Constitutionality of the ACA
The biggest health reform news of 2012 was the June 28 decision of the United States Supreme Court narrowly upholding the Affordable Care Act’s individual responsibility provision as a constitutional exercise of Congress’ power to tax. The Court also held that Congress lacked authority under the spending clause to require the states to extend Medicaid coverage to all adult citizens with incomes under 138 percent of the federal poverty level, although it upheld the Medicaid expansion as an option.
The Supreme Court decision brought to a close most of the approximately thirty cases that had been filed challenging the individual responsibility provision and other provisions of the ACA. On December 19, 2012, a federal court in Arizona dismissed the final remaining claims in Coons v. Geithner, a case brought by, among others, Senator Jeff Flake. The court held that the ACA preempted Arizona’s Health Care Freedom Act and did not violate any rights of the plaintiffs to medical autonomy or informational privacy.
The newest group of litigation to arise under the ACA is the preventive services mandate. Over forty cases have been filed by individuals and organizations challenging an U.S. Health and Human Services (“HHS”) rule requiring health insurers and group health plans to cover contraceptive services.
The ACA requires group health plans and insurers to cover preventive services, including women’s health services as identified by the Health Resources and Services Administration (“HRSA”). Based on recommendations from the Institute of Medicine, HRSA identified contraceptive services as a women’s preventive service that must be covered by insurers and group health plan for plan years beginning after August 1, 2012. For many employers and insurers with plan years that renew on January 1 of each year, the requirement went into effect on January 1, 2013.
HHS exempted from this requirement churches and similar religious entities, which it calls “religious employers.” It did not, however, totally exempt other religious organizations, such as universities, hospitals, and charities, but rather delayed the effective date of the law with respect to such organizations until the first plan year following August 1, 2013, committing itself to work out a compromise solution in the interim. Secular, for-profit businesses, moreover, are subject to the requirement regardless of the religious beliefs of their owners.
The strategy of those challenging the mandate seems to have been to file a large number of cases in courts across the country, thus making likely a split in decisions that would have to be resolved eventually by the Supreme Court. The cases challenging the contraceptive mandate, are cases brought by (a) Catholic institutions not covered by the religious employer safe harbor, such as Catholic hospitals and universities; (b) Protestant institutions that do not necessarily object to all contraceptives, but do object to covering “morning after” contraceptives; and (c) secular businesses owned by individuals who have religious objections to covering contraceptives for their employees.
The question is whether the employers who are bringing these cases have to comply with the preventive services mandate, which applies to insurers and group health plans. The challenges do not at this point involve either the ACA’s individual or employer mandates, which do not go into effect until January of 2014. Once these provisions of the ACA are in effect, however, individual health insurance and small-group health plans must cover the “essential health benefits,” which under the proposed rules must include required preventive services including presumably contraceptives. Once the individual and employer mandates are in effect, therefore, individuals who are subject to the individual mandate and small groups with between 50 and 100 employees (which are considered large groups for the employer mandate but small groups for the EHB coverage requirement, at least beginning in 2016) may need to purchase insurance that covers contraceptives.
It is also important to understand the law that is at issue in these cases. Although these cases rely in part on the First Amendment’s free exercise clause, they are based primarily on the Religious Freedom Restoration Act (“RFRA”), a federal law that prohibits the federal government from substantially burdening the free exercise of religion unless it establishes that a requirement “is in furtherance of a compelling governmental interest” and “is the least restrictive means of furthering” that interest. Under Supreme Court precedent, the First Amendment does not protect employers from having to comply with a “neutral law of general applicability,” including, presumably, the preventive services mandate.
The Dispute Over Premium Tax Credits for Participants in Federally Facilitated Exchanges
In Pruitt v. Sebelius, a case that was initially filed by the Attorney General of Oklahoma challenging the individual mandate, Pruitt moved to amend his complaint to raise a completely different issue: the legality of federally facilitated exchanges issuing advance premium tax credits and cost-sharing reduction payments. The ACA provides that advance premium tax credits are available only through the exchanges. It asks the states to establish exchanges, but provides that the federal government can establish exchanges in any state that fails to do so.
The section of the ACA that establishes premium tax credits, however, defines eligibility for tax credits in terms of enrollment in a plan “established by the state under section 1311” of the ACA. The CATO Institute, a libertarian advocacy organization, has argued that this provision bars federally facilitated exchanges from issuing premium tax credits, and this argument has found some traction among state officials that oppose the ACA.
Whether the ACA provision does this or not is a matter of statutory construction. The IRS in drafting its advance premium tax credit rules considered other provisions of the ACA, as well as the structure and legislative history of the law, and concluded that state exchanges established by the federal government can issue premium tax credits. Pruitt challenges this conclusion. If federally facilitated exchanges cannot issue premium tax credits, however, employers in states that refuse to establish state exchanges will not be subject to the employer mandate, because employers can only be taxed for failing to provide coverage (or affordable or adequate coverage) to their employees if an employee receives a premium tax credit. Of course, since federally facilitated exchanges are likely to exist in two-thirds of the states in 2014, including Oklahoma, millions more Americans, including nearly 400,000 Oklahomans, will remain uninsured if the IRS rule is invalidated.