Kill the Medicare Drug Plan Donut Hole Plug With the Rest of the ACA: Texas to Supreme Court

Officials from Texas and other states that oppose the Affordable Care Act say the U.S. Supreme Court should kill every bit of the Patient Protection and Affordable Care Act of 2010 (PPACA) — not just the controversial parts related to individual health insurance.

That position could lead to the sudden death of the ACA Medicaid expansion program, ACA medical education and research support programs, and a provision that phased out the Medicare Part D prescription drug plan “donut hole.” The donut hole was the gap between the point where an enrollee’s drug benefits ended and catastrophic benefits began.

Lawyers for Texas and its allies make the case for killing the “minor PPACA provisions” in a brief filed Thursday in connection with California v. Texas (Case Number 19-840) and Texas v. California (Case Number 19-1019). Those are related Supreme Court cases that hinge on the constitutionality of PPACA, and on whether the Supreme Court can separate an unconstitutional provision from a law that lacks a “severability clause.”

Resources

Links to the California v. Texas pleadings, including the brief filed by Texas and its allies, is available here.
An article about what ACA supporters are saying about the case is available here.

A severability clause is a section that lets the rest of a law stay in effect if a court throws out part of the law. PPACA lacks a severability clause.

Lawyers for Texas and its allies say some minor PPACA provisions are closely related to the individual health insurance sections, even if they don’t look that way, because drafters added the provisions to raise the revenue needed to pay for the individual health provisions.

“Without the ACA’s major provisions, ‘the tax increases no longer operate to offset costs, and they no longer serve the purpose in [its] scheme of ‘shared responsibility’ that Congress intended,” Texas and its allies write in their brief.

Other provisions that have no apparent relationship with individual health insurance, and raise no revenue, are also impossible to sever from the rest of the law, Texas and its allies write.

“‘There is no reason to believe that Congress would have enacted them independently’… given that they are ‘mere adjuncts of the [main] provisions of the law,’” Texas and its allies write, quoting from earlier Supreme Court case majority opinions and dissenting opinions.

Lawyers for the U.S. government have made a similar argument in a separate brief.

The History

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

The parties that filed briefs refer often both to PPACA and the ACA, but not to HCERA. It’s not clear what they think should happen to HCERA.

The PDF version of PPACA takes up thousands of pages.

Traditionally, health insurers protected themselves against high claims by refusing to sell coverage to sick people, or by charging sick people very high prices. In some states, for example, obese people with no current acute health care problems had trouble buying conventional health coverage.

States tried to help sick people get coverage by setting up special “risk pool” programs, for high-risk people. Many of those programs charged high premiums, had low annual benefits limits, or had long waiting lists.

In California, health insurers waged famous battles to rescind coverage issued to people who developed expensive health problems. Insurers would review the original application of a high-cost enrollee and look for any possibility that the enrollee had left out material information, or answered any questions incorrectly, then try to nullify the coverage based on allegations of fraud.

Health insurers themselves said they could not create voluntary arrangements to eliminate medical underwriting because of factors such as antitrust concerns, and concerns that insurers that opted out would have an unfair advantage over insurers that gave up on medical underwriting.

The PPACA drafters tried to overcome those problems by banning use of personal health factors other than age and location in decisions about whether to sell someone coverage, and by banning use of factors other than age, location and tobacco use in decisions about how to price coverage.

The Individual Mandate

Originally, health insurers thought they needed the individual mandate to be in place to be able to survive without medical underwriting in the individual market.

ACA opponents tried to kill the health law by arguing that the mandate was unconstitutional, and was the equivalent of Congress requiring people to buy broccoli.

In 2012, the U.S. Supreme Court rejected that attack, by arguing that the individual mandate penalty was a tax, and that a federal statute blocks taxpayers from suing to kill taxes.

In 2017, when Congress passed the Tax Cuts and Jobs Act (TCJA), it included a provision that set the individual mandate penalty at zero.

Many ACA opponents, including the officials in Texas who started the legal fight now at the Supreme Court, have argued that, because the penalty amount is now zero, the mandate provision is no longer a tax.

The opponents say the mandate provision is now simply a bare, unconstitutional requirement for people to buy a commercial insurance product.

Severability Provision Counterarguments

Some health insurers and other parties have argued that the penalty provision is still, technically, a tax, even if the dollar value of the tax is set at zero.

Some have noted that, even though the Internal Revenue Service will not collect mandate violation penalty payments for 2020, it’s continuing to collect payments for previous years, and that the penalty provision is continuing to generate some venue.

Politics

Observers say, given the way filing deadlines have worked, that the Supreme Court hear oral arguments in connection with the case in October, shortly before voters go to the polls for the 2020 presidential and congressional elections.

Elizabeth Goodman, AHIP’s executive vice president of government affairs and innovation, said last week, during a session at AHIP’s annual meeting, that she was skeptical about the politics even of states’ simply reducing the size of their Medicaid programs within the next few months, given the severity of the COVID-19 outbreak.

“I don’t see, from a political standpoint, the politics of denying people health insurance in the middle of a pandemic,” Goodman said.