Lawyers for the Department of Justice have asked a court to strike down key Obamacare regulations requiring insurers to offer coverage to those with pre-existing conditions at equal price, arguing that they are now invalid due to the passage of last year’s tax law.
While the legal move still faces an uphill climb, it creates another cloud of uncertainty for insurers in the coming months as they finalize rates for the new year. It is also sure to embolden Democrats who plan to make healthcare a central part of their strategy to retake Congress in this fall’s elections by arguing that Republicans led by President Trump are sabotaging Obamacare.
The latest legal twist for Obamacare arises out of a suit filed by 20 states led by Texas and Wisconsin which argues that because the tax law eliminated penalties for going uninsured, the individual mandate is no longer constitutional. The reasoning is that in 2012 the Supreme Court found the mandate constitutional by defining it as a tax, but absent the penalties, it is no longer a tax and thus cannot be constitutional. Given its centrality to the law, the plaintiffs argue, striking it down means that the rest of Obamacare must also fall.
Far from defending Obamacare against the suit, as is typical for the government in challenges to federal law, the DOJ filed a brief in the U.S. District Court for the Northern District of Texas agreeing with the plaintiffs that the individual mandate was no longer constitutional.
Though the brief did not support the plaintiff’s desire for immediate relief from the law, the DOJ argued that the individual mandate will be unconstitutional once the penalties disappear on Jan. 1, 2019.
At that point, DOJ argues, two other Obamacare provisions should be struck down — one requiring insurers to cover those with pre-existing conditions and the other preventing insurers from charging more based on health status. The DOJ argues that these regulations cannot be severed from the individual mandate, which was put in place to compel younger and healthier individuals to purchase insurance to offset the costs of covering older and sicker individuals with pre-existing conditions.
The DOJ, however, argues that the rest of Obamacare, including its subsidies and Medicaid expansion, can be separated out from the individual mandate and should be allowed to stand.
Though it’s unusual for the DOJ to decline to defend a federal law, it is not unprecedented. In 2011, for instance, President Barack Obama’s DOJ refused to defend the Defense of Marriage Act in court.
The fact that the DOJ is not defending Obamacare, however, does not mean that it will go undefended, as other states could still step up to defend the law. And there are still many reasons to be skeptical the latest challenge to Obamacare will go very far.
Still, the news introduces a new wild card that insurers will have to consider as they decide how much to charge for Obamacare insurance next year and even determine whether they should participate in the program at all.
