Can States Fill the Gap if the Federal Government Overturns Preexisting-Condition Protections?
Updated since original publication on May 7, 2019.
The Affordable Care Act (ACA) continues to be under threat, currently in the form of Texas v. U.S., a federal lawsuit challenging the law’s constitutionality. The Fifth Circuit Court of Appeals is considering this lawsuit and could hand down its decision any day. The proceedings took an unexpected turn in March when the U.S. Department of Justice (DOJ) sided with the plaintiffs, urging the court to strike the ACA down in its entirety. Even before this suit, DOJ had refused to defend key provisions that guarantee coverage of preexisting conditions.
If the courts agree with the DOJ, it would invalidate every provision of the 2010 law. As many as 20 million people nationwide would lose their coverage, while millions more could face insurance company denials, premium surcharges, or high out-of-pocket costs because of their health status.
To help blunt potential fallout and prevent adverse effects for millions of individuals, several states have enacted bills to ensure that federal ACA protections become part of state law. However, before the ACA, state efforts to require insurers to cover people with preexisting conditions resulted in large premium spikes and, in some cases, caused insurers to exit the market. The ACA’s premium subsidies have had a critical stabilizing effect. If those subsidies are invalidated, states will have a hard time restoring them with state dollars. In addition, state regulation of self-funded employer plans is preempted under the federal Employee Retirement Income Security Act (ERISA), meaning the 61 percent of people with this type of job-based coverage can regain their protections under the ACA only if Congress steps in to restore them.
ACA Protections for People with Preexisting Conditions
- Guaranteed issue. Health insurers are prohibited from denying an individual or employer group a policy based on their health status.
- Community rating. Health insurers may not use an individual or small employer group’s health status to set premiums.
- Preexisting condition exclusions. Health insurers and employer group plans are prohibited from refusing to cover services needed to treat a preexisting condition.
- Essential health benefits. Health insurers selling to individuals and small employers must cover a minimum set of 10 “essential” benefits: ambulatory services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services; and pediatric services, including oral and vision care.
- Cost-sharing protections. Health insurers and employer group plans must cap the amount enrollees pay out-of-pocket for health care services each year.
- Annual and lifetime limits. Health insurers and employer group plans are prohibited from imposing annual or lifetime dollar limits on essential health benefits.
- Preventive services. Health insurers and employer group plans are required to cover evidence-based preventive services without any enrollee cost-sharing.
- Nondiscrimination. Health insurers must implement benefit designs for individuals and small employers that do not discriminate based on age, disability, or expected length of life.
States Are Stepping Up, but Power to Fully Protect Consumers Is Limited
In a previous post, we found that at least four states (Colorado, Massachusetts, New York, and Virginia) had laws that would preserve key ACA preexisting condition protections if the federal law is overturned. Now, the lawsuit is prompting other states to do the same. Since February 2018 when the suit was filed, 13 states (Connecticut, Delaware, Florida, Hawaii, Indiana, Louisiana, Maine, Nevada, New Hampshire, New Mexico, Oregon, Vermont, and Washington) have acted to preserve the ACA’s protections for their residents.
These bills take different approaches. Maine, New Mexico, and Washington passed comprehensive bills that would preserve all the ACA protections listed above. The laws in Florida, Hawaii, Indiana, and Nevada are more narrowly focused. All four prohibit insurers from imposing preexisting-condition exclusions, though Florida’s protection only goes into effect if a federal law expressly repeals the ACA or the U.S. Supreme Court invalidates the law. Maryland took a different approach, creating a workgroup to recommend ways to protect residents if the ACA is struck down. North Dakota is studying the feasibility of enacting guaranteed issue and preexisting condition protections. The governors of New Jersey, Rhode Island, and Wisconsin have issued executive orders directing their state agencies to uphold the ACA’s principles, by guarding against discrimination based on preexisting conditions and strengthening consumer protections to ensure access to affordable coverage.
The Fifth Circuit Court of Appeals could render a decision at any time. Whatever that court decides, the losing party is likely to ask the Supreme Court to hear the case, and a ruling could come as soon as June 2020 or it could be delayed until 2021, extending the uncertainty facing the individual market. With the future of the ACA hanging in the balance, some states are trying to include federal consumer protections in state law, but none can fully blunt the widespread and severe consequences of the courts invalidating the entire ACA.