The Supreme Court heard oral arguments today on California v. Texas, another challenge to the Affordable Care Act (ACA). At issue is whether the ACA’s individual mandate—which requires most Americans to have health insurance or pay a tax penalty—is constitutional now that the 2017 tax bill has reduced the penalty to zero, and whether this, in turn, makes the ACA as a whole unconstitutional. A ruling that invalidates the ACA—or parts of it—could have far-reaching consequences for California.
Since California implemented coverage expansions under the ACA in 2014, its uninsured rate has been cut in half. Most of the coverage gains resulted from increased eligibility for the Medi-Cal program, which now insures more than 13 million Californians. More than 1 million Californians rely on Covered California, the state’s ACA insurance marketplace, for health insurance, and nearly 90% of these enrollees receive federal subsidies for coverage and care.
California’s coverage gains might not be in jeopardy if only parts of the law are deemed unconstitutional. For example, the court could find the individual mandate unconstitutional, but decide to invalidate only certain portions of the ACA that are “non-severable” from the mandate. This could include insurance market reforms that guarantee insurance coverage regardless of health status or pre-existing conditions and prevent insurance companies from charging more based on health status. Other ACA market reforms that could be eliminated in this scenario include limits on patient cost-sharing, no annual and lifetime coverage limits, and the requirement that insurers spend at least 80% of premium revenues on patient care (medical loss ratio).
California has enacted state laws that could protect some of these market reforms (e.g., cost-sharing limits), but the main safeguards for Californians with pre-existing conditions are contingent on federal law under the ACA. California also adopted a state individual mandate that has been credited with keeping down insurance premium increases in Covered California, but it could face legal challenges depending on the court’s decision.
If the court invalidates the ACA in its entirety, California’s health coverage gains would be in jeopardy, since federal funds support the vast majority of coverage expansions. It would probably take time to unwind the ACA coverage expansions—but the number of uninsured Californians would rise dramatically. And California’s hospitals and safety net providers would lose much of the financial stability that ACA reforms have provided.
State lawmakers have plans to protect ACA reforms and expand affordable coverage options for all Californians. But California, like all states, will continue to rely heavily on funding from the federal government.
President-elect Biden wants to strengthen ACA coverage expansions and protections. The new administration could move in this direction via executive actions and federal regulatory changes, but major new provisions—such as a new public option—would require Senate approval. And any of the new administration’s plans will have to contend with the Supreme Court’s decision in this case and future legal challenges.