In the past couple weeks, there have been significant developments in the healthcare legal sphere. One federal district court invalidated the administration’s approval of waivers that would have permitted Kentucky and Arkansas to establish Medicaid work requirements. Another federal district court invalidated an administration rule to permit the sale of “Association Health Plans” that do not conform to the standards of the Affordable Care Act (ACA). And, finally, the Department of Justice announced that it now agrees with a district court decision that the entire ACA is unconstitutional.

Federal District Court Vacates Kentucky and Arkansas Medicaid Waivers
On March 27, a federal district court vacated the approval by the Centers for Medicare and Medicaid Services (CMS) of Medicaid Section 1115 waivers allowing Kentucky and Arkansas to establish “community-engagement” requirements for Medicaid beneficiaries. Judge James Boasberg found that the agency’s approval of these waivers was “arbitrary and capricious” (thus violating the Administrative Procedures Act) because the agency had failed to consider the waivers’ impact on health care coverage, a key objective of the Medicaid program. The court remanded the waiver requests to the agency for reconsideration. As a result, no Medicaid beneficiaries in Arkansas will be disenrolled for the time being, and Kentucky will not be able to implement its proposed work requirement. The court’s ruling does not directly affect any other waiver requests that have already been granted, but may still have ramifications for other states, as explained in a blog post from the Georgetown Center on Children and Families (CCF) — Judge Blocks Arkansas and Kentucky Medicaid Work Requirement Waivers: What Does This Decision Mean for Other States? (3/28/19) — which concludes that, in considering future waiver requests, “HHS will at a minimum have to estimate how many beneficiaries are likely to lose coverage, what will happen to those who lose coverage, and explain why that coverage loss is justified….” In response to the court’s rulings, CMS Administrator Seema Verma tweeted that the agency would continue to encourage state experimentation within the Medicaid program. See also Federal Judge Strikes down Medicaid Work Requirements in Kentucky, Arkansas (Fierce Healthcare, 3/27/19).

Federal District Court Invalidates Rule on Association Health Plans
To address the high cost of some insurance individual and small-group insurance policies that comply with the standards of the Affordable Care Act (ACA), the Centers for Medicare and Medicaid Services (CMS) issued a regulation allowing the sale “Association Health Plans” (AHPs), which do not meet these standards and are therefore less expensive. These AHPs do not need to cover the “Essential Health Benefits” included in ACA-compliant plans, and are allowed to charge higher premiums for individuals with pre-existing conditions. Health-policy experts predict that the availability of AHPs will attract healthier individuals, thus making ACA-compliant plans more expensive for those who need or want the more robust coverage they offer. For details about the basis and impact of the ruling, see Judge Blocks Trump’s Rule to Expand Insurance Plans That Don’t Meet ACA Requirements (Roll Call, 3/29/29); Court Invalidates Rule on Association Health Plans (Health Affairs blog, 3/29/29). A separate regulation allows the sale of another type of non-ACA-compliant plan, “Short-term, limited-duration” plans. That regulation is also under legal challenge.

Administration Changes Position in Texas v. U.S. (Texas v. Azar)
In Texas v. United States, Republican attorneys-general from 20 states challenged the constitutionality of the entire Affordable Care Act (ACA). In a December 2018 decision that surprised most legal scholars, the district court agreed. The case is now before the Fifth Circuit Court of Appeals. Normally, the U.S. Department of Justice (DOJ) defends laws challenged in court. In this case, however, the administration agreed in part with the law’s challengers, arguing that the court should invalidate the requirements that all individuals be guaranteed insurance and should not be charged higher prices based on health status. The Department did defend the constitutionality of the law’s unrelated provisions, such as the Medicaid expansion. On March 25, the DOJ sent an unusual two-sentence letter to the appeals court, stating that the U.S. now supports the lower court’s ruling that the entire ACA should be invalidated. See Trump Administration Asks Court to Strike Down Entire ACA (3/26/19). At the same time, White House Chief of Staff Mick Mulvaney, promised that no one would lose their insurance and that there would still be protections for people with pre-existing conditions should the ACA be overturned. White House Chief of Staff Mick Mulvaney Guarantees No One Will Lose Coverage If Obamacare Struck Down (USA Today, 3/31/19). As a result of the DOJ’s new position, the only parties left to defend the ACA are the intervenors – attorneys-general from a number of other states, and the House of Representatives. It could take many months for the appeals court to act, and then the case would likely be taken up by the Supreme Court, which would not be able to hear the case until its October 2019 term, at the earliest. In theory, Congress could amend the ACA in order to make the case moot before it reaches that point. Congress Could Get Rid of ACA Lawsuit, But Won’t (Axios, 12/18/18).

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