Courts Instead of Congress: That’s How Consumer Protections Crumble

It’s been a long road since promises to ensure healthcare access for people with pre-existing conditions were made on the campaign trail, and laws and politics do change fast. As a result of past and current challenges to the constitutionality of the Affordable Care Act, the widely popular protections for those with pre-existing conditions are under fire. And as of early June, the Trump Administration made it clear it would not work to protect them.

When 20 Republican attorneys general sued the federal government in Texas v. Azar in February, they argued that when Trump’s Tax Cuts and Jobs Act eliminated the tax penalty for those who do not have health insurance (the “stick” in the Affordable Care Act) it also eliminated the constitutionality of the individual mandate and its associated consumer protections.

Those protections — the community rating and guaranteed issue requirements — are the legal provisions that protect premium equity for those with pre-existing conditions in the same region.

As a quick healthcare 101 from Wikipedia:

  • A community rating “requires insurance providers to offer health insurance policies within a given territory at the same price to all persons without medical underwriting”.
  • Medical underwriting is the use of medical or health information in the evaluation of an applicant for coverage, typically for life or health insurance).
  • Guaranteed issue requires that “a policy is offered to any eligible applicant without regard to health status”.

The lawsuit argues that both community ratings and guaranteed issue are no longer constitutional, since the individual mandate is no longer constitutional because it is not a “tax” because it does not generate any tax revenue. [To go deep into why being a tax generating tax revenue is important to the constitutionality of the individual mandate, read this brief explaining how its constitutionality came to rely on tax law in 2012.]

How Does This Protect People With Pre-Existing Conditions?

Together, these provisions require insurers on the marketplace exchanges to sell policies at equal prices to those living in the same region–regardless of their medical condition. Without them, individuals who have pre-existing conditions would face medical underwriting, unless state laws bar the practice (as they do in some states).

In short, those with pre-existing conditions would pay more and insurance rates for some people would be untenable, leading to less people having insurance. This is how it was before the ACA and, providers and other proponents of the law argue, can lead to worse health outcomes and delayed, high cost treatments, the cost of which is borne by local hospitals and government agencies.

The existence and unpopularity of individual mandates are not unique to health insurance. If drivers prone to drunk driving and texting were the only ones to purchase car insurance, premiums would skyrocket. That’s why there is an individual mandate in auto insurance in 49 of the 50 states, despite the fact that many “good” drivers might prefer to take their chances without it.

Brooks Insights: Polarization of Healthcare Access Beyond Medicaid

The courts chosen for the case are conservative–both the Texas court and the circuit court any appeal would be filed in–so success is a distinct possibility. Like the polarization of Medicaid, if this case leads to the dismantling of consumer protections in the ACA, the states will have to take it on in their own ways. That will lead to further disparities in healthcare access, depending how blue or red each state is.

The lawsuit and any appeals are likely to take a year or longer to conclude and as such it does not have a direct impact on insurance markets yet, other than by driving even more uncertainty into a troubled market. But that is the new normal.

Meanwhile just watch the show and hope the fun and games don’t end with anyone getting hurt — or at least if they do, that they have good health insurance.

Let’s Work Together