As Washington has been consumed by talk of a legal effort by President Trump to invalidate all of Obamacare, the administration was just dealt a blow on a less high profile, but ultimately more significant, Obamacare case.
On Thursday, a federal judge struck down a Trump regulation that was the linchpin of the administration’s strategy to reshape Obamacare in the absence of a legislative path to replacing it.
Specifically, U.S. District Judge John Bates ruled against the administration’s regulation allowing small businesses and self-employed Americans in similar industries to to band together in associations that would allow them to purchase insurance as if they were a single large employer.
These association health plans were seen as a way for Americans to get around the extensive requirements placed on Obamacare insurance plans, allowing them to have more choices and lower premiums. The plans were expected to cover 4.6 million people by 2022, according to the Congressional Budget Office. Along with more flexible rules for short-term plans, the association plans were a central means by which Trump officials intended to provide an alternative to Obamacare through administrative action.
But Bates, who was appointed by former President George W. Bush, argued that the association health plans rule defined “employer” too broadly, in a way that violated the Employee Retirement Income Security Act, or ERISA, and undermined Obamacare. He said that the administration must now consider what part, if any, of the rule could be salvaged in the wake of the ruling. The Trump administration will also have the opportunity to appeal the decision.
Though the current Texas v. Azar case making its way through the courts could, in theory, lead to the overturning of all of Obamacare. In reality, its reasoning is very shaky, and there’s zero reason to believe that Chief Justice John Roberts, who rewrote Obamacare in 2012 in order to save it, is going to overturn the whole law when presented with a weaker case, and when Obamacare is already in effect and has millions of beneficiaries. Calling it a “long-shot” is probably overstating its odds of success. So I believe all the talk of Obamacare potentially being overturned and Trump’s new talk of replacing it, is highly overblown.
But the association health plans were a much more targeted, narrowly tailored, way to get around Obamacare’s regulations and provide people with more options. So it actually had a realistic chance of success. If the administration doesn’t win on appeal, this will ultimately be more consequential. Because it will send a signal that not only has it been impossible to repeal Obamacare legislatively, and overturn it legally, but also that courts will frown on efforts to use regulatory discretion to get around its strict requirements.
