And What Happens if the Individual Mandate is Struck Down?

An alarming article in Politico.com looks at what could happen if the Supreme Court determines that the Affordable Care Act’s individual mandate provision is unconstitutional—something that the current conservative leaning of the Court seems to indicate is somewhat more likely than not.

Assuming that such a possible decision by the Court follows that of the Eleventh Circuit Court of Appeals in ruling that the mandate is unconstitutional but the remainder of the ACA may stand, the Politico.com article anticipates some potentially disastrous consequences.

The provisions of the ACA—some of them already in force—include guaranteed issue, elimination of annual and lifetime limits, and a ban on basing premiums on health status, essentially decoupling coverage and premiums from insurance risk. Without the requirement for almost everyone to have coverage, there will be nothing to ensure that the risk pool contains a large percentage of individuals in good health as well as those with medical problems, and nothing to stop anyone from waiting until they’re sick or injured to demand coverage.

Without a subsequent change to the ACA, the consequences of full implementation in 2014 with no individual mandate would be dramatic jumps in premium rates in the individual and small group markets. These, in turn, would lead to further drops in enrollment, especially by those least in need of coverage, leading to additional premium increases as all but the sick retreat from the insurance market—the classic adverse selection-fueled death spiral.

As premiums for all but major employers shoot through the roof, those unfortunates who work for marginally-profitable small businesses or, worse still, pay for their own coverage will find insurance either unobtainable—as insurers exit the small group and individual markets—or unaffordable.

In a more politically rational world, a possible high court ruling against the mandate would be followed by Congressional action to modify other parts of the law—for example, by modifying the guaranteed issue provision. However, no-one who watched the cliff-edge battle over the debt limit can be confident that extremists in either party would compromise on any reasonable solution. What’s to stop lawmakers from continuing to refuse to modify their positions regardless of the impact on the insurance market? After all, the ACA is anathema to Republicans, while there are plenty of Democrats who despise the private insurance industry and who might be happy to see it close to collapse.

Even leaving political adversarial issues alone, Democrats will not be eager to renege on their promise that health insurance will be available to anyone, while many Republicans may also hesitate to revoke such an apparently attractive provision for fear of a subsequent electoral backlash.

The Politico.com article doesn’t try to guess the outcome, but it’s hard to be optimistic. A reasonable supposition—given the current inflexible mood in Congress—is that there will be no compromise until the insurance market is on the edge of disaster—or maybe already slipping over that edge. Insurance industry lobbyists are likely to find few votes for a rational solution until there is sufficient public outcry over skyrocketing premiums and cancellations of coverage by carriers abandoning the market to put politicians’ reelection chances at risk.

Roger Collier was formerly CEO of a national health care consulting firm. His experience includes the design and implementation of innovative health care programs for HMOs, health insurers, and state and federal agencies.  He is editor of Health Care REFORM UPDATE.

4 replies »

  1. As someone who has worked in the health insurance business for nearly 24 years, the current situation ( with carriers preparing for the mandate) is worse than it has ever been for the consumer and businesses. Just ask anybody in America with health insurance today if there coverage is either better or less expensive than it was just one or two years ago.

    Granted the health care situation in America is very much on the verge of imploding and unless Congress or even better yet we Americans speak up with our votes we might as well call it in.

    Just ask those in neighboring countries how they feel about there own health care situation. The mandate will not work because we cannot force someone to buy something controlled by government.

    Just my thoughts

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  3. Is it possible that the entire health insurance industry needs to take a look at themselves from a broader perspective? Among leading capitalist democracies, the U.S. is alone in allowing insurers to make a profit on basic healthcare plans. We Americans always feel the need to reinvent the wheel. There are plenty of functioning models out there, such as the Japanese or Swiss healthcare systems. The unfortunate attempts to go backwards, as discussed above, are not useful. Get ready for more change, folks. There’s no going back!

  4. I agree with you on many points of this article. I work for a large healthcare company in Utah (we also have one of the larger health plans) and issues you discuss around insurers not being able to turn down applicants as well as no life time limits, coupled with no mandatory insurance legislation scares the hell out of me. In your article “Clueless in Utah,” all I can say is that at least we tried. It is a lot more than others have done. If other states gave it a shot, we would have more models to compare as we look for an ideal way for dealing with this component of the ACA. Since we already knew this is heading to disaster, do you have any thoughts on a solution?