TOO FAST: Jim Donelon, Louisiana’s insurance commissioner, says escalating premium rates and declining health insurance participation is due to problems related to the speedy passage of the Affordable Care Act. (Photo by Don Kadair)
Over a two-year period, Jim Donelon, Louisiana’s insurance commissioner, has watched statewide participation in the individual health insurance market decline by almost 50%, from a high of 220,000 insured residents in 2016 to 105,000 this year.
Why? Donelon attributes much of the decline to premium rates escalating by more than 50% over the two-year period, prompting leading Louisiana companies to bail out of the market. He says Louisiana-based health insurance providers—Blue Cross Blue Shield of Louisiana, headquartered in Baton Rouge, and Vantage Health Plan—were losing “huge amounts of money” until last year, when the trend reversed.
Which explains why Donelon, when asked by state Attorney General Jeff Landry, was quick to provide a sworn statement detailing the challenges Louisiana has faced since the passage of the Affordable Care Act.
“The ACA was done too fast and came with many unintended consequences that we’re seeing play out on a continuous basis,” says Donelon, a statement with which both supporters and opponents tend to agree.
Landry was one of 20 attorneys general joining the Texas v. Azar lawsuit, the latest in a series of lawsuits challenging the constitutionality of former President Barack Obama’s signature overhaul of the national health care system.
This lawsuit is hardly the first filed, and it likely won’t be the last. What makes the case special, says LSU law professor Edward Richards, is the fact that the U.S. Department of Justice filed a brief largely agreeing with the plaintiffs, explicitly stating it would not defend the ACA in the suit.
“The sides of this are split, kind of like the country is—you’ve got half the people on one side who want it done, half the people on the other side who don’t want it done,” says Jeff Williams, executive vice president of the Louisiana State Medical Society, which has not taken an official stance on the case.
While the case still has to play out over a few years, the Trump administration’s position raises the question of whether or not the ACA will even exist in a few years’ time. If it doesn’t, what would that mean for businesses?
The suit: an explainer
The plaintiffs, spearheaded by Texas, comprise the attorneys general from 20 red states, including Louisiana. They’re suing the federal government (“Azar” is the last name of the current secretary of the federal Department of Health and Human Services), arguing the health care law is invalid now that Congress has effectively eliminated the individual mandate .
Still, Texas v. Azar has a nuanced background, deeply mired in politically ideological differences concerning a national health care system’s place in the U.S., as Mike Bertaut, health economist for Blue Cross Blue Shield of Louisiana, outlines in his BCBSLA-sponsored “Straight Talk” blog post.
Under the ACA, individuals who didn’t buy health insurance had to pay a tax penalty, unless they qualified for an exemption. The Obama administration’s rationale for the constitutionality of this was that, under the essentially unlimited taxing authority of the federal government, the feds had the right to tax the absence of health insurance.
Thus came the individual mandate—the tax penalty for not buying health insurance—which, as almost universally agreed, is the crux of Obama’s health care plan. In other words, if there’s no individual mandate, the ACA loses its meat.
Jump to 2017, when Congress passed President Donald Trump’s tax bill, which among other things reduces the individual mandate fine to $0 once the law takes effect in 2019. Consequently, the individual mandate the U.S. Supreme Court earlier affirmed no longer fits the federal definition of a tax.
“The only thing that they said made it constitutional is arguably no longer there,” says Clay Countryman, a health insurance attorney with Breazeale, Sachse & Wilson.
Enter the 20 GOP attorneys general, who argue the entire law is invalid without the mandate, including even the parts unrelated to the mandate. And while California and 15 other states have filed a countersuit to effectively defend the ACA, the U.S. Attorney General’s office is sitting this one out.
The Wall Street Journal predicts these effects can spill over to hit the larger and more popular market for employer-based insurance. If the courts toss some of the insurance coverage mandate provisions, their analysts say, elements of the requirements that also apply to employer plans would likely be halted or reversed as well. It’s a view shared by numerous Louisiana health care experts.
Why employers should care
While the ACA mostly zeroed in on the individual insurance market, companies weren’t left untouched. Under the ACA’s employer mandate, Countryman says companies who employ at least 50 people must offer health insurance that is both affordable and provides “minimum value” to at least 95% of their full-time workers and their dependents up to age 26.
“The two go together,” says Michael Malinowski, an LSU law professor specializing in health insurance, of the ACA mandates on individuals and employers. Because of this, he predicts effects on the employer-based insurance market will be “immediate.”
The reasons for this, he argues, are simple: Any uncertainty the government infuses into the health insurance market will get interpreted as against the insured, resulting in higher premiums that will come through employers, who can only absorb so much of the higher costs.
“That means more is going to be passed down to their employees,” he says.
The most at risk, should the plaintiffs prevail, are employees with preexisting conditions. If consumer protections previously enacted in employer-provided coverage were to be changed as a result of the lawsuit, Richards says employers would likely default to the Health Insurance Portability and Accountability Act of 1996, better known as the HIPAA Act.
HIPAA worked like this: If an employee with a preexisting condition came to work for a company, and that employee already had health insurance from their prior place of employment, then the new company would be required to offer health coverage for the preexisting condition. However, if the employee was not receiving coverage for their preexisting condition before joining the new company, then the new employer was not obligated to provide coverage for their condition.
On the other hand, if a small company wanted to provide “proper coverage” for employees with preexisting conditions, Richards says, it would probably be more costly, especially if they have a larger number of older or sicker people, which might indirectly lead to higher costs for employees who pay a share of their premiums.
“Anything that reduces the number of people in the insurance pool makes the remaining policies more expensive,” Richards says of the potential removal of the employer mandate.
Currently, employers must provide health insurance to workers within their first 90 days of employment, but a change in law might also allow employers to impose longer waiting periods for health coverage on new hires. If the plaintiffs win their case, and if a worker hadn’t previously had coverage or had let it lapse, an employer could opt out of covering their specific health problem for up to a year, even if they provide them with health insurance.
Bigger picture, Donelon says the plaintiffs aim to remove the employer coverage mandate entirely.
“We are already seeing most employers in the U.S. no longer provide health insurance for their employees,” Donelon says. “That would be exacerbated if the employer mandate were removed.”
Though varied in their opinions on Texas v. Azar, pretty much every Louisiana health care professional agrees on one thing: If you’re a business owner and you’re worried about it, don’t be. It’ll take a few years to meander through the courts, so until then, monitor at your own will.