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Where Does Healthcare Go After California v. Texas?

Analysis  |  By Jack O'Brien  
   June 18, 2021

Following Thursday's ruling, industry observers are analyzing the effects of the ACA remaining intact and what it means for healthcare going forward.

The Affordable Care Act (ACA) survived its third major legal challenge on Thursday, as the U.S. Supreme Court ruled 7-2 in the case of California v. Texas that the plaintiffs did not have standing to sue over the law's individual mandate.

The decision was warmly received by many stakeholders across the healthcare industry, including major organizations like the American Hospital Association, America's Health Insurance Plans, and the American Medical Association, among others.

Similarly, Democratic political leaders who have long championed the landmark legislation heralded the Court's ruling, including HHS Secretary Xavier Becerra, who led a coalition of nearly 20 states in defense of the law as part of his role as California Attorney General.  

Related: Healthcare Stakeholders React to SCOTUS Upholding ACA for Third Time

Now, industry observers are analyzing the effects of the ACA remaining intact and what it means for healthcare going forward.

Ratings agencies were quick to evaluate Thursday's decision and what the potential impact will be on providers and payers.

Fitch Ratings stated that the decision was "neutral" to ratings for nonprofit hospitals, adding that the ruling "maintains the status quo" established since the individual mandate was zeroed out in the Tax Cuts and Jobs Act of 2017 (TCJA).

"Today's ruling maintains healthcare coverage for tens of millions of Americans under the ACA, and we expect this to prevent a decline in operating margins associated with a shift in payor mix that would have reversed the positive margin trend evidenced at hospitals in the years following the ACA rollout," Fitch stated. "Fitch's not-for-profit (NFP) hospital operating margin median rose during those years the ACA was fully implemented, increasing from 2.2% in 2013 to 3.0% in 2014 and again in 2015 to 3.5%. Operating margins have continued to benefit since then, due to the incremental revenue from patients enrolled in the healthcare exchanges or under expanded Medicaid programs."

Meanwhile, Dean Ungar, vice president of Moody's Investors Service, said the Court's decision is "credit positive" for payers.

"The US Supreme Court dismissed the lawsuit against the Affordable Care Act. This is credit positive for US health insurers as it removes the risk of disruption in the individual market and preserves Medicaid expansion," Ungar said. "An adverse ruling would have put the health insurance of over 20 million people at risk and resulted in reduced enrollment for health insurers. Instead, we expect enrollment growth in the individual market, driven by supportive policies from the Biden administration."

Additionally, Myra Simon, principal at Avalere Health, said that the decision "providers needed certainty" as payers plan for 2022.

In an interview with HealthLeaders, Michael Kolber, a partner at Manatt Health, said that the Court's ruling was a "great outcome" and noted that it was unlikely the ACA would be struck down because the individual mandate was zeroed out.

"This [decision] allows the healthcare industry to proceed and it allows policymakers to think about how they build on the ACA foundation [regarding] how healthcare and health insurance is regulated," he said.

Kolber said he expects opponents of the ACA to move on from fighting the mandate and instead focus future litigation efforts on other aspects of the law, though he did not know how much political interest remains in challenging the law again.

Robert Henneke is General Counsel at the Texas Public Policy Foundation, which represented two Texas men who joined the plaintiffs in the case.

Henneke told HealthLeaders that he was "perplexed and unsatisfied" by the Court's decision, adding that it "resolves nothing."

"The court has kind of ducked the central question, left the core constitutional issue unresolved, and Americans remain stuck with a broken, expensive healthcare system," Henneke said.

Henneke said the ruling "perpetuates the status quo," though he noted that the ACA will continue to be challenged in the courts.

In response to healthcare leaders who have cheered the Court's decision, Henneke said that some may have on "rose-colored blinders" about the current status of the industry.

"We know that people are going bankrupt as a result of healthcare costs, we know that people are foregoing care because they can't afford it. That's not a healthy system that's not something to celebrate," he said. "Until the policymakers get realistic about the state of health insurance and healthcare in America today, millions of Americans are going to continue to suffer under the expensive, broken system that we're forced to live under."

Jack O'Brien is the Content Team Lead and Finance Editor at HealthLeaders, an HCPro brand.

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