The U. S. Supreme Court is set to hear arguments over the constitutionality of Obamacare (Affordable Care Act) on November 10th, 2020. One outcome from the case is that the Supreme Court could invalidate the entire Affordable Care Act. The question I get asked from my clients is what will happen if Obamacare is blown-up and no longer functions. The good news for my clients is they live in California.
U. S. Supreme Court 19-1019 Texas v. California
- Whether the unconstitutional individual mandate to purchase minimum essential coverage is severable from the remainder of the ACA.
- Whether the district court properly declared the ACA invalid in its entirety and unenforceable any-where.
Supreme Court Could Rule Obamacare Completely Invalid
Since I am not a legal professional, I will refrain from speculating on any potential decision from the Supreme Court. The Court may only invalidate a portion of the Affordable Care Act, or they may determine that the law cannot stand at all. The great fear from many people I talk to is having their health insurance disappear, having the pre-existing clause brought back, or health plans become so expensive they have to drop it.
One of the complications regarding potential outcomes of a Supreme Court decision is that each state regulates its own health insurance market. In other words, each state sets it own rules on what plans will be offered and how they are structured, within certain restraints. For example, California has banned short term medical insurance. Other states allow short term medical insurance with benefit caps and exclusions for pre-existing conditions.
Good News If You Live In California
The good news is that each state sets its own rules for their health insurance market. (Yes, you already that statement.) California, along with a few other states, has demonstrated steadfast support for affordable health insurance. To implement the Affordable Care Act, California had to pass several laws to align the State’s regulations with that of the federal ACA rules. This was necessary because the federal Premium Tax Credits – subsidies – can only be advanced if the health plans meet certain conditions.
Some of those conditions were the ban on exclusions for pre-existing conditions, plans had to include preventive no cost benefits, and the plans had to meet certain actuarial minimum standard values: Bronze, Silver, Gold, Platinum metal tiers. California has mandated some additional benefits such as capping the cost of certain prescription medications under the pharmacy benefit. California also has gender non-discrimination rules that most health plans must abide by.
One of the downsides for the ACA is that the added benefits and protections also raised the cost of health insurance. Since there is no longer a cap on how much a health plan must pay for your care (a $1 million dollar cap was routine), this potential liability is built into the rates. All plans must cover maternity care, which was routinely excluded in pre-ACA plans. Even though spreading the cost of maternity claims across the entire of pool of individuals, many who will never use it, lowered the added increase to the rates, it is still present.
Another step California took that shows the commitment to equitable and comprehensive health insurance was the creation of Covered California. The State could have relied on the federal exchange (healthcare.gov), but California decided to create its own market place exchange. The primary mission of Covered California is to determine the eligibility of individuals for the federal Advance Premium Tax credit, and then distribute that subsidy to the plan member’s selected health plan.
In 2017, the individual mandate penalty was zeroed out of the Affordable Care Act. This action, of essentially eliminating the penalty for not having insurance, is the foundation for challenging the entire act. Regardless, California did pass its own individual mandate for 2020. In short, California is trying to back fill the holes and address the problems with the ACA that congress has not undertaken.
For individuals and families who are eligible, the federal Premium Tax Credit makes the expensive health insurance affordable. The losers, unfortunately, are people who earn too much income to qualify for the federal subsidy. But here again, California recognized the income problem and passed a new health insurance premium subsidy for 2020 aimed at households who earn too much to qualify for the federal subsidies. The modest California Premium Subsidy doesn’t completely address the disparity for high income earners, but it is a start.
If the ACA is scuttled by the Supreme Court in 2021, California is poised to fill the vacuum. I confidently predict that if the unthinkable happens, California will quickly draft legislation to keep health insurance as affordable as possible. Covered California is already in place. The State is implementing its own subsidy over and above the federal funds. All that remains is a revenue source to fund the subsidies in the absence of the federal funds if the ACA evaporates.
MAGI Medi-Cal Is At Risk
The health insurance subsidies are not the only worry if Obamacare is tossed in the waste can by the Supreme Court. California opted into the expanded Medicaid program. Individuals earning less than 138 percent of the federal poverty level automatically qualify for no cost Medi-Cal health insurance. There are approximately 12 million people on Medi-Cal in California with a large proportion eligible because of the expanded Medicaid provisions of the ACA.
Presumably, expanded Medi-Cal may also disappear if the ACA is struck down by the Supreme Court. That will be a bigger challenge for California. It’s possible that California could just extend private health insurance with a super generous subsidy to those affected by the elimination of the MAGI Medi-Cal program. Another route is just maintaining the expanded MAGI Medi-Cal as the monthly capitation rates are less expensive for many ages than private health plans.
If you live in a state that is not as proactive and progressive towards affordable, comprehensive, universal health insurance for all its residents as California, the elimination of Obamacare could be apocalyptic. There could be a complete melt down of the market place where all the insurance carriers abandon the state until new rules are adopted. Then the new insurance laws may expose people to heath plans that includes exclusions for pre-existing conditions, caps on care, and general skinny benefit health plans.
Doesn’t Trump Have A Plan?
I know Trump says he will protect people with pre-existing conditions, but I don’t know how. If the ACA is determined to be unconstitutional, and each state regulates its own insurance market, how would the federal government intervene to protect individuals with pre-existing conditions. What would be the federal mechanism that would force all health plans in all 50 states and territories to ban the denial of health insurance based on a pre-existing condition? The current mechanism is the Affordable Care Act that is coupled with the federal Premium Tax Credit. No ACA, no protection.
“But Kevin,” you say, “Trump has a plan.” I reply, “No, Trump doesn’t have a plan. If he had a plan, he would have revealed it during this presidential election cycle.” There is no plan B. Even if Trump is not reelected, it will take months of wrangling in congress before anything meaningful is passed.
If Obamacare is repealed by the Supreme Court, California will step into the vacuum. It may not be pretty and I am sure there will be a new tax on something, but California will figure a way to continue with the health insurance subsidies through Covered California.
