Federal Administration’s Refusal to Defend the ACA

March 29, 2019

By Garrett Hall

The recent decision of the U.S. Department of Justice to change course and support a federal court finding that the entire Affordable Care Act (ACA) is unconstitutional could have significant impacts for California if ultimately affirmed.

The Department of Justice submitted a letter on Monday, March 25, 2019, to the U.S. Court of Appeals for the Fifth Circuit affirming a district court’s ruling that invalidated the 2010 health care law in its entirety and declining to defend the ACA upon appeal.1 The initial Texas v. U.S. district court ruling, decided on December 14, 2018, ruled that the individual mandate within the ACA, which requires most individuals to maintain a minimum level of health coverage or pay a penalty, is unconstitutional because the 2017 federal tax bill changed the mandate’s penalty to $0.2 The decision further stated that the remaining portions of the ACA must be considered together with the individual mandate, thus making the entire ACA unconstitutional.3

Many legal scholars, including opponents of the ACA, have concluded that the judge’s initial ruling in Texas v. U.S. will ultimately be overturned.4 California Attorney General, Xavier Becerra, leads a group of 21 Democratic Attorneys General in defending the ACA in the appeals process as the status of the law remains in flux.5 The defendants’ opening brief is available here.

The district court’s ruling, if upheld, will likely have far-reaching effects on all Californians. Changes include the Medi-Cal expansion, which increased coverage for adults up to 138 percent of the federal poverty level (a household income of $17,237 per year for one individual in 2019), and the federal subsidies for the state’s ACA marketplace exchange, Covered California.6 The district court’s ruling, if maintained, would also severely impact Californians with pre-existing conditions and 19- to 25-year-old dependent adults. Specifically, an unconstitutional ruling would:

  • End the federal government’s financial share for California’s Medi-Cal expansion, which was 93 percent of expansion funds in 2019 and 90 percent for 2020 onward.7 This will likely eliminate Medi-Cal coverage for the 3.6 million primarily childless adults that were enrolled in the expanded program in 2018, as that federal funding share would fall to California.8
  • Stop providing federal subsidies that improve affordability of Covered California plans. These subsidies provide premium tax credits for marketplace enrollees with incomes between 100-400 percent of the federal poverty level.9 In the first six months of 2018, 1.2 million Californians received an average of $449 per month in premium tax credits.10
  • End pre-existing conditions protections, which state that no individual can be denied coverage or pay increased premiums for previously diagnosed conditions. In California, 5.8 million non-elderly, adults in 2015 were eligible for coverage that might otherwise be denied, more difficult to obtain or more expensive without such protections.11
  • Terminate lifetime limit rules in the ACA, which ban insurers from establishing financial benefit caps. These protections benefited 12 million Californians in 2013.12 If the ACA becomes unconstitutional, these lifetime caps would make coverage inaccessible and unaffordable for many Californians experiencing chronic and serious illnesses.
  • Eliminate coverage for the 435,000 young, dependent California adults up to age 26 enrolled in insurance coverage in 2013 through their parents’ health insurance plans.13

In addition to the impacts on coverage mentioned above, the ACA is a comprehensive law with rules on preventive and essential health services, out of pocket costs, employer-based coverage, workforce issues and system transparency that are all potentially impacted by this lawsuit.

For more information on current California legislation aimed at protecting the ACA, see the ITUP Fact Sheet.

For more information on federal threats to the individual market, see the ITUP Issue Brief Mapping the Future of the Individual Market.

[1] U.S. Department of Justice. Letter to the U.S. Fifth Circuit Court of Appeals. March 25, 2019.

[2] Kaiser Family Foundation, Potential Impact of Texas v. U.S. Decision on Key Provisions of the Affordable Care Act, March 26, 2019.

[3] Kaiser Family Foundation, Potential Impact of Texas v. U.S. Decision on Key Provisions of the Affordable Care Act.

[4] Billy Wynne and Dawn Joyce, What the Texas v Azar ruling means for the ACA and Health Coverage, California Health Care Foundation, December 18, 2019.

[5] State of California Department of Justice Office of the Attorney General. Attorney General Becerra Continues Fight to Protect the Affordable Care Act, Leads Coalition of 21 Attorneys General in Filing Opening Brief in Texas v. US. March 25, 2019.

[6] Covered California. Program Eligibility by Federal Poverty Level for 2019, n.d.

[7] Kaiser Family Foundation, Potential Impact of Texas v. U.S. Decision on Key Provisions of the Affordable Care Act

[8] Kaiser Family Foundation, Medicaid in California, November 2018.

[9] Kaiser Family Foundation, Potential Impact of Texas v. U.S. Decision on Key Provisions of the Affordable Care Act.

[10]Center for Medicare and Medicaid Services. First Half of 2018 Average Effectuated Enrollment Data. September 15, 2018.

[11] Kaiser Family Foundation. Estimated Number of Nonelderly Adults with Declinable Pre-existing Conditions under Pre-ACA Practices, 2015.

[12] Covered California, Report by the California Health Benefit Exchange to the Governor and Legislature. November 8, 2013.

[13] Covered California, Report by the California Health Benefit Exchange to the Governor and Legislature.