Red States’ Case Against ACA Hinges on Whether They Show the Law Harmed Them

Attorneys for GOP-controlled states told the Supreme Court last week that at least some 12 million people enrolled in Medicaid because of a penalty that no longer exists.

By Phil Galewitz | KHN
NOVEMBER 16, 2020

Attorneys for GOP-controlled states seeking to kill the Affordable Care Act told the Supreme Court last week that at least some of the 12 million people who newly enrolled in Medicaid signed up only because of the law’s requirement that people have insurance coverage — although a tax penalty no longer exists.

The statement drew a rebuke from Justice Sonia Sotomayor, who said it belies reason. Several health experts also questioned the argument that poor people apply for Medicaid not because they need help getting health care but to meet the ACA’s individual mandate for coverage.

The point is vital to the Republicans’ case to overturn the ACA, an effort supported by the Trump administration. The states are trying to prove they were harmed by the 2010 health law — and thus have “legal standing” to challenge its constitutionality. They argue their Medicaid spending increased because of the mandate, even though Congress eliminated the tax penalty for not having health coverage in 2019. Even when the penalty existed, most poor people were exempt because of their low income.

Under the ACA, states can opt to expand Medicaid eligibility to all adults earning less than 138% of the federal poverty level, or about $17,600 for an individual. States and the federal government share the cost of their care.

If the states cannot prove they have standing, the justices can toss their case without ruling on its merits. The case also involves two individuals who purchased private insurance from Texas and are suing to have the law overturned.

The Medicaid costs issue was one of several ways Texas and other GOP-controlled states participating in the lawsuit say they were harmed by the ACA even after the individual mandate penalty was reduced to zero. Several justices, including conservatives Clarence Thomas and Amy Coney Barrett, posed questions about whether the states had standing.

The case heard last Tuesday, California v. Texas, was the third time the high court has taken up a major suit on the ACA. Republican attorneys general in 18 states and the Trump administration want the entire law struck down, a move that would threaten coverage for more than 20 million people, as well as millions of others with preexisting conditions, including COVID-19.

Even if the court rules the states have legal standing, the ACA opponents must prove the elimination of a penalty makes the entire law unconstitutional.

The Republican states assert that since the law was upheld under Congress’ taxing powers by the Supreme Court in 2012, once the tax penalty is gone, the entire law must fall, too.

A group of Democratic-controlled states led by California and the Democratic House of Representatives are urging the court to keep the law in place.

Sotomayor raised serious doubts about the plaintiffs’ Medicaid argument and whether the states had suffered injury.

“At some point, common sense seems to me would say: Huh?” Sotomayor told Kyle Hawkins, Texas’ solicitor general, who is leading the GOP states’ legal fight. She questioned whether it seemed reasonable that once Medicaid enrollees are told there is no tax penalty for people who don’t have coverage they would “enroll now, when they didn’t enroll when they thought there was a tax? Does that make any sense to you?”

Hawkins defended his case, saying states need to show that only one person signed up for Medicaid because of the individual mandate. “There’s a substantial likelihood of at least one person signing up for a state Medicaid program, which, of course, would cause at least one dollar in injury and satisfy the standing requirement,” he said.

He cited a Congressional Budget Office report issued in 2017, when lawmakers were considering the change in the penalty. It said some people would continue to buy insurance or seek coverage “solely because of a willingness to comply with the law,” even if the individual mandate penalty were eliminated.

Few surveys have asked Medicaid enrollees why they signed up for the program.

One of them, by University of Michigan researchers that same year, posed the question to 1,750 adults who had become eligible for Medicaid in the state as a result of the ACA expansion. The most common reasons respondents gave for enrolling were that they had lost other health coverage and had a medical condition that required care. Just 2% of respondents cited the need to avoid the individual mandate tax penalty.

With the tax penalty eliminated, legal and health policy experts said, it’s likely the share of respondents signing up for Medicaid because of the health coverage mandate has dropped closer to zero.

Richard Kay, a law professor emeritus at the University of Connecticut, said it’s clear most people don’t seek coverage because of the individual mandate — particularly since there is no longer a financial penalty. But there could be a few who still do.

“Do you stop at a stop sign if you are in the country and no one is around for miles?” he said. “It’s not impossible that some people get insurance just because the law requires them.”

Kay said there is no precise guidance on how courts decide whether a plaintiff has been penalized enough to prove it has legal standing. “It’s a very confused area of the law,” he said.

Pratik Shah, a Washington, D.C., attorney who represents America’s Health Insurance Plans, a trade group fighting to preserve the law, said the plaintiffs in the case have not proved standing.

“It does not make logical sense,” he said of the argument that state budgets were harmed by people signing up for Medicaid even after the individual mandate penalty was eliminated.

“It’s hard to see how the 2017 amendment to the health law would have forced more people into Medicaid,” he said. “If they weren’t signed up before, they would be less likely to get it without the penalty.”

The court is expected to rule on the case by the end of June.