The success of the Patient Protection and Affordable Care Act, or Obamacare as you likely know it, depends on whom you talk to.
Obamacare's success is debatable
If you speak with supporters of the law, they'll point out how 12.7 million people enrolled through Obamacare's marketplace exchanges now have access to medical care, including millions of lower-income individuals and families who aren't even part of the aforementioned 12.7 million figure who have gained coverage through the expansion of Medicaid and CHIP programs in 31 states. All told, Gallup's latest data shows that the uninsured rate dipped to just 11% in the first quarter, down from 17.1% in the fourth quarter of 2013, the quarter prior to Obamacare's implementation.
And if you talk to opponents of Obamacare, they can point to the struggles of healthcare giants like UnitedHealth Group (NYSE:UNH), which is expected to lose $500 million from its Obamacare plans in 2016, and is pulling out of most of its 34 markets in 2017. By a similar token, more than half of Obamacare's 23 approved healthcare cooperatives closed their doors in 2016 due to excessive losses. The result, at least in the early going based on rate request data from a handful of states, is a big uptick in premium prices for 2017. In other words, the programs sustainability and affordability are considered to be very much in question.
Court victories have been commonplace
This back-and-forth debate aside, one area where Obamacare has proven its success is in the courtroom. For instance, in 2012, the Supreme Court of the United States (SCOTUS) upheld the ability of "lay and collect taxes" as it pertains to collect fees associated with violating the individual mandate -- the actionable component of the law that essentially mandates consumers to buy health insurance or pay a penalty.
In March 2015, SCOTUS refused to hear Coons vs. Lew, a case brought by medical practitioners who'd claimed that Obamacare created artificially low Medicare reimbursement levels. The case was thrown out by the U.S. District Court of Appeals, and with SCOTUS refusing to hear it, confirmed the decision of the lower appellate court.
Even more recently, in June 2015, SCOTUS ruled 6-to-3 in King vs. Burwell that the federal government has the right to hand out subsidies on behalf of the 38 states it represents via HealthCare.gov. The case had challenged the validity of the wording "state" as the law is written.
But just because Obamacare has a pretty good record of being defended in the courtroom, it doesn't mean more legal challenges aren't brewing. Last week, the latest legal threat to Obamacare took shape.
Obamacare's next legal challenge takes shape
In July 2014, the Republican-controlled House of Representatives sought to sue President Obama over his implementation of so-called cost-sharing reductions (CSRs) built into Obamacare.
Under Obamacare, insurers were essentially asked to offer considerably lower-priced copays, deductibles, and coinsurance to lower-income individuals and families. Individuals and families earning less than 250% of the federal poverty level, but more than 100%, qualified for CSRs, as long as they purchased a silver-tier plan. In return, the government agreed to pick up the tab on these CSRs to make up the difference for insurers.
The lawsuit brought by the House suggests that Congress would have needed to legally apportion funds used to provide CSRs; and since they had not, the funds were being apportioned illegally.
U.S. District Court Judge Rosemary Collyer, who allowed the historic lawsuit to get off the ground in the first place, ruled on Thursday, May 12, that "Paying reimbursements without an appropriation [from Congress] thus violates the Constitution." Collyer's ruling was put on hold immediately with the expectation that the Obama administration would file an appeal. If this ruling were to somehow stand, premium payments wouldn't be an issue, but going to the doctor could cost more than some 7 million people can afford with no subsidies provided for copays and deductibles.
Assuming an appeal is filed, the next stop for House of Representatives vs. Burwell will be the U.S. Court of Appeals for the District of Columbia, although a ruling may not occur until after Barack Obama has left the Oval Office. If Collyer's ruling is overturned by the appellate court, we could be looking at yet another SCOTUS ruling by 2017 or 2018.
A bigger worry for Obamacare's survival
However, before we even have an opportunity to find out whether the appellate court will uphold or overturn Collyer's decision, we're going to need to see who winds up as our 45th president. Democratic Party front-runner Hillary Clinton has suggested keeping Obamacare firmly in place and building around its success. Conversely, the Republican Party's presumptive nominee Donald Trump would repeal and replace Obamacare. Without Barack Obama in office, Obamacare's future could be very much in doubt, and what happens in November will be very telling as to where the health law of the land heads next.
For consumers, insurers, and investors, this is a very uncertain time. Premium price inflation could deter consumers from purchasing health insurance, as well as chase current enrollees away, and now investors have to deal with the prospect of a legal battle brewing over CSRs to boot.
If there's one important thing to keep in mind from the perspective of investors, it's that the vast majority of insurers derive only a small percentage of revenue from Obamacare plans. While disruption in Obamacare would be an unpleasant bump in the road for the industry, national players like UnitedHealth Group aren't going to necessarily be worse for the wear over the long run without Obamacare. Nonetheless, it looks as if we have yet another Obamacare catalyst to keep our eyes on in the coming months.