Obamacare Struck Down ... What You Need to Know

On late Friday afternoon, December 14, 2018, United States District Court Judge Reed O’Connor struck down Obamacare, a/k/a the Affordable Care Act ruling that it was unconstitutional. Let us explore the reasoning behind the opinion and the possible ramifications and implications, both short term and long term of that decision.

Summary of Decision

Judge O’Connor issued a 55 page opinion which granted summary judgment for the plaintiffs in the case entitled Texas, et al v. United States, et al, Civil Action No. 4:18-cv-00167-O. (The case is generally known as “Texas v. Azar”) The plaintiffs were Republican State Officials from twenty (20) different states. The case was filed in February of 2018. The reason this date is significant will be discussed later in this article.

First, a summary judgment is a motion filed by a party which asserts that there are no disputed material facts in the case and that they are entitled to judgment as a matter of law. If the court agrees that there are no material facts, the judge then applies the law as established by prior cases, interprets the Constitution or statutes involved in the case and makes its ruling.

Judge O’Connor, predicting his ruling would be controversial started his historic opinion with these words: “The United States healthcare system touches millions of lives in a daily and deeply personal way. Health-insurance policy is therefore a politically charged affair – inflaming emotions and testing civility. But, Article III courts, the Supreme Court has confirmed, are not tasked with, nor are they suited to policymaking.”

The Court then struck down the entire Affordable Care Act (“ACA”) on the grounds that its mandate requiring people to buy health insurance is unconstitutional and the rest of the law could not stand without it. Judge O’Connor specifically held that the individual mandate requiring people to have health insurance “can no longer be sustained as an exercise of Congress’s tax power.”

The importance of Congressional taxing power

Judge O’Connor focused on Congress’s taxing power as the key issue because it was the issue the United States Supreme Court relied upon in upholding the constitutionality of the ACA in 2012. In the 2012 case, the Supreme Court said that Congress legally could impose a tax penalty on people who do not have health insurance.

In the 2012 case, the Justice Department under President Obama maintained that the individual mandate went hand-in-hand with the rules protecting people with pre-existing conditions and the insurance subsidies the law provides, and the individual mandate could not be eliminated without scrapping the entire law. This mandate was controversial and in a close 5 -4 decision, the Supreme Court placed great importance on this provision. The mandate provided that if an individual or family did not have health insurance, they would be subjected to a financial penalty of the greater of $695 per person per adult, or 2.5% of household income.

The Supreme Court, in its 2012 opinion written by usually conservative justice, Chief Justice John Roberts held that this “penalty” as referred to in the ACA was not in actuality, a penalty, but instead was a tax and as such, was a lawful, constitutional application of Congress’s taxation power. However, and in a significant glimpse of future battles, Justice Roberts also stated, “The Federal Government does not have the power to order people to buy health insurance.”

The Tax Reform Act of 2017

Enter President Trump and the Tax Reform Act of 2017. In this broad and sweeping reformation of the tax code, Congress eliminated the ACA’s individual mandate’s “penalties” as part of the new tax law. Because there are no tax penalties associated with the ACA and because, in part the Obama Administration argued the totality of the ACA must stand or fall on that basis, the plaintiffs in Texas v. Azar successfully argued that the basis for the Supreme Court’s decision in 2012 had been eliminated.

With the individual mandate now removed, the basis relied upon by the Supreme Court to uphold the constitutionality of the ACA became moot and the ACA was now susceptible to new attacks. These attacks came to fruition in February 2018 when Texas v. Azar was filed in the traditionally conservative Northern District of Texas.

With the reasoning of Judge O’Connor’s decision being explained in “civilian language” (hopefully), we can now examine the implications and ramifications.

Short-term impact?

The short-term impact of Judge O’Connor’s ruling is likely to be negligible. First, Judge O’Connor did not issue a “stay” order or grant injunctive relief to the extent that his ruling would be “stayed” pending final appeal. But, he also did not enter an injunction blocking its continued operation. So, technically, while the ACA is no longer the law of the land, it is likely to stay in force and effect pending final appeal through the Fifth Circuit Court of Appeals and then ultimately, the Supreme Court.

Further, Trump Administration officials who oversee the ACA exchanges went on record Friday night that the federal government will continue to enforce the ACA while the order is being appealed. Seema Verma, administrator of the Centers for Medicare and Medicaid Services tweeted, “The recent federal court decision is still moving through the courts, and the exchanges are still open for business and we will continue with open enrollment. There is no impact to current coverage or coverage in a 2019 plan.” Verma also stated earlier this month that CMS had a plan to protect pre-existing conditions if the law was struck down.

Democratic State Officials from sixteen (16) states vowed to immediately appeal Judge O’Connor’s decision. Ordinarily, a case cannot be appealed until a final judgment is rendered in a case. Some dispute exists as to whether the summary judgment order from Judge O’Connor resolves all issues and disputes in the case. If so, appeal will be immediate and the defendants in Texas v. Azar undoubtedly will petition the Fifth Circuit Court of Appeals in New Orleans to issue a stay of the ruling pending all appeals.

Therefore, until a final decision by the Supreme Court, or until a new law is passed by Congress, the provisions of the ACA are likely to stay in force and effect.

Long Term Possible Impact and Ramifications

Assuming Judge O’Connor’s ruling is not overturned by the Supreme Court, and the ruling that the ACA is unconstitutional is allowed to stand, the long-term ramifications are potentially catastrophic for mental health. The ACA provided coverage regardless of pre-existing conditions. It provided financial assistance for private insurance. The ACA established rules which set forth a basic minimum set of benefits insurance policies must cover. Finally, the ACA provided health coverage for millions of Americans who previously could not qualify under privately operated insurance plans. These issues and concerns, and many others are back on the table and are jeopardized.

The Urban Institute, a left-leaning organization and think tank estimated that up to 17 million Americans could lose their health insurance. This includes the millions who gained coverage through the ACA’s expansion of Medicaid and millions more who received subsidized private insurance through the ACA’s online marketplaces. Insurers would no longer have to cover young adults up to age 26 under their parents’ plans. Insurers could place annual and lifetime limits on coverage. The cap on out-of-pocket costs would be taken away.

Arguably the most catastrophic loss would be coverage for people with pre-existing conditions, a condition which is prevalent with those suffering from eating disorders. More often than not, an eating disorder is a long term disease requiring years of counseling and treatment. Recovery is dependent on medical stabilization, addressing any environmental component, psychological and behavioral treatment, work and resiliency. Recovery for each person is as individual as the person him or herself. It is not unusual for treatment to take a number of years. All of this information is well known to insurance providers. With no legislative oversight or federal law in place, insurance providers could again rely upon the “pre-existing condition” exclusion to deny coverage for residential treatment, outpatient treatment, PHP, IOP … in short, all eating disorder treatment.

Treatment centers and counselors would necessarily become even more dependent on private pay patients as insurance coverage would be denied or limited. This could result in the growing manifestation of the self-fulfilling perception that eating disorders are merely a “rich little, white girl’s disease.”

Residential Treatment Centers could be impacted the most

Despite the passage of the ACA and Mental Health Parity Act of 2008, insurance providers have been carefully scrutinizing residential treatment for eating disorders for medical necessity. Weekly peer-to-peer reviews are not unusual. Insurance guidelines independent from those set forth in the DSM-V are adopted in insurance policies. In November 2017, the Milliman Group found that behavioral health care was four to six times more likely to be provided out-of-network than medical or surgical treatment. This study also found that insurance providers paid primary medical care professionals twenty percent (20%) more for the same types of care than they paid mental health care specialists, including psychiatrists.

After the ACA was signed into law and became effective in 2010, private equity companies went on a feeding frenzy of acquisition of residential treatment centers. Between 2011 and 2018, there were at least seventeen (17) different transactions in which residential treatment centers were bought by private equity firms. Most of the members of the Residential Eating Disorder Consortium (“Consortium”) are owned by PE firms. The acquired facilities include the Eating Recovery Center (twice), Timberline Knolls, Castlewood, Monte Nido, The Emily Program, Remuda Ranch and many others.

The take-over of residential care by PE firms was predicated upon both the Mental Health Parity Act of 2008 and the ACA. PE firms saw an economic opportunity arise from the absence of federal regulation and oversight of the mental health industry. They were emboldened by legislation requiring parity between mental health treatment and medical treatment. The ACA removing pre-existing conditions from the purview of insurance providers and mandatory insurance for all Americans resulted in a perfect storm in the mental health industry and the private equity firms capitalized.

Acquisitions were structured in a manner attempting to avoid corporate practice of medicine doctrines and doctors and owners of treatment centers listened to the seductive “Call of the Sirens,” and sold their practices to PE firms. However, these transactions are structured to be dependent on aggressive expansion and growth. This growth is necessary to increase the asset base of the treatment provider so that future debt obligations can be met. The transactions are also presumably dependent on the belief and necessity that the ACA would remain in place.

With the harsh reality that the ACA has now been ruled unconstitutional, the PE firms and their treatment centers face a new reality … that is, insurance providers will increase their scrutiny of claims for treatment, that they will rely upon the Court’s holding that the ACA is unconstitutional and will phase back in their denying claims because of pre-existing conditions or and will remove the cap on the maximum amount of out-of-pocket expenses incurred by insureds. This will require residential treatment centers to increase their dependence on private pay patients. These treatment centers may also be forced to need to increase their costs and expense to patients. They could also be forced to implement large cost reductions including laying off staff and professional personnel in order to meet their debt obligations.

In short, financial Armageddon could be at hand.

Possible Solutions

The Texas v. Azar decision constitutes a grave crisis impacting all Americans. This crisis could shake the very foundation of the Republic at a time when both major parties are more intent on promulgating the power of their own party and tearing apart the other party. Confidence in our political leaders is low. As for loyal opposition? Respect for those across the aisle? Working together in the spirit of compromise and collaboration while maintaining one’s own dignity and self-respect? These are all attributes which have become foreign to our so-called political leaders on the Hill and in every state capitol.

And yet, the only possible long-term solution is to rediscover that collaboration and come up with a bipartisan plan that results in health care being made available to all Americans at a cost which is affordable. Unfair insurance practices must be curtailed. The most vulnerable of our citizens must be provided with health care which is both substantive and affordable.

The crisis is here. At the same time, the opportunity for a greater future is similarly here.

Crisis or Opportunity? Our future depends on the answer to that question.