Lawsuit Threatens Affordable Care Act Preexisting Condition Protections But Impact Will Depend on Where You Live
The Affordable Care Act (ACA) has been polarizing, but its provisions designed to help people obtain coverage regardless of health status are consistently popular. These provisions prevent insurance companies from denying someone a policy because they have a preexisting condition (the “guaranteed issue” requirement), refusing to cover services that people need to treat a preexisting condition (“preexisting condition exclusions”), or charging a higher premium based on a person’s health status (the “community rating” provision).1 Indeed, multiple efforts to repeal the ACA in Congress in 2017 foundered partly because of public support for the law’s preexisting condition protections.
Nevertheless, ACA opponents continue to target these rules. In February 2018, Republican governors and attorneys general in 20 states filed a lawsuit in Texas federal court seeking to invalidate these and other ACA protections.
Plaintiff States and the Trump Administration Agree: Preexisting Condition Protections Must Go
This most recent legal attack on the ACA asserts that Congress’s repeal of the individual mandate penalty has rendered the mandate unconstitutional. Because the mandate is an essential, nonseverable feature of the ACA, the states assert, the rest of the law must be struck down too. Should this argument prevail, an estimated 17 million people could become uninsured.
In June, the U.S. Department of Justice weighed in, agreeing with the plaintiff states that the ACA’s individual mandate is unconstitutional. While it did not ask the court to block the whole ACA, the administration urged the court to strike down the law’s guaranteed issue, preexisting condition exclusion, and community rating provisions.
The Impact of Eliminating the ACA’s Preexisting Condition Protections Will Depend on Where You Live
Prior to the ACA, standards to protect people with preexisting conditions were primarily determined at the state level, and most states had very limited protections. Indeed, before the ACA, many insurers maintained lists of up to 400 different conditions that would potentially disqualify applicants from insurance or result in their being charged higher premiums. As many as 35 percent of people who tried to buy insurance on their own were either turned down by an insurer, charged a higher premium, or had a benefit excluded from coverage due to a preexisting health problem. Many will face these challenges again if the federal law’s preexisting condition protections are stripped away by the court.
The court’s decision would not inhibit the states’ role as the primary regulators of insurance, meaning that states could enact and enforce their own laws to protect residents from discrimination due to preexisting conditions. Several states have adopted their own laws to incorporate some or all of the ACA’s protections, but these are in the minority.
In a comprehensive review of insurance statutes in 50 states and the District of Columbia, we find most states have not fully incorporated the ACA’s guaranteed issue, preexisting condition exclusion, and community rating standards into state law. Specifically:
- Four states (Colorado, Massachusetts, New York, and Virginia) have adopted all three ACA or equivalent protections.
- Fourteen states have partially adopted the suite of ACA preexisting condition protections, meaning that consumers in those states could face some gaps in coverage access and affordability. For example, Delaware law requires insurers to issue policies to consumers regardless of health status, but insurers would be permitted to impose preexisting condition exclusions if the ACA provision is struck down.
- Nine states and D.C. adopted one or more of the ACA’s preexisting condition protections but include provisions that render the state law protection void in the event the corresponding ACA provisions are repealed or invalidated.
- Twenty-nine states have not adopted any of the ACA consumer protections. Many of these states are also plaintiffs in the litigation.
Although some states have pursued legislation to incorporate the ACA protections into state law or may do so in the future, no state can fully protect all consumers. That is because state regulation of self-funded single employer plans is preempted under another federal law, the Employee Retirement Income Security Act. Thus, while a state could prohibit insurers from imposing preexisting condition contract exclusions on enrollees in fully insured health plans, it cannot prevent employer group plans from doing so if this ACA provision is struck down.2
The arguments advanced by the plaintiff states and the Trump administration have been met with skepticism by legal experts on the left and right. Still, it’s not clear how the court will rule, and an appeal by whichever side loses is a near certainty. Should the case against the federal preexisting condition protections eventually prevail, the effect on consumers will depend largely on how states respond. More states may want to take steps to solidify these protections and shield their residents from ongoing efforts to strip them away.
1 Prior to enactment of the ACA, the federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) had some protections for people with preexisting conditions. Specifically, HIPAA required insurers to guarantee issue coverage and prohibited the imposition of preexisting condition exclusions for individuals who 1) had at least 18 months of prior coverage, not interrupted by a gap of more than 63 days; 2) had exhausted any continuation coverage, such as COBRA; 3) were not eligible for group coverage or Medicare; and 4) had as their most recent coverage a group health plan. However, HIPAA placed no limit on the amount insurers could charge based on an enrollee’s health status.
2 The ACA’s prohibition on preexisting condition exclusions applies to individual and employer group plans, including self-funded, single employer plans. The ACA’s community rating provision applies only to individual and small employer (those with 50 or fewer employees) health plans. The ACA’s guaranteed issue requirement applies to fully insured individual and employer group market plans.