Courts will have their say as legal concerns linger

September 1, 2012

Lower courts will decide on the lingering concerns of uncertain PPACA provisions.

The U.S. Supreme Court's June 2012 decision in National Federation of Independent Businesses v. Sebelius (NFIB) was heralded by many as the definitive judicial answer on the Patient Protection and Affordable Care Act (PPACA). The Court's decision on the constitutionality of the individual mandate was indeed significant, particularly given the threat to PPACA as a whole.

While any significant changes to PPACA likely will arise through the political and legislative process, the judicial branch may yet have its say again.

Independent Payment Advisory Boards (IPABs): In August 2010, a group of individuals, including legislators from Arizona, filed suit challenging PPACA's provisions for IPABs. The plaintiffs argue that PPACA is unconstitutional in, among other things, delegating taxing and spending power to IPABs and by eroding the separation of powers. The court stayed the action in January 2012, pending the NFIB decision. The Department of Justice's most recent update to the Arizona federal court asks that the government be granted judgment as a matter of law on certain of the claims relating to the taxing power based on NFIB, while the remaining claims should be dismissed.

Federal Exchanges: After NFIB, attention has shifted to the insurance exchanges. PPACA provides subsidies for most individuals who purchase insurance "through an exchange established by the state." With nearly half of the states threatening to decline/delay operation of an exchange, the federal government likely will operate those exchanges. But, do the exchanges operated at the federal level qualify as "an exchange established by the state"? Or does PPACA preclude individuals in those states from receiving the valuable subsidies for insurance? In May, the IRS issued a rule extending the subsidies to insurance bought in exchanges operated at the state or federal level. But, challengers appear to be brewing for another fight, arguing that the IRS's rule conflicts with the explicit statutory language.

None of these challenges likely threaten PPACA as a whole. However, insurers should be aware of lingering policy uncertainties surrounding these controversial provisions.

This column is written for informational purposes only and should not be construed as legal advice.

Laura McBride is an associate in the Litigation practice of Calfee, Halter & Griswold LLP.