Health Care in the Courts

Note: This is an unedited transcript. For direct quotes, please see video at: 

Sarah Dash:                        Good afternoon, or good morning for those joining us from the West Coast and welcome to Alliance for Health Policies Webinar on Health Care in the Courts. Part of our Beyond the Beltway Health Webinars for Journalists Series.

Sarah Dash:                        I am Sarah Dash, President and CEO of the Alliance for Health Policy and I will be moderating today’s discussion.

Sarah Dash:                        For those who are not familiar with the Alliance, we are a nonpartisan organization dedicated to advancing knowledge and understanding of health policy issues. We do not lobby, advocate, or take any policy regulatory or legal positions ourselves. Our intention is to educate the health policy community on the issues.

Sarah Dash:                        Today we will be unpacking the many active healthcare cases regarding the affordable care act and related regulations and we’re going to take a closer look at the legal and policy implications that they may have.

Sarah Dash:                        You will hear from two excellent speakers whom I will introduce in a moment. Each of them brings a different perspective to this discussion. We are very grateful to have them shed some light on this critical and evolving topic.

Sarah Dash:                        The Alliance for Health Policy gratefully acknowledges the National Institute for Health Care Management Foundation for supporting this series. If you are interested in joining the Twitter conversation use the #allhealthlive and follow @Allhealthpolicy.

Sarah Dash:                        Before we get started with the program I’d like to briefly orient all of you to the go-to webinar platform and review some technical notes. We’ve taken a screenshot of the attendee interface. You should see something that looks like this on your own computer or desktop in the upper right corner. You can click the orange arrow to minimize and maximize this menu.

Sarah Dash:                        When you joined today’s webinar you were muted and you will be throughout the presentation. Please use the question panel to chat with us about any technical issues you may be experiencing. You may also send in questions that you have for the panelist at any time. We will collect these and address them during the Q&A session.

Sarah Dash:                        Finally, presentation slides and other materials are available to download in the handout section of your attendee interface.

Sarah Dash:                                  Finally, on our website you’ll find all of the additional materials that accompany this webinar including a resource list, expert list, and speaker biographies. A recording of today’s webinar will be available there soon as well.

Sarah Dash:                        Next, let’s move to the agenda for our conversation today. Each of the panelists will give some opening remarks and outline the current court cases. Then we have saved plenty of time for Q&A.

Sarah Dash:                        Here is our esteemed panel of experts. Joining us today we have Timothy Jost, Emeritus Professor at the Washington and Lee University School of Law. Tim has written numerous monographs on legal issues and health care reform for national organizations and until this year blogged regularly for Health Affairs covering nearly every ACA regulation that came out. We are grateful to have him here with us to give us a broad introduction to the current health care law landscape.

Sarah Dash:                        Next, we will hear from Mary Anne Pazanowski Pazanowski, a legal reporter with Bloomberg Law. Mary Anne Pazanowski’s beat include litigation surrounding the Affordable Care Act and its repeal, health industry transactions, and state and federal regulation of health care providers. We are fortunate to have her expertise with us today.

Sarah Dash:                        With that, I will turn it over to Tim to get us started.

Timothy Jost:                     Thank you very much. First slide please. The first lawsuits … Next slide. The first lawsuits involving the Affordable Care Act were filed within minutes of its signing and lawsuits have been coming steadily ever since. If one counts lawsuits involving the contraceptive services rules promulgated under the ACA’s preventative services requirement, there have been well over 100 lawsuits involving the ACA, 4 of which have reached the Supreme Court.

Timothy Jost:                     In the next few minutes I will give you a thumbnail sketch of lawsuits currently pending, which I will place in three categories, lawsuits challenging the ACA itself or policies promulgated by the Obama administration under the ACA, lawsuits challenging Trump administration policies related to the ACA, and lawsuits brought by insurers mainly in the court of claims trying to recover damages they have suffered because of policy changes under the ACA.

Timothy Jost:                     I’m not really an expert on Medicaid and do not intend to cover Medicaid cases. Mary Anne Pazanowski will talk about some of them, although I do have some familiarity with them and will be happy to answer questions.

Timothy Jost:                     Next slide. The most important currently pending challenge to the ACA is the lawsuit that has been brought by the Attorney General of Texas joined by AGs and governors of 19 other Republican-led states claiming that the ACA is currently unconstitutional and should be invalidated. Texas claims that the Supreme Court held in 2012 that the individual mandate was unconstitutional as a legal requirement but upheld it as a tax that the 2017 tax bill zeros out that tax as of 2019, so that the mandate will be totally unconstitutional and that the entire ACA collapses once the mandate is removed.

Timothy Jost:                     Much to everyone’s surprise, including apparently its own career lawyers, the Department of Justice decided to side with Texas on the constitutionality of the mandate, but said that only the ACA’s guaranteed issue and community rating requirements and preexisting condition exclusion ban should go with it. AGs from California and 16 other Democratic-led states has intervened to defend the ACA.

Timothy Jost:                     At the oral argument on September 5, Judge O’Connor who is no friend of the ACA, demonstrated a strong inclination to invalidate at least the guaranteed issue community rating and preexisting condition exclusion ban. The DOJ, the Department of Justice, however, seemed to be having cold feet urging him to not do anything precipitance that would cause “chaos in insurance markets” and presumably also chaos in the midterms.

Timothy Jost:                     Two other important cases challenging Obama-era regulations are pending also in the Texas courtroom of Judge O’Connor, who seems to be the go-to judge for plaintiffs challenging the ACA.

Timothy Jost:                     In the first case, Judge O’Connor invalidated the Obama-era Section 1557 rules prohibiting discrimination against transgender persons or persons who have had an abortion. Judge O’Connor refused to allow the organizations to intervene that thought to defend the rule or to enter a final judgment on their request so they could appeal. The Department of Justice is currently drafting new rules that will presumably not protect transgender individuals. However, a number of courts, including two in the past couple of weeks, have held that Section 1557 does prohibit discrimination against transgender individuals and any rules promulgated by the Trump administration to the contrary are likely to be challenged.

Timothy Jost:                     In the other case, Judge O’Connor invalidated a rule that requires state Medicaid programs to reimburse Medicaid managed care plans that must pay the ACA’s health insurance provider tax. He also ordered the federal government to “equitably disgorge,” which means pay back the money the states had paid in taxes. This ruling, which could award up to $840 million to the plaintiff’s states and is based on some very, very old law, will be appealed by the United States and is almost certain to be overturned.

Timothy Jost:                     Next slide, conflicting district court decisions have been issues in lawsuits challenging the risk adjustment transfer formula used by HHS in 2017 and 2018 to move funds from insurers that cover healthy populations to those that cover enrollees with more medical problems. The court in Massachusetts upheld the rule, but a court in New Mexico vacated it for lack of sufficient explanation. After a week or so of confusion mid-summer HHS republished the rule which should satisfy the court with added and additional explanation.

Timothy Jost:                     Another rule that the Trump administration is reconsidering is that governing employer wellness programs, which a court has vacated as of next year pending reconsideration by federal departments.

Timothy Jost:                     Next slide, the first round of cases brought by Democratic Attorney’s General were filed in 2017 against the Trump administration’s contraceptive rule. The Trump interim final rule allowed any employer, school, insurer, or insured individual to opt out of covering contraceptive coverage or purchasing coverage of contraceptives if the institutional or individual objected to contraceptives for any religious or moral reason. That rule provoked four lawsuits by several Democratic states and an injunction blocking the Trump rule and reinstating the Obama administration contraceptive rule is currently in place and on appeal.

Timothy Jost:                     Also in 2017, California and 18 other states filed a lawsuit challenging the Trump administration’s termination of cost-sharing reduction payments in October of 2017. Virtually all states allowed insurers to raise benchmark planned premiums to cover the cost of the cost-sharing reductions and the judge in the California case ruled that no one was really injured and therefore an injunction or an order to block the rule was not warranted. The California case has been dismissed without prejudice which means it could be revived if the administration changes its policies and prohibits insurers from covering their cost sharing reductions by increasing premiums.

Timothy Jost:                     Attorney’s General from New York, Massachusetts and 10 other states have filed a lawsuit challenging the Trump administration’s regulation broadening the rules governing sponsorship of Association health plans. They claim that the Trump rule violates the Affordable Care Act, ERISA and the Administrative Procedure’s Act. Among other claims the lawsuit assets that the ACA clearly distinguishes between the individual, small group, and large group markets and has different rules for each, as well as clear rules to aggregate groups and that do not allow small groups to be aggregated to form large groups through Association health plans. The states have moved for summary judgment and that motion is being briefed.

Timothy Jost:                     Next slide. On September 13th, 2018, organizations representing community insurers, psychiatrists, and patients filed a lawsuit in federal court challenging the Trump administration’s short-term limited duration rule. That complaint alledges that the rule’s definition of short-term as lasting up to 364 days and has limited duration as lasting up to 36 months violates the ACA and that the rule is arbitrary and capricious, and not supported by reason, explanation, or adequate notice, and thus violates the APA. The plaintiffs ask that the rule be declared invalid and enjoined.

Timothy Jost:                     The broadest challenge to the Trump administration stewardship of the ACA is a lawsuit brought by the cities of Chicago, Columbus, Cincinnati, Baltimore, and a couple of individuals that asserts that the Trump administrations actions and regulations have violated the Affordable Care Act in a host of ways and also violates the Take Care clause of the Constitution, which requires the president to take care that the laws be faithfully executed. Although there is little precedent for a Take Care lawsuit, it is also hard to think of a situation where the president has to blatantly and publicly asserted opposition to the implementation of the law.

Timothy Jost:                     On September 13th also, the Maryland Attorney General filed a lawsuit in the federal district court in Maryland asking the court to declare the ACA’s individual responsibility provision to be constitutional or failing that to hold it to be independent of the rest of the ACA. The complaint notes this is basically the reverse of the case that is being litigated in Texas. The complaint notes that the refusal of the Department of Justice to fully defend the ACA in the Texas case and the serious harm that would be done to Maryland if the ACA were invalidated, and also points to instances where the Trump administration has used pending litigation as an excuse to make policy changes it could not otherwise make.

Timothy Jost:                     Final slide, finally a host of cases continue in the court of claims brought by insurers challenging the failure of the government to reimburse them under the risk corridor program which was partially defunded by Congress in 2014. Under President Trump’s cut-off of cost-sharing reduction payments in 2017, the federal court of appeals decided against the insurers in a two-to-one decision on a risk corridor case this summer the insurers have asked the full federal circuit to re-hear the case en banc.

Timothy Jost:                     A recent court of claims decision held that a Montana co-op was entitled to cost-sharing reduction payments withheld by the Trump administration in 2017. Other cases are pending on this issue and this judgment could result in millions of dollars in judgments against the United States.

Timothy Jost:                     Thank you and I’ll turn it over to Mary Anne Pazanowski.

Mary Anne Pazanowski:         Hi everyone. My name is Mary Anna Pazanowski. I am a legal reporter for Bloomberg Law. I’ve been covering health care for about 11 years now. For the past eight of those years the Affordable Care Act has been a big part of that coverage.

Mary Anne Pazanowski:         Couple of caveats, my beat is health care litigation, that is I jump in whenever a court is asked to rule on a health care related subject, not necessarily ACA or Medicaid, but those are part of my beat. I don’t cover Congress, I don’t cover the agencies except to the extent that they are involved in any litigation.

Mary Anne Pazanowski:         We first really became aware of litigation involving the ACA almost immediately after President Obama signed the legislation, as Tim said earlier. Those earlier cases we farmed out to correspondents because we weren’t sure they really had any legs. We hadn’t seen anything done on this scale before. I took over when it really appeared that the cases were going to go somewhere and that was in November 2010. Those early cases, that Tim talked about of course, Florida versus HHS, National Federation of Independent Business versus Sibelius, which is of course the one that actually got decided in the Supreme Court. There were a couple of other states, Virginia, for example, that filed lawsuits also seeking to hold the Affordable Care Act unconstitutional. Failing that, the individual mandate, which is the section that requires everyone to have health insurance or pay a fine, NFIB of course held that fine as a tax and Congress had the authority to … Oh I’m sorry, can we put my slides up?

Mary Anne Pazanowski:         Yeah thank you. Congress had the authority under the Tax and Spending Clause of the Constitution to go ahead and enact that legislation.

Mary Anne Pazanowski:         Couple of things, now of course we have 2018 and 20 states sued the government in federal district court in Texas saying the ACA is unconstitutional because that tax has been repealed, almost the exact opposite of what the Supreme Court decided, well not all, is the exact opposite of what the Supreme Court decided. They’re trying to use the Supreme Court’s ruling against it.

Mary Anne Pazanowski:         A couple of interesting aspects of this case … Can we change slides now? I am paid to ask questions. So these are a couple of things that I’ve seen in that Texas case that I think deserve noting or maybe subsequent reporting is needed on these. One is just the huge coordinated effort by states. We have 20 red states brought this suit in Texas, 16 states, including the District of Columbia, intervened to defend the ACA after the Department of Justice said it wouldn’t.

Mary Anne Pazanowski:         There are a couple of other cases on this slide. Also, you can see that many, many, many states that are involved in these and they are almost evenly split.

Mary Anne Pazanowski:         If we go to the next slide you can see this red/blue state split is very apparent. Planned Parenthood versus Himes, that is not an ACA case, but I want to talk about that a little bit too because I think it’s an important policy case.

Mary Anne Pazanowski:         The other thing we’re seeing in these cases is the Department of Justice openly opposing federal law saying it won’t defend the federal law or regulations, happened in both Texas versus Azar and Franciscan Alliance, as Tim said.

Mary Anne Pazanowski:         The next is judge-shopping. Texas versus Azar and Franciscan Alliance again are primary examples. They were both filed in the northern district of Texas in I believe the Abilene division which has only one federal judge and that is Reed O’Connor who is not a friend of the ACA, as Tim also said.

Mary Anne Pazanowski:         Can we go to the next slide, please? Before we get to the Medicaid litigation, I did mix slides on these because I believed that somebody else was going to be covering them, but the risk corridor and the cost-sharing reduction cases, my question here really is what do these mean for insurers, what do these mean for individuals. A lot of people have speculated that if insurers don’t receive the cost reduction payments or their risk corridor payments, which, by the way, are in the billions and billions of dollars, I think $7 billion was the last figure I heard, what’s going to happen, are they going to raise premiums to the extent that people can’t afford to buy insurance? Insurance rates right now I think are running about the same as they were in 2017 for the 2019 sign ups. They expect to be about the same as the 2018 sign ups.

Mary Anne Pazanowski:         The silver loading, which is a way that the states that were involved in the California cost-sharing litigation against the government have used to make up for the money they’re losing and that involves putting higher premiums on the middle tier or silver plans. Well what that has done is it’s enabled a lot of people to instead buy gold plans at a lower premium rate because they’re getting tax credit, they qualify for tax credits from the federal government. That will help defer the extra cost of the gold plan, or they can get bronze plans, the lower tier for pretty much nothing.

Mary Anne Pazanowski:         Let’s see, moving on to the Medicaid litigation, the most important cases out there in my mind at the moment are these cases in which Planned Parenthood affiliates have sued states that want to kick Planned Parenthood off of their Medicaid roles. Again, this looks like a blue state/red state thing. The states that have planned or put out policies to stop paying Medicaid money to Planner Parenthood affiliates include Alabama, Arizona, Arkansas, Indiana, Kansas, Louisiana, South Carolina, and Texas. I think all of those have been challenged in federal courts. They’ve gone up to the federal appeals courts and so far four or five of them have said, “No state, you can’t do that. You have to continue operating your Medicaid program with Planned Parenthood in place.” Only one federal court, the 8th Circuit said Arkansas could remove Planned Parenthood from its Medicaid role.

Mary Anne Pazanowski:         These cases are already at the Supreme Court, several of those were denied review last year and the past couple of years. There are two cases that went to conference yesterday, that means the justices talked about them, or supposedly talked about them at their first big meeting which took place on Monday the 24th. We could know tomorrow, yes, Thursday, if the Supreme Court has decided that it wants to consider these cases. Grants are expected on Thursday. If the Supreme Court decides it’s not going to hear these cases we won’t find that out until Monday the 1st. In all likelihood they could also relist those cases. The two, by the way, that are up there right now are Kansas and Louisiana. The issue involved is whether there is a private right of action to enforce a provision known as the free choice of provider provision. That provision says that individuals who are Medicaid beneficiaries have the right to choose their provider unless that provider isn’t qualified for some medical reason. Planned Parenthood providers are qualified for those reasons, it’s just the states wanted to kick them off because they don’t want any of their taxpayer money going to fund abortions.

Mary Anne Pazanowski:         Let’s see, that’s two. Okay, I think that’s … Oh, there also are a couple of work requirement cases that are making their way up through the courts right now. I don’t have a whole lot of information about work requirements, because again, that’s a policy issue that I don’t really follow, but the one case that’s most important I don’t think I have a slide on it, is Stewart versus Azar, this was in the district court in the District of Columbia. The court said the HHS secretary exceeded his authority when he granted a Medicaid waiver that allowed Kentucky to adopt work requirements for its citizens who are Medicaid. The secretary reopened the comment period, the comments were overwhelmingly negative according to what I’ve heard. I don’t know exactly where that case is going. As far as the future of some of these cases, as I said, we will know hopefully within the next week or so whether the Supreme Court is going to hear the Planned Parenthood and Medicaid cases. I think Azar versus Texas could eventually wind up in the Supreme Court, although it’s going to take a long time before it gets there. It has to go from Judge O’Connor to the 5th Circuit, and from the 5th Circuit possibly up to the Supreme Court from there.

Mary Anne Pazanowski:         The cost-sharing reduction cases, one of the individual insurers just won a case interestingly enough on the same reasoning that prevailed in the risk corridor cases. That is, in these risk corridor cases the [inaudible 00:26:37] case, federal circuit said that the statute required the government to make those payments to the insurers, but Congress had changed the rules. It decided that that provision was going to be budget neutral, which meant that the government could only pay out as much money as it took in from insurers that made a profit.

Mary Anne Pazanowski:         In the cost-sharing reduction case the judge who decided that just a couple of weeks ago said well that [inaudible 00:27:17] who uses the same must make payments language as the risk corridor cases so under the Moda ruling we have to rule for the insurer there. Congress didn’t go back and revisit that, as they did there was no budget neutral requirement for those payments.

Mary Anne Pazanowski:         For all the journalists out there, the important thing is really to just think about what questions you want to ask. If these 1515 regulations go away what happens, does that mean that the anti-discrimination rule is no longer in effect? Several courts actually have said that, “Well no, there’s still cause of action under the statute itself.”

Mary Anne Pazanowski:         For Medicaid, if the Supreme Court takes it and it rules against Planned Parenthood then what does that mean for the Medicaid recipients? Are they going to be able to get care? Are they going to be able to afford care?

Mary Anne Pazanowski:         Quickly about Planned Parenthood of Great Ohio versus Himes, which was on one of my earlier slides, Ohio passed a law saying that the Department of Health could not pass on its federal grant money to any recipient that performed abortions or advocated for abortions. The 3 judge panel 6th Circuit held that violated the Unconstitutional Conditionals Clause of the Constitution. I’m sorry, there is not Unconstitutional Clause, it just imposed unconstitutional conditions on the recipient of a federal grant, can’t do that. Ohio petitioned for rehearing en banc. The DOJ joined the request for en banc rehearing and argued in amicus brief that this law should be upheld. There should be a hearing coming up on the en banc request within the next couple of weeks.

Mary Anne Pazanowski:         Okay, that’s all I have to say. Take it back please Sarah.

Timothy Jost:                     Sarah, we can’t hear you.

Sarah Dash:                        Sorry about that everybody. All right, now we’re good to go.

Sarah Dash:                        Thank you Tim and thank you Mary Anne Pazanowski for those opening remarks and for that overview of what is a tremendous amount of volume of court cases. I can see we already have a lot of questions to explore this topic further.

Sarah Dash:                        As a reminder, if you’re watching us you can still submit questions through the question panel in your attendee control panels.

Sarah Dash:                        Let me start by asking Tim and Mary Anne Pazanowski both, talk a little bit about the intersectionality of any of these cases. Is there a question of if one case goes one way then that could affect the way that other cases go and what impact could that have on the on the ground in terms of what happens in the policy or practical context.

Timothy Jost:                     Well one of the most obvious examples of that is the Texas case and the Maryland case because in the Texas case the Republic state AGs are asking the court to hold that the individual mandate is unconstitutional and therefore the rest of the act is void, whereas, in the Maryland case, Maryland is asking the Maryland court to hold that the individual mandate is constitutional and that in any event, the rest of the ACA is severable from the individual mandate and therefore should be upheld. I think it does illustrate I think an increasingly important aspect in these cases, which is forum shopping. Texas has been quite successful in getting it’s cases before Judge O’Connor and a couple of other judges in Texas who have demonstrated a very, very strong predisposition to rule against the Affordable Care Act whenever they can. Now I think the Democratic states are starting to file cases in districts where they feel that the judges are likely to be more friendly. We have the possibility of battling injunctions I suppose. I think that’s one illustration of that.

Timothy Jost:                     The other thing is, and I strongly affirm what Mary Anne Pazanowski has said, that the most important cases right now are these two circ petitions that the court presumably considered, the Supreme Court presumably considered on Monday and we may hear from them on Thursday involving the lawsuits brought by Medicaid recipients to enforce the free choice of provider provision of the Medicaid statute and ensure that Planned Parenthood continues to be available as a provider of family planning services, of Medicaid services in their state. The court could deny [inaudible 00:33:31] in these cases and not hear them, in which case, we would continue to have a situation where in most parts of the country Planned Parenthood is available but not in Arkansas or in the 8th Circuit, or they could take the case and decide it on some fairly narrow grounds like judge say that particular statutory provision is not enforceable by recipients or the court could take it and enter a very, very broad ruling that recipients can’t enforce any part of the Medicaid statute, which I think would be a very dramatic change in the law and would basically mean that states can do anything they want as long as they have a sympathetic federal HHS. I think the decision in that case could affect many other cases that have been brought or could be brought by Medicaid recipients to enforce federal law when states fail to follow federal law.

Mary Anne Pazanowski:         Right, I agree with Tim there. I think the Medicaid cases are probably the most significant at the moment. I’ve been told that cases involving different provisions in the Medicaid act are very provision specific and very fact specific. Some of my sources have said they don’t expect the Supreme Court, assuming it takes the case, to issue one of those really broad, really, really broad rulings that no part of the Medicaid act could be enforced by individuals or by beneficiaries. But, if it were to do that, that would be a major, major change in Medicaid law right now.

Mary Anne Pazanowski:         As far as other suits, I think the court of claims decision in that cost-sharing suit, that was a Montana health case, the way that the judge in that case took the ruling in Moda Health, which was in favor of the government and against the insurers and turned that back around and said, “Well, but these two provisions of the ACA use the same language and you said that language obligates the government to make these payments.” There’s been no other changes. There was with the risk corridors payments being declared to be budget neutral. I think that’s a very interesting example of where one court’s decision, the federal circuit’s in this case, had a major impact on the case.

Mary Anne Pazanowski:         Now, there are lots of other cost-sharing cases making their way up through the claims court, lots of different judges. It’s possible a different judge sitting on that same court could reach the opposite result.

Sarah Dash:                        Thank you both. Let me ask another question related to the risk corridor, cost-sharing reduction cases in particular, which is going back to the policy implication and the implication on consumers, can you speak more about the premium implications that these cases might have on plans particularly in the individual market? The question from the audience asks that premiums for families and middle income people who do not qualify for subsidies continue to be pretty high. The question is can you talk more about the premium implications of the court cases and then can you talk about what actions, if any, the states might be taking with respect to premiums?

Timothy Jost:                     Well that’s a pretty big question. The-

Mary Anne Pazanowski:         I’m going to differ to Tim on that.

Timothy Jost:                     Thanks. With respect to the direct consequences, what we’re talking about here are two situations. One was the situation of the risk corridor program, which was a program included in the ACA and which was supposed to share the risk with insurers who entered the program for the first three years. It was pretty uncertain what the market was going to look like, where the premiums had to be set. The idea was that we, the federal government, will share the risk with you if you enter this market, and if you take big losses we’ll help you out, and if you make really big gains then we’ll share those too. It turned out that the insurers had really big losses and few of them made really big gains.

Timothy Jost:                     In the meantime, after they had set their rates for the first year the Congress passed the amendment which limited payouts to the amount collected. So the insurers did take some pretty big losses, which I think over 3 years were about $12 billion. Cost-sharing reduction payments, again, the way it works is that insurers reduce cost-sharing for low-income people. They’re required to do it under the statute. They were supposed to be reimbursed. The House argued in a lawsuit that there was no appropriation. The Trump administration eventually agreed with that. The Obama administration disagreed and the Trump administration cut off those payments. The states then allowed them to raise their premiums on the benchmark plans, it’s called silver loading, which Mary Anne Pazanowski referred to, so that they were really after the first few months finishing up 2017 held harmless, but they did lose a lot of money in 2017 because, again, they had set their premiums with the assumption that the federal government would follow them all and then it didn’t.

Timothy Jost:                     As far as implications for premiums, what we’re mainly talking about here are losses that have occurred in the past and not current expenses. So they may have some ramifications for premiums, but on the whole, the premiums are based on current expenses, not on those losses. In fact, some of those insurers went bankrupt or went insolvent, some of those claims are being pursued by state solvency funds, some of them are being pursued by investors who bought up the claims of the insurers for a few cents on the dollar and they’re now trying to recover.

Timothy Jost:                     In any event, I think the main ramification that those lawsuits have for premiums going forward is just that insurers continue to be in a market where everything is very uncertain, is Congress going to try to repeal the Affordable Care Act again? What is the impact that the Association health plans and short-term rule are going to have on insurers going forward? What’s the Trump administration going to do next? When you’re trying to sell insurance in a market, trying to set your premiums in a market when you don’t know when the ground’s going to be pulled out from under you again you set the premiums higher than you would if you thought you knew what your risks were and that they were pretty manageable.

Timothy Jost:                     I think the main implication for all of this litigation is just that premiums are higher than they otherwise would be because insurers are dealing with greater risk than they should be. What happens as the premiums go up for people who are eligible for the subsidies is that the subsidies go up. The main bearer of the cost of all of this uncertainty is the federal government, which has seen the premium tax credits go up and up and up. But for people who aren’t eligible for subsidies they are having to pay those premiums themselves and in some markets where I live in western Virginia, premiums have gotten very high and are really no longer affordable for an awful lot of people. I think it’s just the problem of policy uncertainty, which can be aggravated by litigation if Judge O’Connor decides for Texas, as the Department of Justice attorney said twice during the oral argument, “It’s going to cause chaos in insurance markets.” We can just look forward to that and that’s going to drive premiums up again.

Sarah Dash:                        In terms-

Mary Anne Pazanowski:         The other-

Sarah Dash:                        … of anything that the states can do or might be contemplating is there anything and could you speak to that?

Timothy Jost:                     Well states-

Mary Anne Pazanowski:         Well the-

Timothy Jost:                     … are reacting to the Trump administration rules. I should say that if Judge O’Connor goes on with Department of Justice and holds that the guaranteed issued community rating and preexisting exclusion bans are invalidated a number of states have state laws requiring one or more of those requirements, so in those states, the impact would be far less than in states where there is no state law protection against preexisting condition exclusions.

Timothy Jost:                     Secondly, states have been reacting to the Trump administration rules by putting out their own laws governing short-term plans or Association health plans and states have a lot of discretion to do that. Unfortunately, the rules have been implemented so quickly that states really have not had time to respond. The National Association of Insurance Commissioners had said, “If you’re going to do these rules gives us some time so that the states can respond with the short-term rule that goes into affect next week.” States just haven’t had time to respond. Of course, once judges decide some of these cases state legislatures can’t react immediately either because they’re either not in session or just takes time to get laws drafted and passed.

Mary Anne Pazanowski:         I think a few states also have enacted their own contraceptive mandate or something that will require insurers to cover contraceptive products and services in their state in reaction to the rollback of the rules regarding religious non-profit organizations or organizations that object to supplying that coverage in their employee health plans on religious or moral grounds.

Sarah Dash:                        Thank you. Well let me ask just another question someone asked related to the health insurance provider fee case about the relationship between that case and the legal definition of what constitutes actuarial soundness. I don’t know if either of you can address that.

Timothy Jost:                     Well what happened in that case is that the Affordable Care Act imposed on health insurers a tax, a provider fee. That tax applies to some Medicaid managed care organizations which are insurers. Now, the law requires that states reimburse Medicaid or make sure that Medicaid managed care organizations are paid sufficiently so that they’re, I may get this a little wrong, but my recollection is so that they are actuarily sound, that you can’t drive a Medicaid managed care organization out of business by not paying it enough to cover its costs, because they are essentially just processing claims for the state, although they have some obligations to manage those claims.

Timothy Jost:                     What happened was that it was determined under rules under the Actuarial Standards Board, I believe, that meant that states should reimburse Medicaid managed care plans for the money that they paid for those taxes.

Timothy Jost:                     Judge O’Connor, once again, held that was an unconstitutional delegation of authority to a private body, the Actuarial Standards Board, and therefore, that rule could not be enforced. In doing so, he relied on some case law back from the early years of the Roosevelt administration. This is case law from pre-New deal case law mostly and case law that nobody’s really paid much attention to for the last half century or more, more than that. If you think about it there are so many ways in which the federal and state governments, the state government of Texas relies on actuarial standards from the Actuarial Standards Board, but there’s so many ways in which the government relies on private standard sitting bodies. Think about the joint commission, a huge organization that promulgates and enforces standards for federal and state government. When that ruling came down it just seemed to me to be breathtaking. Then on top of that, this disgorgement order basically seems to me to be an end run around the Tucker Act which says if you want to sue the government for money you have to go to the court of claims. The federal government certainly is going to appeal those decisions and I think they are almost certainly going to be struck down. But in the meantime, there are literally 100s of millions of dollars at stake in that litigation.

Sarah Dash:                        Thanks. Both of you talked about the Administrative Procedure Act and I want to ask you about that next. Can you talk about are there an unusual number of cases asking about the Administrative Procedure Act that has been an issue both under the Obama administration and now the Trump administration that has been raised? Can you talk a little about what that is and what’s at stake here?

Mary Anne Pazanowski:         The Administrative Procedure Act basically requires all agencies before they adopt a new regulation to put it through what’s known as notice and comment rule making, that is, they have to publish the rule in the Federal Register, they have to give it I believe it’s a 60 day period for people to comment on it and say is this a good idea, is this not a good idea before they can even go ahead and adopt the rule. I think at the end of that 60 day period they have to collect all of those comments, consider them, and then make up their minds whether they should adopt the rule or not. This is a very common way that agency rule making is challenged, especially in the Medicaid and Medicare cases. There are any number of cases that just allege that the government just didn’t do it properly. The agency just went about this the wrong way. In this case, in the cases we’re talking about, the contraceptive mandate cases are among those cases. They’re being argued on the idea that the government went about adopting these new rules in the wrong way. I don’t think there’s anything new about this type of litigation, it’s very pronounced here just because of the amount of new rules and new regulations that are coming out of the Trump administration. Maybe Tim could talk to that a little bit more.

Timothy Jost:                     The APA … basically I agree with Mary Anne Pazanowski … The APA though has both a substantive and a procedural element. Section 5USC706 says that court can hold unlawful and set aside agency action findings and conclusions found to be … then it lists a number of things. The main one is arbitrary, capricious, and abusive discretion or otherwise not in accordance with law. So if you look at the cases like the case against the Association health plan rule, against the short-term plan rule, against the Take Care lawsuit, the first they allege that the rule that is being challenged is otherwise not in accordance with the law, otherwise not in accordance with the affordable care act, otherwise not in accordance with ERISA, that it violates some law, but also, that it is arbitrary, capricious, and an abuse of discretion. There it may be refer to procedural defects with both the Association health plan rule and the short-term rule there were 100s or 1000s of comments filed. The Los Angeles Times studied the comments filed on those two rules and found that of the comments filed by stakeholders, which is to say consumer medical patient insurer organizations, 95% or more of the comments opposed the rule. So one of the issues raised in this litigation is why did you promulgate a rule that almost everybody affected by it thinks is a bad idea. Those are the kinds of challenges that are being brought against these rules.

Timothy Jost:                     Now, the importance of the case being brought under the Administrative Procedures Act is that it does say that a court may hold unlawful or set aside the agency action. What happened with the risk adjustment rule, what happened with the Section 1557 rule, is that the court simply said that the rule is invalid, it’s not enforceable, that happened with the contraception rule as well. The practical effect of that is that the rule is unenforceable anywhere in the United States.

Timothy Jost:                     The Department of Justice, Attorney General Sessions, put out a guidance I think last week saying that the Department of Justice attorneys ought to oppose that, that they ought to take a position that the court cannot vacate a rule for the entire country, it might be able to vacate it just for the parties before it, but not for the entire country. Also, this is related to nationwide injunctions, which we haven’t really discussed yet, but it’s something else that courts are doing where a court enters an injunction in a particular district court in some small town in Texas and says that we’re going to enjoin the enforcement of the rule, or the policy, or whatever, over the entire country. So Sessions’ guidance says we should oppose nationwide injunctions. We should oppose vacaturs of rules that apply to the entire country. But at this point, courts are entering those kinds of orders and then the government has to appeal up through the appellate courts and ultimately to the Supreme Court to get the rule reinstated, or it has to, as it is happening in some cases, rewrite the rule.

Timothy Jost:                     Let me just say one final thing about that and that is that the Sessions’ policy, this policy of opposing nationwide injunctions, opposing the vacating of rules under the administrative procedures act, could result in kind of a one-sided result where if the court sets aside a rule or tries to enjoin a rule nationwide the federal government will oppose it if it’s a rule that it likes. But if, for example, a court tries to set aside a rule from the previous administration like the rule protecting transgender individuals then the federal government could simply say, “Yeah, we agree and we will throw that rule out.” It could result in it making, if this policy at the Department of Justice were accepted by the courts, it could make it much harder to challenge rules that the current administration likes, but still make it very easy to challenge rules from a prior administration, which the current administration doesn’t like.

Sarah Dash:                        Thank you. I just want to remind the audience we have about 10 minutes left for questions. If you still have a question and you’d like to ask you can type it into your question box on your screen and we’ll take that question.

Sarah Dash:                        Let me ask the question for Mary Anne Pazanowski, and Tim if you want to join in, there’s a question about what can policy stakeholders do, there’s a question about particularly patient advocacy organizations. I know your field is journalism, so we’ll include journalists in there. What’s a journalist do to better educate the public on all these health care cases and their potential policy implications? It seems like such a challenge to keep track of it all, but would love your comments of that.

Mary Anne Pazanowski:         You do need a spreadsheet to keep track of all these cases. I think the number one thing you can do is ask really smart people like Tim Jost and I think there’s a couple of people probably on this call, exactly what does this mean for everybody? It’s very easy to talk in the abstract about this is what this judge held in this case, or this is what we think this court will do. That’s really what I do as a legal reporter. My coverage doesn’t really go beyond that too much. But I think for people outside the beltway, which is what this webinar was titled, you might want to go to those patient advocacy organizations and say, “Hey, how many people will this kick out of Medicaid? If Planned Parenthood affiliates can no longer offer low-cost healthcare and be repaid by Medicaid how many people is that going to affect?”

Mary Anne Pazanowski:         I think you can do the same thing with the health insurance question, how many people are no longer going to be able to afford to buy health care? We talk a lot about tax credits or subsidies, and Medicaid expansion, but there’s a big group of people in between who don’t qualify for tax credits and who aren’t poor enough to qualify for Medicaid. I think in those local papers, maybe that’s where your focus needs to be more than on the case itself. You can say if the court rules in a certain way how’s that going to affect those people. That’s always my question in the end, although like I said, my coverage is much narrower than that in general.

Sarah Dash:                        Great, thank you. On that note of who else this might affect, there was a question from the audience about beyond the health insurance industry, in particular, are there others that might be affected, the question pertained to device manufacturers, but in all of these cases-

Mary Anne Pazanowski:         Oh sure.

Sarah Dash:                        … are there other health policy or other health care industry stakeholders that might be impacted by-

Mary Anne Pazanowski:         Absolutely.

Sarah Dash:                        … a major ruling?

Mary Anne Pazanowski:         Absolutely. Health care providers are impacted by these rulings. The whole idea was for them to get paid. Health care providers are out there going, “Well who’s going to pay me if people are no longer able to afford insurance?” A big part of what helped prompt the Affordable Care Act, or at least its adoption in the form it was in in Massachusetts before it became a federal law, was the problem of people not getting care, so patients really going to get care when they can’t afford it. Are the health care providers going to be able to stay in business because they may not be getting paid for the care that they have to. The emergency rooms in particular are required by law not to turn people away, they have to screen and stabilize people who come into the emergency room. Well if they’re not getting paid can they continue operating those emergency rooms? Can they continue giving care at the quality level that they are expected to do so by the Medicare agencies or by accreditors like the Joint Commission, Tim mentioned them.

Mary Anne Pazanowski:         Really, it’s an overall … patients are affected, providers are affected, insurance is affected, medical device companies are affected. There’s a medical device tax in this law as well, although that may have been repealed. Employers are affected. Do employers have to provide their employees with health plans and what do those health plans have to cover, there’s certain special coverage provisions that they have to insure in all their plans, so a lot of stakeholders here.

Timothy Jost:                     It’s interesting, in the Texas case there were 11 amicus briefs filed by organizations supporting the California group that was defending the ACA. There were briefs filed by hospital associations, the AMA, and other medical associations, [inaudible 01:03:17] and other insurers, consumer groups, a whole variety of disease groups, cancer, heart, et cetera, a small business group, a labor union that represents health care workers, a group of health economists, a group of public health experts, a small business group, a group of law professors. Actually, across the political spectrum group of law professors because it was both law professors who had opposed the Affordable Care Act in earlier litigation and those who had supported it in earlier litigation. There was only Amicus brief in support of Texas opposing the Affordable Care Act and that was filed by Citizen’s United and some splinter gun group. It was an impressive array, and these were briefs written on very short notice, very impressive array of all of the stakeholders in the health care system saying this law isn’t working for us and reinstating preexisting condition exclusions, and conditions is not something that’s good for us or for the country.

Sarah Dash:                        Great thank you. We have a few minutes left, but I just have a couple more questions. I have to ask because a few people have now asked it. We have an election coming up. We have some mid-term elections coming up as well as the potential for a lot of change in the states as well, a lot of state legislatures, governors offices, et cetera. The questions really pertain to what, if any, impact could the elections have on these court cases, will they continue as is, and just keep making their way through the courts? What do you foresee?

Timothy Jost:                     Well I think that’s a very interesting question. Two of the Attorney’s General who filed the Texas litigation are now running for Senate, one in Missouri and one in West Virginia. Not surprisingly, the ads for their opponents are very, very prominently featured in their position on this litigation and then therefore their position on preexisting conditions.

Timothy Jost:                     I think there’s a number of poles now that are showing that protection against preexisting conditions exclusion or health status underwriting are very, very important to voters. I think that’s true because even though the immediate and primary impact of a decision in the Texas case would be on the individual market, we are all, not all of us, most Americans, are one pink slip away from the individual market. Most Americans have employers coverage but many Americans have preexisting conditions and if you lose your job you are at the mercy of the underwriting practices of insurers, so this is something that’s very important to voters.

Timothy Jost:                     Just one example, in Virginia where I live, Ken Cuccinelli, who was Attorney General at the time the Affordable Care Act was adopted, brought one of the first lawsuits challenging the Affordable Care Act. When in the, I believe it was the next election, we elected a Democratic Attorney General, Mark Herring, he switched sides and now Herring has been one of the Democratic Attorney Generals who is consistently he filed lawsuits or supported defending lawsuits involving the Affordable Care Act, so elections have consequences and if the poles are right I think we may see a number of situations where we may have attorney generals switching sides or states switching sides in some of this litigation.

Mary Anne Pazanowski:         Also in Virginia, going on the elections have consequences, there as a blue wave last November, a lot of Republican seats went to Democrats and now Virginia is adopting Medicaid expansion, which was something that Republicans had fought very vehemently before that happened.

Mary Anne Pazanowski:         I don’t know what the result of the election is going to be. I don’t know if the House is going to flip to a Democratic majority. If it does, then maybe all the talk of repealing the ACA will be put to rest again for a while. That doesn’t have any effect on the rules and regulations, and the policies being put out by the Trump administration, of course. Those will continue to be litigated and maybe those rules and policies, maybe that will have an effect on the election in 2020, the next presidential election.

Sarah Dash:                        All right, thank you.

Sarah Dash:                        Well that’s actually a perfect segue. Our next webinar in the series on October 16th will actually further explore the potential mid-term election implications for health care at large, not just in the courts. We are running out of time. I just want to ask Tim and Mary Anne Pazanowski if you have any final thoughts as we conclude this webinar?

Timothy Jost:                     Well I guess I would just say watch closely over the next day few days and weeks. The decision in the Texas case could come down this afternoon or it could come down a couple of months from now. We’ll probably see on Thursday whether the Supreme Court is going to hear the Medicaid Planned Parenthood cases, so stay tuned.

Mary Anne Pazanowski:         Right. We also have a lot of cases out there pending on the contraceptive mandate case. Those are in the appeals courts, we’ll see if those get upheld or struck down.

Mary Anne Pazanowski:         Another thing also to keep in mind is the Trump administration has been very good about putting conservative judges on the bench. The 8th Circuit in particular has a lot of Trump appointees right now. That’s going to have an effect on how these cases are decided in the future.

Timothy Jost:                     Yes.

Sarah Dash:                        All right, so plenty of things to watch for in the coming days and weeks.

Sarah Dash:                        I want to thank Tim Jost and Mary Anne Pazanowski Pazanowski for joining us today.

Sarah Dash:                        For those of you still on the webinar, please do take time to complete the brief evaluation survey that you will receive immediately after the broadcast ends, as well as by email later today. We appreciate your feedback and we use it when we plan our programming.

Sarah Dash:                        Thank you again to Tim and Mary Anne Pazanowski.

Sarah Dash:                        Again, a recording of this webinar will be available on our website soon along with the slides, additional reading, and a list of experts who you can contact for further questions.

Sarah Dash:                        I also want to thank the National Institute for Health Care Management Foundation, which helped to make today’s webinar possible and thank you to our audience for joining us this afternoon.

Sarah Dash:                        That concludes our webinar. Thank you again to everybody.