Supreme Court, it’s hard to see a court  that essentially has the same makeup in terms of votes as did the court that declined to rule the ACA unconstitutional in 2012, upholding the lower court ruling given the issues with the original decision.
  • Standing: Although making an argument that the House of Representatives was injured by overturning the ACA may be challenging, it’s not difficult to make a case that the individual states (and their residents) who are plaintiffs in this case, would be harmed if the decision is upheld.

As Katie Keith points out in her detailed HealthAffairs blog on the implications of the supplemental briefing, “states would suffer more than $650 billion in losses if the ACA is struck down.” 

About the Authors

Chad Mulvany, FHFMA

is a director, healthcare financial practices, perspectives and analysis, in HFMA’s Washington, D.C., office, and a member of HFMA’s Virginia Chapter. 

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