If the ACA is struck down next spring, what about the rest of 2021? It's complicated...but definitely not good.

Five weeks ago, right after Supreme Court Justice Ruth Bader Ginsburg passed away, I once again wrote about the different options available to Democrats to save the ACA from a potentially disastrous SCOTUS ruling next spring...each of which would require them holding a trifecta in the House, the Senate and of course the Presidency:

  • 1. Pass a simple bill changing the federal mandate penalty to an amount higher than $0.00.
  • 2. Pass a simple bill clarifying that the mandate is separate from the rest of the ACA.
  • 3. Pass a simple bill striking out the underlying mandate language itself.

As I understand it, two of these would also require the newly-Dem controlled Senate to also kill the filibuster (or to somehow convince enough Republicans to agree to hit the 60-vote threshold), while the third (raising the penalty back over $0.00) could be done with just 50 votes (+ VP Kamala Harris as the tiebreaker) via the reconciliation process...which itself gets messy.

Still, assuming they flip the Senate, one of these (or potentially two) could be done long before the Supreme Court issues their ruling on the Texas Fold'em case, which isn't expected until April at the earliest.

However, there's yet another wrinkle which underscores the urgency of the situation.

Twp days ago, I wrote:

It's also possible that [Colorado GOP Senator Cory Gardner is] correct about the timing of the Supreme Court's ruling; it isn't expected until sometime next spring (I've heard between April and June), and it's possible that they'd put some sort of stay on their own ruling until, say, January 2022, seeing how millions of people would already be locked into legally-binding contractual agreements with their insurance carriers, which in turn would be locked into contracts with doctors, hospitals, drugmakers and so on.

However...it's also possible that any such ruling would be effective immediately, and if that were to happen...well, as Amy Lotven discovered a few years back, the insurance carriers have a special "Escape Clause" baked into their contracts with the federal government which would allow them to terminate coverage almost immediately in the event that the ACA's subsidies are cut off (or other significant changes to federal law which would impact their healthcare policies, which this obviously would). So...yeah, it's conceivable that millions of people would indeed see their coverage terminated as soon as the end of the month that such a ruling came out.

When I wrote that, I was operating under the assumption that the Supreme Court probably would issue a stay on such a ruling until at least 1/01/22 due to the massive disruption and confusion this would cause. While I made sure to mention the alternative as a Worst Case Scenario, in my head the odds were around 10:1 that they'd issue a stay, because not doing so would seem to be nuts even for Trump-appointed judges.

Unfortunately, it looks like I had those odds flipped around:

I’ve asked @nicholas_bagley for clarification on this but I *think* that’s exactly what they’d likely do—put a stay on their ruling until 1/1/22 or whatever. But...I could be wrong.

— Charles Ghoul-ba (@charles_gaba) October 26, 2020

They could put a stay! But they probably wouldn't. The longer explanation is here. The context for this post was King v. Burwell, but the same explanation holds: https://t.co/RviVYImQEF

— Nicholas Bagley (@nicholas_bagley) October 26, 2020

Ut-oh.

Here's the piece Bagley linked to, from way back in 2014. It relates to the prior "ACA-cripping" lawsuit, King vs. Burwell, which I wrote ad nauseum about throughout 2014-2015, but as he notes, the "logic" is similar here even if the potential damage is far, far greater:

But what happens after June? Unless the Supreme Court stays its decision, the IRS would have to abruptly stop issuing advance tax credits. The effects would be felt almost immediately: 4.5 million people would see their insurance rates surge; many of them would drop coverage; and insurers’ risk pools would skew toward the unhealthy, leading to enormous losses. In a word, there would be chaos on Healthcare.gov.

Could the Supreme Court draw on Northern Pipeline and Buckley to enter a stay? Sure, in principle. But don’t count on it. Decided more than thirty years ago, the cases display more comfort with the Court’s power to tailor its remedies than do cases decided more recently. In the 1993 case of Harper v. Virginia Department of Taxation, for example, the Court held that it would no longer countenance giving only prospective effect to its judgments. Doing so, the Court suggested, was “incompatible with the judicial role.”

Entering a stay in King might similarly smack of legislating from the bench. That’s especially so given that King is quite different from Northern Pipeline and Buckley. There, federal officers whose appointments were technically invalid were temporarily allowed to continue doing their work. Here, in contrast, the Court would have to allow federal officials to withdraw money from the U.S. Treasury, even without statutory permission to do so. As I explained in my last post, enabling such withdrawals raises especially serious constitutional concerns.

In other words, the Supreme Court might be fine with issuing a stay for some parts of the ACA which don't require affirmative actions which have already been paid for anyway. They might allow any ACA provisions which have already been pre-paid through the end of 2021 by the time their ruling is issued to keep operating. They might let HealthCare.Gov keep operating through 12/31/21, for instance (not that there'd be much point to doing so).

However, other major provisions such as the federal Advance Premium Tax Credits (APTC) and the 90% federal share of paying for Medicaid expansion are done on a month to month basis. Any payments which hadn't already been made effective the date of the decision (let's say April 30th) could be considered to be a bridge too far. In that scenario--which Bagley thinks is the most likely one, not the least likely as I'd thought until now--the vast bulk of the ACA would indeed be terminated immediately.

Speaking of which, I also noted that:

Amy Lotven discovered a few years back, the insurance carriers have a special "Escape Clause" baked into their contracts with the federal government which would allow them to terminate coverage almost immediately in the event that the ACA's subsidies are cut off.

Well, sure enough, Lotven has confirmed this to be the case here as well:

2021 Contract For Federal Exchange Plans Includes ‘Exit’ Clause

The contract between the federal government and insurers who will be selling plans on the federal exchange in 2021 includes a new clause that says the plans might have cause to end their agreement if the ACA’s tax credits are ended. The clause does not specifically mention the high-profile challenge to the law that will be heard by the Supreme Court Nov. 10, although the case is the only significant threat to the subsidies at this point.

...The contracts, which were completed in early October, now have a section that reads: “CMS acknowledges that QHPI (qualified health plan issuer) has developed its products for the FFE based on the assumption that APTCs will be available to qualifying Enrollees. In the event that this assumption ceases to be valid during the term of this Agreement, CMS acknowledges that Issuer could have cause to terminate this Agreement subject to applicable state and federal law."

In other words, if you're enrolled in an ACA-compliant healthcare policy for 2021 and the ACA's premium subsidies are cut off, your insurance carrier would have the right to terminate your policy that month. Furthermore, it doesn't look like it matters whether you're receiving subsidies yourself or not--the clause refers to APTCs being cut off in general, not only for specific enrollees, so even someone paying full price could see their policy terminated.

I should note that this doesn't absolutely guarantee that every carrier will do so--the first time this situation came up in 2017, Molina Healthcare threatened to invoke their right over the potential cut-off of CSR payments (which led to high drama as the Molina Board of Directors fired their CEO for doing so...which was even more shocking given that the CEO was Mario Molina, son of the founder of the company itself), but they never actually followed through with the threat...and the whole CSR cut-off issue was eventually resolved anyway thanks to carriers instituting Silver Loading as a workaround instead.

There'd be no such saving grace this time around, however: If the ACA is struck down and APTC payments are cut off, most insurance carriers would likely bail almost immediately. Some might give their enrollees a grace period of a few months, but that wouldn't be much help to the 9-10 million enrollees who would suddenly have to start paying full price to do so...

This doesn't even get into the MCO (managed Medicaid) situation; as Bagley himself noted the other day:

Hive mind! If the Supreme Court ends the ACA, and so the Medicaid expansion money dries up, how long before Medicaid managed care plans will ditch their enrollees? Is there a grace period for nonpayment? Does it depend on the state?

— Nicholas Bagley (@nicholas_bagley) October 26, 2020

There's also the last part of the clause: "subject to applicable state and federal law." I assume this refers to laws regarding breach of contract and so forth, which vary from state to state. There would no doubt be lawsuits galore...not just between individuals and their insurance carriers, but possibly between insurance carriers and their networks of hospitals and doctors, as well as drug companies and medical equipment suppliers. In short, it would cause a complete legal mess.

There's one interesting twist to this, however:

The contracts for the state-based marketplaces do not include the clause.

If you live in California, Massachusetts, New York or other states which operate their own full state-based ACA exchange, the carriers might have to keep your policy in place through the end of 2021...but again, that doesn't help you much if you have to go from paying $20/month to $500/month for your premiums.

As an aside, in case you think the insurance industry is licking their chops over the downfall of the ACA, you couldn't be more wrong:

Inside Health Policy asked the insurance industry’s key lobby, America’s Health Insurance Plans (AHIP), if the group had requested the clause for this year as it had when the CSRs were under threat.

“Your question goes to the heart of one of the many ways in which invalidating the ACA would be misguided and wrong and would have profound consequences for all Americans. That’s why we argued in an amicus brief that provisions of the ACA should remain law regardless of the fate of the individual mandate,” AHIP spokesperson David Allen said.