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A Quick Update on All the Health Insurance Lawsuits

A Quick Update on All the Health Insurance Lawsuits

This is a weird time in the United States. Republicans and Democrats are at an impasse on healthcare; they can’t seem to agree on anything. But it’s worse than that. Each side seems to hate anything the other side proposes, and with a divided Congress, it’s pretty clear that we aren’t going to see any major bills to fix the current system anytime soon. None that have a chance at passing, anyway.

With their hopes of repealing and replacing the Affordable Care Act put on hold, Republicans are utilizing the other two branches of government—the executive and judicial branches—to dismantle the law:

  1. The three big government agencies that oversee the health care financing system (HHS, Treasury, and the Department of Labor) have published new regulations to circumvent some of the ACA’s rules, including the expansion of short-term health plans, Association Health Plans, and Health Reimbursement arrangements.
  2. Another government agency, the Justice Department, has now formally asked the court to rule the entire ACA unconstitutional.

Democrats have no control over federal regulators, but they, too, are turning to the courts in an attempt to thwart the President’s attempts to dismantle the Affordable Care Act. Lawsuits challenging the legality of the new regulations are working their way through the courts, and another suit claims that the Medicaid work requirements are unconstitutional.

In this article, we’ll take a look at each of the four major lawsuits, some of which could find their way to the Supreme Court before ultimately being decided.

Medicaid Work Requirements

There are, at last count, three lawsuits currently challenging the Trump administration’s Medicaid work requirements. The most recent lawsuit, brought by New Hampshire residents, alleges that the Trump administration is bypassing the legislative process by approving the state’s petition to impose work requirements on Medicaid recipients. As the Wall Street Journal explains, the administration’s goal is to “overhaul Medicaid state by state, after a wholesale revamp of the program sank in 2017 with Republicans’ failed attempt to repeal the Affordable Care Act.” While HHS is allowed to grant waivers to states that want to experiment with ways to expand Medicaid coverage, the plaintiffs argue that these sorts of laws do just the opposite and threaten “irreparable harm to the health and welfare of the poorest and most vulnerable in our country.”

The other lawsuits were filed in Arkansas and Kentucky, and, as the Wall Street Journal reports, a federal judge invalidated the Medicaid work requirements in those states at the end of March. In the ruling, U.S. District Court Judge James Boasberg said that the work requirements violate “Medicaid’s basic purpose of delivering health coverage to low-income and disabled people.” The decision is being appealed and could ultimately be decided by the Supreme Court.

Short-Term Health Plans

In October, 2017, following the failed attempts to repeal and replace the Affordable Care Act earlier that summer, President Trump issued an executive order asking the Departments to re-write the rules for short-term, limited-duration health plans as well as Association Health Plans and Health Reimbursement Arrangements. The government agencies were asked to find ways, within the current law and supported by sound policy, to make coverage under these sorts of plans more widely available. On August 1, 2018, the final rules on short-term plans were released, and the White House announced that the president was delivering on his promise to “deliver relief to American workers, families, and small businesses, who right now are being crushed by Obamacare.”

Not everyone agreed, though. In September 2018, as Health Affairs explains, “a coalition of consumer advocates and safety-net health plans sued over the new rule, arguing that it is contrary to Congress’s intent in adopting the ACA and should be invalidated.” Both sides have filed briefings with the court, and the lawsuit is proceeding. For now, the final rule expanding the maximum duration of short-term plans to twelve months with the option to renew them for up to three years stands. Congress, however, has opened an inquiry into the marketing practices of insurance companies and brokers who sell short-term policies according to Health Payer Intelligence.

Association Health Plans

As requested by President Trump’s October 2017 executive order, the Department of Labor issued a new final rule expanding the definition of Association Health Plans (AHPs), and, of course, this rule was also met with an immediate lawsuit. Ten states and the District of Columbia sued, claiming that the rule allowed employers to avoid many of the consumer protections offered by the Affordable Care Act. The court agreed.

As SHRM explains, a federal judge on March 28, 2019, “struck down a Department of Labor (DOL) final rule that had relaxed restrictions on multiemployer association health plans (AHPs).” The final rule was issued last year, and several AHPs have already been launched nationwide under the new regulations. However, District Judge John Bates thought the DOL had gone too far and that the rule was “clearly an end run around the ACA.”

With the ruling, new sales of association plans have been put on hold. According to Health Leaders Media, the Trump administration has filed an appeal of the decision with the D.C. Circuit Court.

Affordable Care Act

The big case, though—the one that has the most potential to turn the health insurance industry upside down—is Texas v. United States. You’ve no doubt heard about this case; it’s the one in which the Department of Justice has not only decided not to defend the existing law but has actually sided with the plaintiffs in their attempt to undo the health reform legislation. In December, a judge in Texas ruled the entire Affordable Care Act unconstitutional but stayed his ruling pending appeal. That appeal was recently heard by the Fifth Circuit Court of Appeals in New Orleans, but there’s no decision yet.

The argument made by the state of Texas and 19 other “red” states is that the individual mandate can no longer be termed a tax since the penalty has been reduced to zero. If the mandate is no longer a tax, then it is unconstitutional since Americans cannot be forced to purchase a particular product. And, as we learned in the 2015 King v. Burwell case, there are three essential components to the ACA: 1) a guarantee issue provision with community rating, 2) a coverage requirement, and 3) premium tax credits for those who cannot afford health coverage. If any of those components is missing, then the other two will fail. It’s sort of like a three-legged stool; if one of the legs is removed, the stool falls over. Therefore, if the individual mandate is unlawful, then the entire law must go.

Again, the judge in Texas agreed, so now the defense, which includes a number of Democratic state attorneys general, is appealing the decision. Ultimately, the case could work its way to the Supreme Court. The Court of Appeals heard oral arguments from both sides on July 8, and the Court’s decision is expected to come down sometime this fall.

Even More Lawsuits

While the above lawsuits have captured the most media attention, there are others. For instance, Health Affairs reports on two separate cases in which insurers have sued HHS for “failure to make more than $12 billion in outstanding risk-corridors payments” and failure to pay “at least $2.3 billion in…cost-sharing reduction payments (CSRs) after the Trump administration decided to stop making the payments in October 2017.” Another lawsuit challenges “the methodology used in the risk adjustment program.”

Closing Thoughts

To state the obvious, there are a lot of lawsuits in various stages of arguments and appeals, but this isn’t really all that surprising. With Congress unable to pass any meaningful healthcare legislation, the Trump administration has turned to executive orders to implement its agenda. When that happens, supporters of the ACA see the actions as executive overreach and ask the courts to intervene. This isn’t a fast process, though, as whatever decision a judge makes is usually appealed, and then that decision is appealed, and so forth. Unfortunately, all of these legal battles create uncertainty in the market and have a negative impact on our clients.

As we learn more about the various suits discussed in this article, and others that will inevitably be filed, we’ll be sure to let you know.

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