AM Best’s Commentary

Fate of the ACA Remains in Doubt, But No Changes … for Now

The crux of the argument: Without the ‘tax’ individual mandate is unconstitutional

OLDWICK, N.J., March 4, 2020—The U.S. Supreme Court’s recent decision to hear the latest case on the appeal of The Patient Protection and Affordable Care Act (ACA) marks its third review of the landmark healthcare law since it was passed. A new Best’s Commentary, titled, “Fate of the ACA Remains in Doubt, But No Changes … for Now,” states that at stake is the individual mandate, which is considered the key component holding the healthcare law together.

The appeal case centers on a December 2018 ruling by the Federal District Court in Texas that states the ACA is invalid, and that, without the “tax,” the individual mandate is unconstitutional. Additionally, a December 2019 ruling by the Fifth Circuit Court of Appeals in Louisiana, also agreed that the individual mandate was unconstitutional; however, it did not render a decision on the rest of the law and sent the case back to the prior judge.

Upholding Texas = End of ACA

Upholding the Texas court ruling would end the ACA, barring any new federal legislation re-establishing the law’s provisions. Elimination of the ACA would end federal premium subsidies in the individual market and federal funding of Medicaid expansion populations. Although the ACA individual business was highly unprofitable in the early years, the situation has reversed in the past few years. Medicaid has been profitable, albeit with narrow margins.

AM Best does not expect any significant impacts to health insurers in 2020—but that may not hold for 2021.

To access the full copy of this commentary, please visit here.


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