California Stands to Lose Big if US Supreme Court Cancels Obamacare

SACRAMENTO, Calif. — Of any state, California has the most to lose if the U.S. Supreme Court overturns the Affordable Care Act.

Health care coverage for millions of people is at stake, as are billions in federal dollars. Yet Democratic California leaders don’t have a plan to preserve the broad range of health care programs the state has adopted since it aggressively implemented Obamacare — including initiatives that go far beyond the federal health care law.

“We have made great strides and we don’t want to go back,” said Katie Heidorn, executive director of the nonprofit Insure the Uninsured Project. “This is real and we have to get our ducks in a row.”

The Supreme Court heard arguments Tuesday in the case, now known as California v. Texas. Texas and 18 Republican attorneys general are challenging the law, with backing from President Donald Trump and his administration. They argue that Obamacare is unconstitutional because the law cannot stand without the tax penalty that accompanies the individual mandate, which is the requirement to have health coverage. The Republican-controlled Congress zeroed out the mandate’s tax penalty as part of the 2017 tax bill, which the Republican attorneys general say rendered both the mandate and the rest of the law unconstitutional.

California Attorney General Xavier Becerra is leading the defense and says the law can stand without the mandate.

Legal experts predict the court is unlikely to rule until spring 2021, at the earliest. It could strike down the law entirely or keep parts of it, such as the ability for states to expand Medicaid to more adults, which has brought health insurance to roughly 12 million Americans. Or, the justices could preserve the law as is.

Even as legal experts say the addition of three Trump-nominated justices to the Supreme Court since the last time it weighed in on the law amounts to a legal wild card, Becerra is optimistic.

“We feel pretty confident that, as in the past, when the justices look to the fundamentals of the Affordable Care Act, they’re going to find that it is constitutional,” Becerra told California Healthline. “It would be near impossible right now to keep a state’s head above water without the Affordable Care Act.”

Democratic Gov. Gavin Newsom’s administration agreed the situation would be “catastrophic” for California if the law, or core parts of it, are overturned.

The state enthusiastically embraced Obamacare, and it gets more money than any other state under the law. It expanded its Medicaid program, called Medi-Cal, adding nearly 4 million enrollees as of June. It was the first to create a health insurance exchange, Covered California, which offers tax credits to help qualified Californians pay for coverage. Currently, about 1.5 million people are enrolled.

Since 2014, when the major provisions of the law took effect, California has cut its uninsured rate to historic lows — down to about 7% from 17% — and health insurance premiums for those buying coverage on the individual market are rising slower than before. The statewide average premiums for Covered California plans in 2020 and 2021 have increased less than 1%.

But if the court finds the law unconstitutional, about 5 million residents could lose health coverage, and the state stands to lose an estimated $27 billion in federal funds annually.

Of that, Medi-Cal would lose $20 billion and Covered California would lose nearly $7 billion, according to the state Department of Finance. Public health agencies, which also receive federal Obamacare funding, would also take a nearly $50 million hit.

California also offers much more than Obamacare provides, such as state subsidies to help low-income and middle-class families pay for their Covered California plans. It also covers full Medicaid benefits for unauthorized immigrants up to age 26. And as the Trump administration cut funding for outreach and enrollment, Covered California has continued to plow more money — $157 million this year — into such efforts.

Should Obamacare be struck down during a deepening financial and public health crisis, Newsom administration officials and lawmakers say California could not afford to continue its Medicaid expansion on its own. Millions of other low-income residents on Medi-Cal could face cuts to their benefits and insurance markets could be destabilized, sending insurance premiums soaring, state lawmakers warn.

And Covered California would be in peril, said Covered California Executive Director Peter Lee.

Lee told lawmakers in October that coming up with a replacement strategy would be a waste of time because the state couldn’t make up for such a monumental loss in funding.

“Talking about contingency plans is like talking about adding a few lifeboats to the Titanic,” he said. “We are not spending time on contingency plans, I’ll be really frank about that.”

Instead, Democratic lawmakers say they’d be forced to make painful health care cuts because, unlike the federal government, states can’t operate with budget deficits. And legislative leaders say they wouldn’t be able to finance the far more ambitious health care agenda they are eyeing under a Joe Biden-Kamala Harris administration.

“Peter Lee is right. I don’t know how we’d pivot and replace resources that should be coming to us from the federal government, because we’re in a budget crisis brought on by the pandemic,” Senate President Pro Tem Toni Atkins told California Healthline.

“We’ve gone from a $26 billion budget reserve and surplus in March to a $54 billion deficit, so this would put us in an impossible situation to continue to move forward creating more access from a health care perspective,” Atkins said.

Powerful lawmakers who lead the health committees in the state Senate and Assembly said they fear California would have to rescind programs approved just last year, including the state subsidies for low- and middle-income Californians.

To date, roughly 40,000 low- and middle-income people have benefited from those subsidies, expected to cost $240 million this year, according to Covered California.

Most likely, lawmakers said, the state would no longer be able to afford its 2019 expansion of Medi-Cal to unauthorized immigrants between ages 19 and 25, which is expected to cost roughly $100 million per year. About 75,000 unauthorized immigrants in that age group signed up for the program this year, according to the Department of Health Care Services.

California has codified other parts of Obamacare into state law that don’t require major state spending. These laws would preserve protections for some Californians should the federal law be invalidated.

For instance, state-regulated plans must cover dependents up to age 26, and this year Newsom approved laws prohibiting them from imposing annual or lifetime coverage limits. Also, state-regulated insurers are required to cover preventive care such as mammograms and vaccines.

But millions of Californians in plans regulated by the federal government would lose those protections.

“We’ve passed some bills that do a little patchwork, but it’s a fraction of what’s needed,” said state Sen. Richard Pan (D-Sacramento), who chairs the Senate Health Committee. “People with preexisting conditions are going to be in big trouble.”

Because the Supreme Court likely won’t issue its ruling for months, Newsom administration officials and lawmakers said they have time to come up with a plan should Obamacare be deemed unconstitutional. If necessary, they could call a special legislative session and Democratic lawmakers, with a supermajority in the legislature, could enact emergency legislation.

Dr. Robert Ross is a member of the Healthy California for All Commission, which is studying the feasibility of enacting a state-based single-payer system. He said the commission, with deep health policy expertise, also could be well poised to respond.

“All the lofty aspirations to do something that transformative turn to dust if the Affordable Care Act is blown up,” said Ross, president of the California Endowment, a foundation that focuses on expanding health care access among Californians. “We’d be having an entirely different, sobering conversation, and I’d hope our commission could put ideas in front of the governor for consideration.”

Samantha Young of California Healthline contributed to this report.

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