3 things to know as federal appeals court prepares to weigh in on ACA's perilous future

A federal appeals court will hear oral arguments this week on a case that could upend the ACA. Here's what you need to know about the case. (Getty/designer491)

A federal appeals court will hear oral arguments this week on a case that could upend the entire Affordable Care Act. 

Red and blue states will face off before the Fifth Circuit Court in New Orleans on Tuesday afternoon, where a three-judge panel will weigh whether the 2017 rollback of the individual mandate invalidates the ACA in its entirety. Texas District Judge Reed O’Connor ruled that the ACA was unconstitutional as a result of the mandate’s repeal in December.

The ruling baffled legal experts on both sides of the aisle and was decried by payer and provider groups. 

The Trump administration has said it agrees with O’Connor’s decision but has also continued to enforce the ACA as the legal back-and-forth plays out. 

RELATED: DOJ injects further uncertainty into ACA markets—but for some it’s just more legal ‘noise’ 

Ahead of the hearing, here are some central questions the case will be tackling:

Who can actually defend the ACA?  

In late June, the circuit court asked the parties involved to weigh in on whether the intervening states and the House of Representatives have standing to defend the ACA in the Justice Department’s stead.  

If the court determines that they’re ineligible, it could leave O’Connor’s ruling to stand, wrote Jonathan Adler, a law professor at Case Western Reserve University and an expert on the case. But plenty of legal questions would still be left in that scenario, Adler said in his analysis. 

“Should the Fifth Circuit decide the case is moot and that it should leave the district court decision in place, it would not be the end of the matter,” he wrote. “The district court only provided declaratory relief to the plaintiff states, so the question of whether they are entitled to any form of injunctive relief—such as an order barring enforcement or implementation of the ACA—has yet to be decided.” 

RELATED: Appeals court denies states’ request in Texas v. Azar to delay hearing set for July 9 

The parties in the case filed briefs late last week in response to the court’s inquiry, where they argued that the case is not moot despite DOJ’s changed position. The department noted (PDF) that the White House is still enforcing the ACA though it generally agrees with O’Connor’s position. 

This stance is similar to the one the Obama administration took on the Defense of Marriage Act, where it continued to enforce the law while it was on the books but declined to vigorously defend it against legal challenge, DOJ said. 

The plaintiff states—led by Texas Attorney General Ken Paxton—argue (PDF) that the intervening states have the standing to enter the case, but the House does not as it signed on too late. DOJ shares this position. 

“The state intervenors cannot stand in the shoes of the federal government to defend the ACA,” they said in the brief. “Nevertheless, the states can prosecute this appeal in their own names because of their alleged threatened loss of federal funds.” 

How much of the ACA should be tossed?

There’s a divide between the Department of Justice and the plaintiff states on how far a ruling that invalidates the ACA should go, legal experts note.  

Nicholas Bagley, a law professor at the University of Michigan and an expert on the case, wrote in a blog post that the red states that initially brought the suit aim to “blow up the ACA altogether,” while the Trump administration would like to preserve some elements of it, notably provisions pertaining to fraud enforcement. 

RELATED: Kentucky, West Virginia among states that would be hit hardest by an ACA rollback 

It’s likely the department is currently prosecuting fraud cases under these provisions, Bagley said, which is why they’d want to see those elements stand. But DOJ has yet to clearly define a line in the sand on this position, he said. 

“The department flagged certain anti-fraud statutes as examples, but it’s not all that clear how far the argument goes,” Bagley wrote. “Does it apply to the biosimilar program? Calorie-count labels in chain restaurants? The Medicaid expansion?” 

Because the Trump administration wants to see less of the law invalidated than the states do, that also ensures that the case would not be moot, DOJ wrote in its brief, as there is still disagreement between the states and the feds. 

“Although the United States has argued that '[t]he district court correctly held that the individual mandate is unconstitutional … and that the remainder of the ACA is inseverable in turn,’ the government has explained that the district court’s judgment is overbroad,” the agency said. 

How will coverage for millions—and business for insurers—be impacted? 

It’s not a secret that if the ACA were eliminated overnight, the impacts would ripple to all parts of the healthcare system; industry groups have spent the months since O’Connor’s ruling sounding the alarm about the potential impacts. Analysis from the Urban Institute projects that 19.9 million people would lose insurance coverage if the ACA was invalidated, increasing the uninsured population by 65%. Rolling back the ACA would especially hit young and low-income people, according to a second Urban study

These trends would especially hold true in more rural states that expanded Medicaid under the ACA, Urban analysts said. 

RELATED: Centene still bullish on ACA exchanges despite legal challenges to the law 

In addition, big-name insurers such as Centene Corporation and Molina Healthcare have built their business on the ACA’s exchanges—and seeing those vanish could cripple those companies. The largest insurers—such as UnitedHealth, Humana, Anthem, CVS and Cigna—have more diverse portfolios and would feel less strain on their business if they no longer offered ACA exchange plans, financial analysts said. 

Centene and Molina are also heavily invested in Medicaid managed care plans, which could also be impacted if the ACA’s expansion ends. Both companies said they were optimistic about the ACA’s future, however, and Centene said it has a backup plan if the exchanges are nixed.