Lopsided Support for Obamacare Seen in Red State Suit

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By Mary Anne Pazanowski

Over a dozen groups representing physicians, hospitals, insurers, patient advocates, and others are asking a federal trial court to refrain from doing something Congress couldn’t do: repeal Obamacare.

Groups including the American Medical Association, the American Hospital Association, and America’s Health Insurance Plans June 14 joined a coalition of blue-purple state attorneys general who are defending the Affordable Care Act. They are asking Judge Reed O’Connor, of the U.S. District Court for the Northern District of Texas, not to issue an order that would block the ACA’s enforcement nationwide. Friend-of-the-court, or amicus, briefs usually aren’t filed at the trial court level, but this is a highly unusual case.

Texas Attorney General Ken Paxton (R) Feb. 26 led a 20-red-state coalition in arguing that the Tax Cuts and Jobs Act, signed by President Donald Trump in December 2017, eliminated the rationale used by the U.S. Supreme Court when it declared the Affordable Care Act valid in 2012. If these states succeed in their quest to have the ACA declared unconstitutional, “hospitals could face disruption as the number of uninsured Americans could rise,” Brian Rye, a Bloomberg Intelligence analyst, told Bloomberg Law.

“The suit adds another layer of unwanted complexity for insurers evaluating their participation and rate decisions for the ACA’s individual marketplace,” Rye said.

Riding Off the Range

Congressional Republicans and the Trump administration have tried several avenues to kill Obamacare, including dialing back some key regulations like the mandate requiring employee health plans to cover contraceptive products and services at no cost to employees. The most blatant action to date came June 7, when the Department of Justice said it wouldn’t defend the ACA in the red states’ lawsuit.

The DOJ normally defends federal laws, even when it disagrees with them. In its June 7 brief to the court, the DOJ technically argued against the red states’ preliminary injunction motion, but only on the grounds that enjoining the law now would be premature.

The DOJ in its brief to the court said the individual mandate will be unconstitutional as of 2019, when the Tax Cuts and Jobs Act takes effect. That is because the tax act eliminated the penalty imposed on people who don’t obtain health insurance, meaning the law will no longer raise revenue.

The U.S. Supreme Court, in Nat’l Fed’n of Indep. Bus. v. Sebelius, said the penalty imposed for noncompliance with the insurance mandate was revenue-raising and, therefore, Congress had the power to enact the ACA under the Constitution’s taxing and spending clause. The tax act undercut that rationale, the red states said.

The DOJ asked the Northern District of Texas to enter a pretrial judgment declaring invalid the individual mandate and two other ACA provisions, the guaranteed issue and community-rating requirements. These are the provisions that prohibit insurers from denying or charging more for coverage for people with pre-existing conditions. The remainder of the law, the DOJ said, could be severed, or separated, from the offensive provisions, leaving it intact for now.

Coming to the Rescue

A coalition of blue-purple state attorneys general in May won permission to join the lawsuit to defend the ACA. They argued on June 7 that declaring the ACA invalid “would cause catastrophic harm to tens of millions of Americans.” They said there was “no legal or equitable justification” for blocking the law’s enforcement.

The tax act didn’t undo the individual mandate’s “tax-like features,” the blue-purple states said. In any case, a tax can be lawful even if it doesn’t raise revenue all the time. Congress “routinely enacts taxes with delayed effective dates” or that are suspended for a period of time, the states said. The individual mandate still met the NFIB factors and, therefore, remained constitutional.

The AMA, in a brief joined by the American Academy of Family Physicians, the American College of Physicians, the American Academy of Pediatrics, and the American Academy of Child and Adolescent Psychiatry, argued that the position advanced by the red states would “effectively destroy” separation of powers restraints. It is the province of Congress, not the courts, to settle national policy disputes, the groups said. Congress already has failed to settle this one, they said.

The groups added that the red states lacked power to sue because they can’t show they were injured by the ACA. The red states said they had standing because the ACA will force them to pay “substantial and unrecoverable amounts” under Medicaid and the Children’s Health Insurance Program because the individual mandate forces people into these programs. The “fatal flaw” in this argument is that it states a derivative injury. That is, it rests on “what third parties may voluntarily elect to do.”

“The policies being undermined through the plaintiffs’ action have broad, bipartisan and public support, and have improved the lives of patients,” AMA President Barbara L. McAneny said in a press release announcing the brief’s filing. She decried the disruption, uncertainty, and health insurance premium increases that would follow a ruling for the plaintiffs in this case.

Threat to Other ACA Provisions

Other briefs, such as those filed by America’s Health Insurance Plans and Families USA, urged the court to consider the impact a ruling enjoining the ACA’s enforcement would have on the country.

“Abruptly threatening or even cutting off billions of federal dollars that allow individuals to purchase insurance and that fund benefits offered through Medicaid or Medicare would have devastating effects,” AHIP argued.

The elimination of the Medicaid expansion and federal financial assistance that helps people buy insurance in the individual market would have untoward impact “on the 20 million people with low to moderate incomes who would lose meaningful coverage, including 12 million people who get coverage through the Medicaid expansion and 8 million who purchase coverage on the individual market using federal subsidies,” Families USA said in a brief joined by Community Catalyst, the National Health Law Program, the Center on Budget and Policy Priorities, and the Texas-based Center for Public Policy Priorities.

Other groups that filed briefs supporting the blue-purple state defendants included the American Hospital Association, the American Cancer Society, the American Heart Association, the American Diabetes Association, the Service Employees’ International Union, the Small Business Majority Foundation, the AARP, and a group of economic scholars.

Interestingly, a group of constitutional law scholars who have disagreed in the past over the ACA’s validity, including Jonathan Adler, who developed early arguments against the ACA’s constitutionality, filed a brief for the limited purpose of arguing that the individual mandate, guaranteed issue, and community rating requirements can’t be severed from the rest of the law. The scholars expressly took no position on the ACA’s constitutionality in the brief.

Lone Ranger

By contrast, only one friend-of-the-court brief was filed in support of the red states’ position. Citizens United, Citizens United Foundation, DownsizeDC Foundation, DownsizeDC.org, Gun Owners Foundation, Gun Owners of America Inc., Conservative Legal Defense and Education Fund, Eberle Communications Group, and Restoring Liberty Action Committee joined in a brief urging the court to issue the injunction.

The individual mandate “remains as the ACA’s linchpin,” the groups argued. Removing it from the law renders the ACA “an irrational regulatory regime governing an essential market,” they said.

The penalty for noncompliance, moreover, has been treated as a tax. Congress had no constitutional power to enact the ACA under its taxing and spending authority without that penalty, they said.

The defendants will have until 30 days after the court issues its order on the preliminary injunction motion to file an answer to the plaintiffs’ complaint.

The case is Texas v. United States, N.D. Tex., No. 18-cv-167, friend-of-the-court briefs filed 6/14/18.

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