Appeals Court ruling on Obamacare may jeopardize federal funding for Massachusetts

A federal Appeals Court on Wednesday struck down the individual health insurance mandate as unconstitutional, a ruling that could ultimately jeopardize up to $2.4 billion a year in federal funding for Massachusetts, and health insurance for up to 375,000 residents, according to a new report released by the Blue Cross Blue Shield of Massachusetts Foundation.

“Because we had health care reform in 2006, sometimes it’s easy for people to think what happens at the national level isn’t going to affect us,” said foundation president Audrey Shelto. “It certainly would, depending on what happens.”

The Fifth Circuit ruling in Texas vs. United States is not the final word on federal policy on Obamacare, and it will be some time before any impact is felt in the states.

The U.S. Supreme Court previously ruled that Congress had authority to require individuals to buy health insurance because Congress has the power to tax, and the individual mandate could be read as a tax on the decision not to buy health insurance.

However, in 2017, the Republican-led Congress eliminated the financial penalty for failing to buy health insurance.

The Appeals Court now ruled that without that financial penalty, the individual mandate can no longer be considered a tax, so it is an unconstitutional exercise of Congressional power.

But rather than overturning the entire law, the Appeals Court sent the case back to a Texas District Court judge to determine if the rest of the Affordable Care Act remains valid without the individual mandate.

Ultimately, the case is expected to end up before the U.S. Supreme Court.

Massachusetts is in a unique position because the state already implemented a health insurance mandate and near-universal coverage in 2006, under then-Gov. Mitt Romney. However, Massachusetts still had to make numerous changes to its health care system to comply with the Affordable Care Act.

The Blue Cross Blue Shield of Massachusetts Foundation report, done by the Urban Institute, looks at two scenarios: one where the Affordable Care Act is repealed and Massachusetts is able to restore its 2006 coverage program, and another where Massachusetts is unable to restore that system.

Shelto said because the 2006 reform relied on federal approval and federal funding, “We couldn’t just assume we can fall back and the feds would say everything we authorized in the past and funded, we’re going to agree to reinstate for you.”

If Massachusetts cannot revert to its 2006 coverage system, the report estimates that 375,000 people would lose health insurance and the state would lose $2.4 billion in federal funding. More than 10% of the nonelderly population of Massachusetts would then be uninsured, compared to 3.5% today. Hospitals would have to provide around $400 million in uncompensated care, to provide emergency services to people without insurance who cannot afford to pay.

If the Affordable Care Act is repealed but Massachusetts is allowed to keep its 2006 system, with some federal funding, an estimated 40,000 people would lose insurance. The state would lose $1.4 billion annually in federal money compared to today.

If Massachusetts is allowed to keep its 2006 system with subsidized coverage but with no federal funding, it would cost the state an additional $1.7 billion a year compared to today’s spending.

In both scenarios, anyone who currently buys federally subsidized or unsubsidized insurance on the health insurance exchange would lose that coverage. If Massachusetts were able to keep its 2006 reforms, some of those people would be able to enroll in ConnectorCare, the state-subsidized option on the health insurance marketplace.

Those individuals newly eligible for Medicaid under the Affordable Care Act would lose their eligibility in both cases.

Health Care for All, a Massachusetts advocacy group focused on health care access, said it is “deeply concerned” about the Appeals Court decision. “This decision puts access to health insurance and needed health services at risk for millions of Americans, including hundreds of thousands of Massachusetts residents," the organization said in a statement.

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