For more than a decade, states have been at work implementing the Affordable Care Act (ACA). Today, to varying degrees, its provisions are hardwired into all states. If the ACA fails to survive the objections raised in the US Supreme Court case California vs. Texas, states will face significant challenges and new costs.
The court may reaffirm its 2012 ruling that upheld the constitutionality of the mandate that individuals must have insurance coverage or pay a penalty. It could also conclude that the individual mandate is in fact unconstitutional and strike down some but not all the law, or it could end the law altogether. Of course, the most profound impact such a decision would have is on the more than 20 million Americans now covered through ACA’s coverage expansions. Most states, now confronting severe budget constraints due to COVID-19, would be unable to replace the federal dollars that now support that coverage through Medicaid expansion and tax subsidies.
But there are more implications – some mundane but substantial – at stake here for states should the court significantly alter or eliminate the ACA. This blog and the accompanying slide deck outlines the far-reaching effect of states’ health insurance programs stripped of the ACA.
For starters, the ACA required states to significantly alter how Medicaid eligibility and enrollment is conducted and changed how financial eligibility is determined for many Medicaid enrollees. It required a single application to be used for multiple health coverage programs and streamlined how eligibility is conducted. Federal dollars supported the buildout of new technologies and other administrative apparatus to support the new, consolidated eligibility and enrollment systems and to link Medicaid to health insurance exchanges. This work was transformative and is now well established in all states, but without the ACA:
- Would states be required to again retool all their systems and do it without the federal money that helped build them?
- Would states face federal penalties for noncompliant eligibility determinations as they transitioned Medicaid expansion enrollees off coverage and revamped their systems to once again administer traditional Medicaid programs?
- What about the cost and ensuing confusion as children of state employees, now eligible for the Children’s Health Insurance Program (CHIP) and ACA funding, lose that coverage and revert back to their parents’ health coverage?
If the ACA’s expanded coverage to fill the Medicare Part D’s “donut hole” is eliminated, how will states protect low-income Medicare beneficiaries who are dually eligible for Medicare and Medicaid, and at what cost?
Importantly, the ACA set national standards for insurance regulation, particularly for small group and individual markets. Before the ACA, insurers used crude tools to lower costs and maximize revenue, imposing annual and lifetime limits on claims, refusing to cover pre-existing conditions, using discriminatory rating practices, denying renewals, and rescinding coverage while shifting more and more costs to out-of-pocket expenses for consumers. The ACA prohibited such practices and imposed medical loss ratios on all markets to limit what insurers could charge in overhead and administration.
In providing advanced premium tax credits (APTC) and health insurance exchanges to help consumers find and secure affordable, comprehensive coverage, the ACA stabilized and grew the individual markets in states. The loss of these consumer protections and subsidies will alter the dynamic of these markets and challenge states to maintain coverage. While 40 states have enacted laws to allow children to stay on a parent’s plan until age 26, some make that coverage optional for insurers, not a requirement. As the chart in this slide deck demonstrates, some states have concretized parts of the ACA in their state laws, protecting those with pre-existing conditions, limiting out of pocket exposure, and banning annual and lifetime benefits. But the majority of states have not followed suit and the loss of APTCs that make that coverage affordable will complicate state policymaking decisions.
These few examples of the data included in NASHP’s slide deck make clear that the ACA is deeply embedded in state program operations, policy and law. The elimination of the ACA would indeed create profound loss for the millions of people covered by the program, but the disruption it would cause states’ insurance markets and administrative and IT infrastructure cannot be ignored. As the court hears oral arguments and ultimately makes its decision, states must be prepared for potential upheaval as 11 years of work implementing and refining the ACA could be upended.