The appellate decision virtually guarantees that uncertainty over the sprawling Obama-era legislation will linger until 2021 or later.
The uncertainty unleashed more than a year ago when a federal judge declared the entire Affordable Care Act invalid will likely plague the healthcare industry for at least a year longer.
In a 2–1 decision Wednesday, the Fifth Circuit Court of Appeals agreed that the ACA's individual mandate is unconstitutional, but it sent the rest of the expansive law back to the U.S. District Court for the Northern District of Texas for a more detailed analysis of which ACA provisions, if any, should be severed from the mandate and upheld.
Rather than cueing up an expected showdown before the Supreme Court, the appellate decision calls for another round of complex litigation that could again be appealed to the Fifth Circuit.
"It's entirely possible that we're right back in this same place a year from now, if the district court reaffirms its … controversial … severability analysis and this same panel affirms," said Stephen I. Vladeck, JD, a law professor at the University of Texas School of Law, in a tweet.
California Attorney General Xavier Becerra, who's leading a coalition of states that stepped in to defend the ACA, has signaled he may take the case to the nation's highest court, but some healthcare industry attorneys say the Supreme Court may be disinclined to step in at this stage in the proceeding.
Rick Zall, JD, chair of Proskauer Rose LLP's healthcare group, says the Supreme Court generally avoids issuing rulings when doing so is unnecessary, so most observers think the justices are unlikely to take up this ACA case at this time.
"Here, there is a process that the Fifth Circuit has now initiated that, I think, they may just want to let run its course, particularly given the potential ramifications of a decision that the ACA should fall entirely," Zall tells HealthLeaders.
Vladeck said there's no imperative for the justices to weigh in now, so he'd be "shocked" if they take up the case.
Stephanie A. Kennan, senior vice president of federal public affairs for McGuireWoods Consulting, said the Fifth Circuit's decision will slow this litigation down considerably.
"It will be time-consuming for the lower court, so it's unclear when this case will advance to the Supreme Court," Kennan said, adding that a resolution before the 2020 election is unlikely.
Even Michigan Attorney General Dana Nessel, who's working with Becerra to defend the ACA, acknowledged Thursday that the Supreme Court justices probably won't take up this dispute right away.
"I do think that it is more likely that they will allow the case to go back down to the district court," Nessel said during a press call. "I wouldn't be surprised if they want the district court to rule on it before they went back up the chain."
Becerra said during the call that he's hopeful the Supreme Court would grant a cert petition if the coalition he leads files one within the next month or so.
In her dissenting opinion, Fifth Circuit Judge Carolyn King criticized the majority for sending the dispute back to a judge who has already shown a lack of restraint.
"The district court's opinion is textbook judicial overreach," King wrote. "The majority perpetuates that overreach and, in remanding, ensures that no end for this litigation is in sight."
What It Means for Healthcare
In light of how extensively the healthcare sector has reoriented itself around the ACA's provisions in recent years, the ultimate outcome of this litigation could have significant and far-reaching effects for payers and providers.
Although the appellate ruling offers some hints as to where the case might lead, it doesn't change the status quo. The ACA is still the law and will remain so for the foreseeable future.
David C. Pate, MD, JD, president and CEO of St. Luke's Health System, based in Boise, Idaho, said the appellate decision met his expectations for the most part, and it's generally good news "for those of us who do not want to see health care in the U.S. suddenly uprooted, especially when none of the politicians in Washington, D.C., appear to have a better solution."
"While I had hoped that the court would overrule the decision to strike down the entire ACA, its decision to remand the case back to the judge with instructions to go through the entire 900-page law to review its individual provisions is likely to result in the same outcome, but just take a whole lot longer," Pate wrote in a blog post on the St. Luke's website.
Pate said he believes there would be good reason to declare only the individual mandate unconstitutional and leave the rest of the law intact, including its guaranteed issue and community rating provisions. But he's not certain the courts will see things the same way he does.
Despite the past year of uncertainty, some healthcare executives have said they are unbothered by murmurings of the ACA's potential demise. Centene CEO Michael Niedorff referred to all the ACA hubbub earlier this year as mere "headline volatility," and his company continued expanding its ACA plan offerings.
That's not to suggest industry heavyweights are ambivalent. Major hospital groups have argued not only that invalidating the ACA would subvert congressional intent but that it would "wreak havoc in healthcare delivery" across the country as well.
Tossing out the massive Obama-era legislation in its entirety would cancel the law's protections for consumers with preexisting conditions, nix Medicaid expansion, and result in millions of Americans losing coverage, as the American Hospital Association said in urging the court to keep the ACA on the books. It would also undermine the statutory authorization for some of the Trump administration's own healthcare policy agenda.
It's worth noting that the market seems to be healthier and more stable today than it has been in recent history.
"We view the individual market as stronger than it was when the ACA exchanges opened about six years back," S&P Global Ratings said Thursday in a note. "Going into 2020, pricing has moderated in most segments, and some of the existing players have expanded their presence into new states and counties. This is starkly different from the double-digit price increases and insurer exits we have seen in the past."
What It Means for Politics
Major players on both sides of this case agree that Wednesday's appellate decision is politically consequential.
Andy Slavitt, MBA, who served as acting administrator of the Centers for Medicare & Medicaid Services during the Obama administration, said during a Protect Our Care press call Thursday that the appellate decision shifts the political center of gravity ahead of the 2020 election.
Slavitt has argued in the past that Democratic politicians should help the American public see a fundamental difference between how the two major parties approach healthcare policy: while Democrats are trying to expand coverage, Republicans are trying to invalidate the ACA and its preexisting condition protections without a replacement plan ready to go. The appellate decision could emphasize that central distinction.
At the same time, the appellate decision may have cut the ACA's opponents a break, as Nicholas Bagley, a law professor at the University of Michigan, wrote for The Atlantic.
"By refusing to say how much or little of the law has to go, the opinion avoids creating an immediate headache for Republicans going into the 2020 election," Bagley wrote.
Robert Henneke, general counsel for the Texas Public Policy Foundation and lead counsel for the two individual plaintiffs seeking to invalidate the ACA, said during a separate press call Thursday that those who hope to salvage parts of the ACA should look to state and federal lawmakers.
"There's a path forward, but it should be the legislators and policymakers that the hospital associations and medical industry and Americans should look for the solutions, rather than expecting that the courts will come in and rewrite the Affordable Care Act which is not their proper role," Henneke said.
Pate, from St. Luke's, said he doesn't expect lawmakers on Capitol Hill to step up to overhaul or replace the ACA while this case is pending, leaving two key ACA provisions vulnerable to judicial invalidation.
"[O]ur current political situation is so polarized that Congress cannot and will not develop a new law that will protect guaranteed issue and community rating that could be implemented before or at the time a final appeal might result in those provisions being struck down," Pate said.
That doesn't mean, however, that healthcare policymaking will stall at the state level. California has already expanded its subsidies for individual market health plans, and other states are in the process of imposing their own individual mandates, as S&P Global Ratings said in its note.
"We expect greater involvement by the states as the ACA continues to face legal and policy challenges," the note added.
“While I had hoped that the court would overrule the decision to strike down the entire ACA, its decision to remand the case back to the judge with instructions to go through the entire 900-page law to review its individual provisions is likely to result in the same outcome, but just take a whole lot longer.”
David C. Pate, MD, JD, president and CEO, St. Luke's Health System
Kicking the case back to the lower court for a detailed severability analysis could mean the ACA proceedings are still at the Fifth Circuit a year from now.
As far as the healthcare industry is concerned, the status quo remains for now. But there could be political ramifications while the case plays out.