The Affordable Care Act and California v. Texas Q&As on Possible Outcomes of the U.S. Supreme Court’s Decision

The Court likely will issue a decision in 2021, with far-reaching implications for employers and the entire health care system.

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November 11, 2020

On November 10, 2020, the U.S. Supreme Court is scheduled to hear oral arguments in the case California v. Texas (originally Texas v. U.S.), the latest ACA lawsuit to reach the Court. The Court likely will issue a decision in 2021, with far-reaching implications for employers and the entire health care system.

What are the key issues in California v. Texas?

This suit involves a number of legal issues1, but the most significant for employers are:

  • Whether the ACA’s individual mandate (i.e., the requirement to maintain health coverage, with a zero penalty for noncompliance) is constitutional; and
  • If the individual mandate is unconstitutional, whether the rest of the ACA is also invalid.

Will the confirmation of a new Supreme Court justice affect the outcome of this suit?

Possibly. Amy Coney Barrett’s confirmation as Ruth Bader Ginsburg’s successor on the Court expands the conservative wing of the Court to 6 justices. The last time the Court considered the ACA’s individual mandate, it was upheld by a 5-4 margin. Although it is not certain, Barrett’s appointment makes it more likely that the Court will (a) find the individual mandate unconstitutional and (b) invalidate the rest of the ACA as well.

What are possible outcomes of California v. Texas?

Several scenarios are likely:

  • The individual mandate is found unconstitutional, but the rest of the ACA remains law. This outcome would be the least disruptive to the health care system, as the individual mandate penalty is already zero and all other ACA subsidies and rules would remain in place.
  • The individual mandate is found unconstitutional, and the rest of the ACA also is found invalid. This outcome would bring substantial changes to the health care system. Employers would confront a number of plan design choices on lifetime and annual dollar limits, child coverage to age 26, and coverage of preventive services with zero cost sharing, among many others.2 Meanwhile, the process of unwinding the ACA’s individual market subsidies, Medicaid expansion, insurance rules, and Medicare reforms would cause significant shifts in health insurance markets and health care system funding. Congress would face pressure to pass another law preserving at least some of the ACA’s protections such as the prohibition on preexisting condition exclusions. Some states would likely also pass laws to preserve some of the ACA’s protections, which would increase variation across the 50 states in health care costs, coverage, and delivery.
  • The individual mandate is found unconstitutional, and some portions of the ACA also are found invalid. This outcome would also bring change (and confusion) to the health care system. Depending on which portions of the ACA remain law, the employer-sponsored market, individual market, Medicaid, and Medicare could undergo substantial change. Changes in any of these sectors inevitably would impact the others.

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