The Trump administration said in a court filing late Thursday it will no longer defend key parts of the Affordable Care Act, including the requirement that people have health insurance and provisions that guarantee access to health insurance regardless of any medical conditions.
The decision, announced in a filing in a federal court in Texas, is a rare departure from the Justice Department's practice of defending federal laws in court. Texas and other Republican-led states are suing to strike down the entire law because Congress recently repealed a provision that people without health insurance must pay a fine. The repeal takes effect next year.
Texas said that without the fine in place the requirement to have health insurance is unconstitutional and the entire law should be struck down as a result.
The administration said it agrees with Texas that the so-called individual mandate will be unconstitutional without the fine. It also said that provisions shielding people with medical conditions from being denied coverage or charged higher premiums and limiting how much insurers can charge older Americans should fall as well.
It said the rest of the law, including Medicaid expansion, can remain in place.
But the major insurance industry trade group said Friday that removing consumer protections for people with health problems and for older adults will harm consumers and create more turmoil in markets that have already seen steep premium increases.
"Zeroing out the individual mandate penalty should not result in striking important consumer protections," America's Health Insurance Plans said in a statement. "Removing those provisions will result in renewed uncertainty in the individual market, create a patchwork of requirements in the states, cause rates to go even higher for older Americans and sicker patients, and make it challenging to introduce products and rates for 2019."
The lawsuit, filed in February, is in many ways a replay of the politically divided litigation that ended with the Supreme Court upholding the health care overhaul in 2012. In the new suit, California is leading a group of Democrat-led states in defending the law.
The major difference is that the Justice Department under President Donald Trump has largely switched sides.
Attorney General Jeff Sessions said in a letter to Congress on Thursday that Trump, who campaigned on repealing the law and nearly did so his first year in office, approved the legal strategy.
Donald Verrilli Jr., President Barack Obama's top Supreme Court lawyer who defended the law, called the decision "a sad moment."
"I find it impossible to believe that the many talented lawyers at the department could not come up with any arguments to defend the ACA's insurance market reforms, which have made such a difference to millions of Americans," Verrilli said.
Shortly before the government's court filing, three career lawyers at the Justice Department withdrew from the case and were replaced by two political appointees, according to court filings.
Timothy Jost, law professor emeritus at Washington and Lee University in Virginia said the Trump administration is trying to persuade the court to do what it was unable to achieve in Congress last year - essentially, repeal key parts of the Obama health law.
Jost said it's telling that three career Justice Department lawyers refused to support the administration's position.
"It's just one more part of the story of trying to politicize the Justice Department," said Jost, a supporter of the health law.
Despite the Justice Department position, the Health and Human Services Department has continued to apply the health law. Indeed, sign-up season for 2018 under the Trump administration resulted in only a slight enrollment drop-off from Obama's last year.
Insurers are now finalizing their premium requests for 2019, and Jost said the Justice Department filing may prompt jittery carriers to seek higher rates.
"The question is, what does this do to insurance markets now?" said Jost.