Obamacare Lawsuit Stirs Worries for Insurers

Ray Hanley, president & CEO of the Arkansas Foundation for Medical Care, opposes attempts to halt the Affordable Care Act.
Ray Hanley, president & CEO of the Arkansas Foundation for Medical Care, opposes attempts to halt the Affordable Care Act. (Daniel Moody)

Arkansas and 19 other Republican-led states are taking their shot at dismantling the Affordable Care Act, rekindling the anxieties of health care executives who fear thousands of Arkansans could lose insurance coverage.

A coalition of states have filed a lawsuit against the federal government in federal court in Texas, saying the ACA, also known as Obamacare, is unconstitutional. The states have asked for an injunction to bring a halt to the health care program while the lawsuit goes forward.

“We have argued for years that the Affordable Care Act is unconstitutional, and so essentially that was the emphasis of this lawsuit,” said Attorney General Leslie Rutledge, who is representing Arkansas in the case, which is being led by Wisconsin AG Brad Schimel and Texas AG Ken Paxton.

Other states suing the federal government include Louisiana, Tennessee and Mississippi. “The federal government does not have the power to force Americans to buy health insurance that they don’t want, that they can’t afford,” Rutledge said.

The states’ argument centers on the constitutionality of the individual mandate, which had required people to buy health insurance or face a tax. In late 2017, though, Congress repealed the tax penalty beginning in 2019. The states say that since the tax penalty has been removed, the individual mandate now is unconstitutional. And since the entire ACA was built on the individual mandate, they argue, the statute is unconstitutional.

Oral arguments were heard on Sept. 5 in front of U.S. District Judge Reed O’Connor in the Northern District of Texas. Timothy Jost, a retired law professor at the Washington & Lee University School of Law in Lexington, Virginia, said he expects O’Connor to rule in the states’ favor.

“He’s a very conservative judge and hates the Affordable Care Act,” said Jost, who has lectured on health law topics and reviewed the transcript of the oral argument.

If the states win, Jost expects the ruling to be appealed and possibly make its way to the U.S. Supreme Court.

In the meantime, he said, “it’s going to be a lot of chaos if they get the injunction they’re asking for.”

Ray Hanley president & CEO of Arkansas Foundation for Medical Care, agreed.

“Arkansas has a tremendous amount to lose if this lawsuit were successful,” he said.

Hanley fears if the ACA is abolished, people without insurance will resume going to hospital emergency rooms for treatment, driving up uncompensated care for hospitals.

He also said coverage would end for 300,000 Arkansans who received health insurance coverage under the Arkansas Works, the name for the state’s expanded Medicaid program using federal ACA dollars. Only six of the 20 states that are suing the federal government participated in the Medicaid expansion, which in Arkansas now includes a work requirement for some people to keep the insurance coverage.

Last week, more than 4,300 people were removed from Arkansas Works because they didn’t prove that they met the work requirements.

Hanley said a lot of those people who were removed couldn’t be located to be encouraged to stay in the program. “I don’t know how many of them moved out of state,” he said. “I don’t know how many of them have gotten jobs and don’t need the coverage.”

Still, he said, Arkansas Works has contributed to the stability of the health care infrastructure in Arkansas.

In August, the Arkansas Insurance Department approved rate increases for individual health insurance marketplace rate changes for 2019. The average increases ranged from 1 percent for QualChoice Life & Health of Little Rock to 4.6 percent for Ambetter, the brand name of plans offered by Centene Corp. of St. Louis. Arkansas Insurance Commissioner Allen Kerr said in an August news release that the relatively small increases reflected stability in the Arkansas market.

ACA Ingrained
Jost, the Virginia law professor, said he thinks repealing the Affordable Care Act would shut down the health care system because so many health care regulations have changed as a result of the ACA.

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“I don’t think the 20 state AGs really know what they’re doing when they’re asking to repeal the Affordable Care Act,” he said. “I think an injunction like they’re asking for would enjoin every regulation promulgated under the Affordable Care Act and would probably close down the Medicare program.”

Medicare payment regulations now are tied to the Affordable Care Act.

Rutledge disagreed, saying the law could be untangled from other regulations.

“I think it’s important that we continue to look for way to make health care more affordable,” she said. “For Americans, health care costs have skyrocketed out of control.

“I don’t think just because something has been in existence for a handful of years that we should keep it,” she said.

A survey released in May by the Commonwealth Fund of New York, which supports independent research on health care issues, said 25 percent of Americans say health care has become harder to afford and about half of Americans wouldn’t have money to pay for an unexpected medical bill.

Obamacare History
The ACA, President Barack Obama’s signature legislation, became law in 2010. Beginning in January 2014, the ACA’s centerpiece — known as the “individual mandate” — required Americans to have health insurance or face a penalty, but it also offered financial assistance in the form of tax credits for those who couldn’t afford it on their own.

The individual mandate survived a challenge at the U.S. Supreme Court, but the ruling gave states the option of refusing to expand Medicaid to households with incomes just above the poverty line — the working poor who earn too much for traditional Medicaid but too little to afford commercial health insurance.

Nineteen states rejected the Medicaid expansion. Arkansas, however, accepted the federal money and developed a unique approach that used the federal dollars to buy private insurance from the exchanges for eligible Arkansans rather than covering them through the traditional state-run Medicaid program. This plan, known first as the “private option,” has since been tweaked and renamed Arkansas Works by Gov. Asa Hutchinson.

Bo Ryall, president and CEO of the Arkansas Hospital Association, said the Arkansas Works program has helped hospitals, especially those in rural areas of Arkansas, which have remained open as a result of the program. (The Dallas Morning News reported in April that at least 14 rural hospitals had closed in Texas since 2010, and another Texas hospital closing was announced in May.)

“We’re concerned about any repeal of the Affordable Care Act, which would take away the Arkansas Works program and any other insurance coverage for the citizens of Arkansas,” Ryall said.

Rutledge said state and federal leaders have had many years to prepare for the possibility of the ACA not being upheld.

“So I believe it’s imperative on policy leaders and government leaders to look at other alternatives,” she said. Those alternatives include expanding competition, she said.

Hutchinson’s spokesman did not respond to questions about Rutledge’s involvement in the lawsuit.

Legal Argument
In 2012, the Supreme Court found that the individual mandate to buy insurance was unconstitutional as a legal requirement because Congress did not have authority under the Commerce Clause to require people to buy health insurance.

The Supreme Court did, however, rule that the mandate’s penalty was constitutional as a tax because Congress does have the power to tax, said Jost, the law professor. Congress “can raise taxes as a way of encouraging people to do or not to do things,” he said.

Rutledge said Chief Justice John Roberts’ 2012 ruling “essentially stretched” the individual mandate penalty to characterize it as a tax. “He upheld the entire law on that,” she said.

“So without that one crutch, that entire law would fail as unconstitutional.”

When President Trump took office in 2017, he vowed to repeal the ACA. In late 2017, Congress repealed the tax penalty tied to the individual mandate. Congress wanted to leave in the popular part of Obamacare — keeping, for example, the ban preventing insurance companies from denying coverage to people with pre-existing conditions.

In February, the 20-state coalition filed the lawsuit, arguing that the ACA is unconstitutional.

In June, the Justice Department — “in a move that surprised everybody,” Jost said — announced that it wouldn’t defend the ACA in the case. Instead, the state of California and 16 other Democratic-led states are defending the ACA.

“They, of course, argue that the statute remains constitutional as a tax” which has been zeroed out, Jost said. He also added that none of the plaintiff states are injured by the mandate because it applies to individuals, not states.

‘Strictly on the Law’
Jost said that most people under the age of 65 are one pink slip away from being on the individual health insurance marketplace. If the states are successful with the lawsuit, someone with a pre-existing condition might be denied health insurance coverage by carriers, he said.

“So I think this is a grossly irresponsible lawsuit,” Jost said. “I really don’t think that the attorney generals … would like what they’re asking for if they got it. But I think they thought they could make some political hay out of this.”

Rutledge said the lawsuit wasn’t done for political reasons.

“This lawsuit is based strictly on the law,” she said. “I have long argued that the Affordable Care Act was unconstitutional in its entirety, and that the federal government’s limited powers cannot encroach on individual liberty and state autonomy.”

Judge O’Connor’s ruling is expected within the next few weeks.