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Analysis

As ACA Case Heads to Supreme Court, Healthcare Execs Plan for 'Uncertainty'

By Jack O'Brien  
   March 05, 2020

Though hearings won't take place for months and a decision is likely a year away, providers should keep cash on hand, one healthcare attorney advises.

The U.S. Supreme Court's decision this week to hear United States v. Texas, the lawsuit challenging the constitutionality of the Affordable Care Act (ACA), has once again presented the landmark healthcare law with an uncertain fate, according to healthcare stakeholders.

In December 2018, a district court judge in Texas ruled that the entire ACA was invalid because the individual mandate was zeroed out as part of the Tax Cuts and Jobs Act of 2017.

The case was appealed to the Fifth Circuit Court of Appeals, which ruled in December 2019 that the individual mandate was unconstitutional, but the judges did not strike down the entire law.

After the ruling, California Attorney General Xavier Becerra, who is leading a coalition of nearly 20 states in defense of the law, filed a petition of certiorari with the Supreme Court to hear the case on an expedited basis.

On Monday, the court agreed to hear the case and though it did not elaborate on a specific timeline, the case is not likely to be heard until the court's fall term, with a decision likely to be delivered by mid-2021.

Provider organizations must be ready for potential financial and clinical impacts if the legislation is repealed or changed in some way, according to several healthcare attorneys.

Given that the court's composition has changed with the addition of Justices Neil Gorsuch and Brett Kavanaugh since its previous legal challenges in 2012 and 2015, along with the political nature of the case, and the lack of a definitive replacement plan if the law is stuck down, providers need to have contingency plans in place for their bottom lines.

Related: Supreme Court to Hear Challenge to ACA

Rick Zall, JD, chair of Proskauer Rose LLP's healthcare group, tells HealthLeaders that the Supreme Court's decision to hear the case was "unexpected," given that the most likely scenario was to let the case be remanded and play out in the district court.

Zall says this decision promises resolution of the case for both sides, though it likely won't be delivered until after the new Congress is sworn in at the start of 2021.

"You can look on the one hand, we'll have resolution sooner, which I think is desirable to many because it will remove uncertainty," Zall says. "On the other hand, it won't be until after the election. I do think there's some unease about what the Supreme Court will do here."

Zall continues: "I think people have to plan for the possible scenario where it is struck down and then the question will be what would replace that.” 

Related: Insights from the 38th J.P. Morgan Healthcare Conference

Susan Feigin Harris, partner at Morgan Lewis & Bockius LLP, advises numerous healthcare clients and tells HealthLeaders that while the primary concern for many executives relates to the current spread of the coronavirus disease 2019 (COVID-19), there is cause for healthcare leaders to worry given the legal developments surrounding the ACA. 

"Uncertainty in the healthcare industry is never a good thing, because if you're a leader, [then] you're trying to execute on a vision responsibly," Harris says. "If you can't execute on that vision responsibly, because you want to make sure that you have the capital in place for other things that may come down the road, you're not going to be able to do that."

Harris says that most of her healthcare clients are focused on how to provide more effective and less costly care, which she credits to the ACA, allowing providers to extend care opportunities to their local communities through care coordination and primary care programs.

She adds that providers supported the ACA before it was signed into law because it meant that more patients receiving care would have insurance coverage and hospitals would not have to handle as many uninsured patients.

Related: ACA Ruling Dismays Hospitals, as Law's Defenders Look to Supreme Court

What you should do

Harris says healthcare organizations should remain focused on their strategic objectives. She advises health systems to consider bulking up on capital reserves and reducing their investment portfolio so there is more available cash-on-hand for a worst-case scenario. 

"Some leaders say, 'I'm not going to allow this to impact what we're doing,' while others say, 'I'm just going to be more conservative, because we don't have the reserves on hand to shoulder the additional burden,'" Harris says. "It's going to be dependent on institution and the markets."

Related: Appellate Court Rules ACA Individual Mandate Unconstitutional But Stops Short of Tossing Entire Law

Alden J. Bianchi, JD, practice group leader of Mintz's employee benefits and executive compensation practice, says that he believes that the individual mandate is severable from the ACA, adding that Congress was clear when it passed the tax reform bill in 2017 that it was only repealing the individual mandate, not the entire ACA.

"This law has most affected, besides the hundreds of millions of Americans buying health insurance, the hospitals and insurance companies,” Bianchi tells HealthLeaders. “Now employers are the ones caught in the crossfire since they were an afterthought when the ACA was written but they cover 147 million Americans."

Since hearings are months away and a ruling is likely a year away, Bianchi says that providers should view this interim period as "status quo” and continue their business operations as usual.

However, he says that if the court strikes down the law, the government will need to pass a temporary measure to stabilize certain features of the ACA and maintain coverage before a replacement plan can be enacted. Bianchi warns that this could be a "feeding frenzy" for interests with the most money to affect policy.

Related: No End in Sight: Courts Unlikely to Resolve ACA Case Before 2020 Election

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.

Photo credit: WASHINGTON, DC, USA - September 30, 2018: The U.S. Supreme Court is back to a full 9-Justice bench this Term after the confirmation of Justice Kavanaugh. / Editorial credit: Erik Cox Photography / Shutterstock.com


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