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States demand clarity on Obamacare ruling before Friday to avoid ‘chaos’

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Demonstrators in support of U.S. President Barack Obama's health-care law, the Affordable Care Act (ACA), hold up 'ACA is Here to Stay' signs after the U.S. Supreme Court ruled 6-3 to save Obamacare tax subsidies outside the Supreme Court in Washington, D.C., U.S., on Thursday, June 25, 2015.

Andrew Harrer | Bloomberg | Getty Images

Demonstrators in support of U.S. President Barack Obama’s health-care law, the Affordable Care Act (ACA), hold up ‘ACA is Here to Stay’ signs after the U.S. Supreme Court ruled 6-3 to save Obamacare tax subsidies outside the Supreme Court in Washington, D.C., U.S., on Thursday, June 25, 2015.

The federal judge in Texas who struck down the Affordable Care Act over the weekend must clarify by Friday that his ruling will have no immediate impact, the coalition of states defending the law demanded in a court filing.

U.S. District Court Judge Reed O’Connor ruled Friday that the ACA, also known as Obamacare, was unconstitutional.

He reasoned that the Trump administration’s elimination of a penalty for those who choose not to buy health insurance undermined the constitutional basis of the law. The U.S. Supreme Court has upheld the law under Congress’ taxation power.

The ruling, which was over a lawsuit filed by a group of Republican state attorneys general and governors, came a day before the deadline to sign up for an Obamacare plan. It generated confusion about the near-term impact on the health-care law that affects millions of people and hundreds of billions of dollars in federal funding.

In a motion filed Monday evening with the U.S. District Court for the Northern District of Texas, California and more than a dozen other states asked O’Connor to clarify his ruling, or order that it not go into effect pending a review by a federal appeals court.

The states argued that such action was necessary to “avoid the widespread confusion and massive disruption to the healthcare market that would otherwise ensue.” They argued that declaring Obamacare void would “cause chaos for patients, providers, insurance carriers, and the federal and state governments.”

More than $600 billion in federal funding for health care is on the line, the states said. In addition, an invalidation of the law would cause 12 million Americans to lose their insurance and strip 8 million low-income individuals of billions of dollars in tax credits.

Sign-ups for insurance on the Obamacare marketplace are down so far this year amid confusion about the state of the health law.

Stocks in the health-care sector plunged Monday, the first full day of trading following O’Connor’s ruling. The Health Care Select Sector SPDR (XLV) dropped 2 percent Monday and was little changed Tuesday.

Experts anticipate that O’Connor’s ruling would not have an immediate impact on the law.

That view is shared by the federal government. The White House said that “the law remains in place” pending the appeals process. But the text of the ruling left open the possibility that states could stop complying as soon as the start of 2019 — when the individual mandate penalty drops to $0, which was included in the tax revamp passed by Congress late last year.

Courts have issued conflicting rulings about how quickly a judgment such as O’Connor’s should go into effect.

In their motion, the states cite a decision from the 5th U.S. Circuit Court of Appeals, which has jurisdiction over the Obamacare case if it is appealed, which found that a declaratory judgment is designed to be “milder” than an injunction. O’Connor declined to grant an injunction in his Friday order.

The states also cited a ruling from 1995 that found that the government can continue to apply a law even after a district court declares the law is unconstitutional. But, the states noted, at least one district court has held that a declaratory judgment is “effective immediately.”

The states also argued that the possibility of a federal government shutdown, which could take place as soon as Friday, bolstered their case for a ruling ahead of the deadline. The federal judiciary said it had enough funding to maintain operations for three weeks during a shutdown earlier this year.

The government is set to temporarily shutdown if Congress cannot agree on a spending compromise. President Donald Trump said last week that he would be “proud” of a shutdown in order to secure $5 billion to fund a proposed wall along the U.S.-Mexico border. Democrats so far have been unwilling to agree to such a spending measure. The White House suggested Tuesday it might back down from its demand.

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