The Trump Administration and 18 state attorneys general are asking the courts to strike down the entire Affordable Care Act (ACA) as unconstitutional. With a cloud of uncertainty hanging over coverage and protections for tens of millions of people, some states are looking for ways to protect their residents. On their own, however, states can do nothing to stop most of the harmful consequences of ACA repeal: the only solution is for the courts to uphold the law.
The ACA remains the law of the land as the lawsuit moves through the courts, and experts almost uniformly agree that the legal arguments against it are extraordinarily weak. Nonetheless, the Fifth Circuit Court of Appeals recently sided with the Administration and plaintiff states on part of their argument and sent the case back to the district court to decide how much of the law should fall. That decision has been appealed, but it lets the Administration and plaintiff states keep trying to repeal the ACA through the courts, and it prolongs the uncertainty about the future of health coverage.
The problem for states trying to ameliorate that uncertainty is that there is virtually nothing they can do to avert the most harmful consequences of striking down the ACA. Striking down the law would roll back its expansion of Medicaid to low-income adults and its premium tax credits and cost-sharing assistance for lower-income individual market consumers, zeroing out $135 billion in annual federal funding for coverage. It would also eliminate HealthCare.gov (the ACA’s federal health insurance marketplace); end important Medicare and Medicaid improvements; and cause massive uncertainty and disruption in both programs by abruptly changing the rules for Medicare provider reimbursements and Medicaid eligibility determinations.
State efforts to protect their residents from the lawsuit have mostly focused on the ACA’s protections for people with pre-existing health conditions. For the individual and small-group markets, these protections include prohibitions on denying coverage or charging higher premiums to people with pre-existing conditions and requirements that plans cover essential health benefits, such as maternity care, substance use treatment, and prescription drugs. The ACA also prohibits individual, small-group, and large-employer health plans from imposing annual or lifetime limits on coverage, and it requires them to cap consumers’ total out-of-pocket costs. These protections have improved coverage for tens of millions of people with employer plans.
States can put in place their own versions of these protections for some of their residents. But there are two problems.
First, prohibiting discrimination against people with pre-existing conditions without providing financial assistance to help people afford individual market coverage would do little to help consumers. By itself, eliminating the ACA’s subsidies for low- and moderate-income consumers would put coverage out of reach for millions of people. It also would create severe adverse selection in state insurance markets by removing a major incentive for healthy people to enroll in plans that pool risk across people with and without serious health needs, raising premiums for the less-healthy people who remain in those plans.
The Congressional Budget Office (CBO) predicted that maintaining the ACA’s consumer protections while eliminating its subsidies for individual market coverage would cause the individual market to collapse in much of the country and cause premiums to spike sharply elsewhere. CBO based its projections partly on the pre-ACA experiences of states that prohibited discrimination based on pre-existing conditions but did not provide financial assistance. These states often had very high individual market premiums, which put coverage out of reach for most of their residents.
Second, there are legal limits on states’ ability to reinstate ACA protections. Generally, only the federal government is allowed to regulate the health insurance that self-insured large employers offer. Since these plans cover most workers, that means that, whatever states do, tens of millions of people could see a return of annual and lifetime limits and plans that don’t cap their out-of-pocket costs.
State policymakers might still conclude that it’s worth codifying the ACA’s pre-existing conditions protections. In a dire scenario in which the courts strike down much or all of the ACA, doing so might offer limited protection for some. It’s also possible that the courts could strike down only the ACA’s pre-existing conditions protections and not the rest of the law (as the Administration initially urged before changing its position) — although no party to the lawsuit is now advocating this outcome. In that case, state laws might provide a more workable, though still incomplete, substitute.
But state policymakers should pay close attention to the details of these proposals, since some would do more harm than good. For example, some states have codified the ACA’s prohibitions on discrimination against people with pre-existing conditions without codifying its essential health benefit requirements and other standards for what plans have to cover. Were the ACA struck down, that would drive a race to the bottom in benefits as plans competed to attract healthy enrollees without the ability to offer them lower premiums. In the end, comprehensive coverage would likely disappear in these states.
State policymakers should also be wary of putting too much stock in policies that would codify pre-existing conditions protections. Certainly, there’s no reason to agree to any policy that weakens residents’ coverage now as part of a negotiation to secure legislation that would provide at best very limited protection down the road if the ACA were ultimately struck down.
The only real protection for states and their residents is for the courts to uphold the law, which state policymakers can help convince them to do. With the Administration refusing to defend the ACA in court, 21 Democratic state attorneys general are doing so in its place. Republican attorneys general from Montana and Ohio filed an important amicus brief defending the law and delineating the weaknesses in the Administration and plaintiff states’ arguments. State officials have also issued valuable analyses that illuminate the consequences of striking down the law and are clear-eyed about how little states could do to ameliorate these effects.