How Does the Texas Ruling Impact ACA Health Insurance Right Now?

No stranger to a challenge, the Affordable Care Act (ACA) faced another blow when Texas federal court judge Reed O’Connor last month ruled it unconstitutional in light of Congress’ elimination of the individual mandate tax penalty.

Judge O’Connor’s decision, which came the day before 2019 open enrollment ended, seemed poised to create confusion among consumers over whether or not Obamacare remains law (it does—O’Connor allowed it to remain in effect pending an appeal) and elicited many questions about the fate of the health care reform legislation passed in 2010.

Whatever the long-term outcome, the ruling changes nothing in the immediate future. There will be no effect on 2019 health insurance coverage. Open enrollment for individual major medical plans continued as planned, and approximately 8.4 million people selected or were automatically re-enrolled in health insurance plans through HealthCare.gov, according to CMS, which provides enrollment figures for the 39 states that use the federal platform.

Furthermore, O’Connor’s December 2019 ruling doesn’t apply to short term medical plans, which are not subject to the ACA. Short term health insurance remains available year-round and its availability has even expanded in light of regulations that took effect Oct. 2, 2018. With the individual mandate tax penalty repealed on the first of this year, short term plans remain an affordable health insurance alternative for those who do not enroll in an ACA-compliant plan.

What happens to Obamacare plans down the road, as a result of the Texas ruling, depends on the appeals process and related court decisions. At this time we can only look at the immediate facts and speculate what different outcomes could mean for the future of health insurance and the ACA.

What is Short Term Medical Insurance?

Short term health plans can be a budget-friendly alternative, especially when there is a temporary health insurance need if you are uninsured. They cover qualified doctor office visits, hospital stays and emergency room visits, in addition to outpatient surgery and physical therapy if you have an unexpected accident while covered. Benefits are paid based on medically necessary treatment and some plans have additional doctor office visit copays and prescription drug coverage. When considering a short term medical plan, read the fine print known as limitations and exclusions to make sure the coverage is right for you.

What Was The Texas ACA Ruling and What Does it Mean Right Now?

It’s no secret that the ACA has been under fire since it became law in 2010. This latest challenge stemmed from legislation signed into law on December 22, 2017. The 2017 Tax Cut and Jobs Act repealed the ACA’s federal tax penalty, effective Jan. 1, 2019, essentially invalidating the law’s individual mandate.

It was on the heels of this act that 20 states filed a lawsuit challenging the ACA’s constitutionality in February 2018—Texas and Wisconsin led the charge and were joined by Alabama, Arkansas, Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Maine, Mississippi, Nebraska, North Dakota, South Carolina, South Dakota, Tennessee, Utah and West Virginia.

Their case? As reported by CNN, “voiding the penalty removes the legal underpinning the Supreme Court relied upon when it upheld the 2012 law under Congress’ tax power.” (The Supreme Court upheld the ACA of 5 to 4, citing Congress’ taxation power.)

Then, the Trump administration last summer set the stage for O’Connor, stating it would not defend several key ACA provisions in court, namely the individual mandate and protections for pre-existing conditions.

However, O’Connor argued in his initial 55-page ruling that the individual mandate “‘is essential to’ and inseparable from ‘the other provisions of’ the ACA.” Based on this interpretation, the absence of the individual mandate’s tax penalty renders the entire ACA unconstitutional.

Again, Judge O’Connor’s ruling has no immediate impact, as he formally allowed the law to remain in effect pending appeal, stating that, “many everyday Americans would otherwise face great uncertainty during the pendency of appeal.” The ACA remains law in 2019.

Texas Attorney General Ken Paxton, who led the 20-state lawsuit, issued the following statement in reaction:
We are eager to defend the district court’s ruling declaring Obamacare unconstitutional. We have no quarrel with the district court’s stay, which provides the states with an opportunity to develop plans to address the health care needs of their residents for the day this ruling is ultimately upheld.

What Happens if The ACA Goes Away?

If the ACA were repealed, the health insurance landscape could return to its pre-Obamacare existence. The impact on the American public and the health care industry could be substantial.

Key ACA protections and benefits at stake would include:

  • Essential health benefits including the end of no-cost preventive care
  • The requirement that major medical insurance coverage be guaranteed, regardless of an applicant’s health history and pre-existing conditions
  • Federal subsidies, including both premium tax credits and cost-sharing reductions
  • Annual limits on out-of-pocket expenses paid by the consumer
  • The elimination of lifetime caps set by insurers
  • The requirement that employers allow children to remain on a parent’s health insurance plan to age 26

The actual consequences would, of course, depend on the exact federal laws passed to replace the ACA and any laws individual states pass. In terms of scope, the Associated Press reports that effects could be felt by the 20 million people covered through the ACA’s individual major medical plans as well as the more than 170 million covered by their employers.

Could the ACA be Maintained But Weakened?

Some argue that the ACA has already been already weakened under President Donald Trump, who vowed repeatedly to repeal and replace it as part of his campaign.

While the Trump administration has not successfully repealed the law, it has worked to dismantle it through actions that include reduced funding for health insurance navigators during 2019 open enrollment, expanded access to non-ACA-compliant health insurance alternatives such as short term medical, the elimination of the federal tax penalty owed by those without ACA-compliant health insurance, and sample waivers for how states can alter the ACA .

The ACA’s durability amid these changes and in the face of future actions remains to be seen.

Appeal Underway as 2019 Begins

It comes as little surprise that O’Connor’s December 2018 ruling didn’t remain unchallenged for long. A group of 17 Democratic state attorneys general, led by California’s Xavier Becerra, formally appealed it on Jan. 3, citing its potential impact on the U.S. health care system and most anyone with health insurance.

Some may wonder why the appeal wasn’t filed sooner. As reported by Kaiser Health News, due to O’Connor’s failure to issue his ruling as a formal and final decision, there was a gap between his ruling and the Democrat’s appeal.

Becerra stated in a press release:
Our goal is simple: to stand up for the law of the land – the Affordable Care Act – in order to keep healthcare affordable and accessible for millions of Americans.

This shouldn’t be a debate; the ACA has been the law for nearly a decade and is the backbone of our healthcare system. This case impacts nearly every American – workers covered by employers, families, women, children, young adults, and seniors – so we will lead the ACA’s defense as long and far as it takes. It’s troubling to think anyone would go back to the days when Americans with serious medical conditions like pregnancy or devastating illnesses like cancer or diabetes could be denied or charged more for coverage due to a preexisting condition.

The court proceedings could stretch out for months and, more likely, years. If the 5th U.S. Circuit Court of Appeals reverses O’Connor, there’s only a slight chance the Supreme Court would hear the case, according to the Associated Press, which also reports that if the 5th Circuit agrees with O’Connor, the Supreme Court wouldn’t hear the case before fall 2019, at the earliest.

Will an appeal be successful? O’Connor himself thinks not. However, others, including several Wall Street analysts expect the Texas ruling to be overturned.

What Should Consumers Know About the ACA in 2019?

Obamacare can be condensed into two simple statements for 2019: Yes, the ACA remains law. No, you won’t owe a federal tax penalty if you go without ACA-compliant coverage like short term health insurance or another health insurance alternative.

For now, the ACA’s key provisions remain in effect: major medical insurance remains guaranteed issue regardless of health history and pre-existing conditions; subsidies that help consumers manage costs remain available; and ACA-compliant plans continue to offer benefits mandated by law.

What has changed in 2019 is the federal government’s ability to enforce the individual mandate with a tax penalty. Yes, if you went without ACA-compliant health insurance in 2018 and weren’t exempt, you could still owe a tax penalty when you file your taxes. However, the rules changed with the start of the new year, which means you will not be subject to a federal tax penalty if you don’t abide by the ACA’s individual mandate in 2019 and beyond.

Anyone looking for affordable health insurance outside of open enrollment or a special enrollment period can select a non-ACA-compliant option, including short term health insurance, without facing a tax penalty. Short term plans remain a year-round option for uninsured individuals looking for ACA alternatives as well as those who can’t afford major medical health insurance.

As the courts sort out the O’Connor ruling and its appeal, we will continue to track this topic and report on additional challenges and changes to the Affordable Care Act, specifically how they impact you and your coverage options.