If the Supreme Court Overturns the Individual Mandate

First, trying to predict how the Court will rule is at best just speculation. I know what Justice Kennedy said both today and yesterday and it certainly doesn’t look good for the Obama administration and upholding at least the mandate.

But I will remind everyone, based upon oral arguments, most Court watchers expected a ruling in favor of the biotech industry on a recent case involving health care patents. “Surprisingly,” the Court ruled against the industry.

Whatever the justices are now thinking, there isn’t a lot anyone could do differently until we actually get a ruling and know exactly what gets thrown out, if anything, in the 2,800-page law.

But if the mandate is overthrown, then what?

First, exactly how the Court rules on severability will be critical. What could go out with the mandate?

The Obama administration has smartly tried to build a firewall around the rest of the Affordable Care Act (ACA) by arguing before the Court that only the insurance reform elements of the bill should fall if the mandate goes down—that the mandate is only the quid pro quo for the insurance industry in exchange for taking all comers. That looks to me like the most logical outcome of overturning the mandate—but my perspective is one of an insurance veteran not a Court expert.

The Obama firewall strategy is a smart strategy for two reasons. First, it leaves the rest of the health law standing. Second, losing the most popular part of the new law, the insurance reforms, leaves the administration with lots of political leverage later on to fix the bill.

From a policy perspective, I would see fixing the law in the wake of losing just the the mandate an easy thing to do. In place of the individual mandate, I would suggest a provision that:

  • Has no mandate for any individual to buy insurance.
  • Allow individuals and families to be able to buy insurance at any time.
  • Upon purchase, everyone in the family would be covered under any of the plans available.
  • But, if the insurance were not purchased when first offered, any preexisting condition would not be covered for two years.

So, guaranteed insurability if purchased when first offered, no mandate to buy, people can purchase at any time and be covered, other family members are not penalized, and the insurance pool is protected.

The policy fix is easy.

But politically, in the current hyper partisan environment, the Republicans have no interest in helping the administration fix the Affordable Care Act. Until both sides are willing to work together on a comprehensive compromise on health reform, there will be no fixes.

What happens if the mandate falls, the Court leaves the insurance reforms in place, and the political paralysis continues?

New Jersey. That state has had insurance reform and no mandate for a number of years and it’s a mess—even more unaffordable rates and enormous anti-selection in the insurance market.

The lack of a mandate won’t hurt the larger already efficient employer market and it won’t help the already problematic small group market. The employer mandate for those with more than 50 employees would continue.

In the exchanges, where the ACA would provide good subsidies for the poor and near poor, there would likely be adequate spread of risk among these lower income groups in a completely voluntary market because the insurance is affordable. But higher insurance rates will mean the CBO’s estimates for the cost of the subsidies will be way off. Remember, the ACA’s subsidy system caps the cost for health insurance based upon income—higher insurance premiums mean higher federal costs.

Without a mandate and with the insurance reforms still in effect, the anti-selection would be most pronounced in the middleclass where the subsidies were always insufficient anyway.

What happens if the Court throws out the mandate as well as the insurance reforms? The insurance industry would get the benefit of many more customers because the subsidies would still be in place. But they would be healthy because the insurance underwriting and pre-existing condition provisions would remain. While the insurance industry would do well, the providers would still suffer the ACA’s payment cuts and not have as many patients coming in with insurance cards as they expected—particularly the most sick and costly for them.

If the Court throws out the individual mandate, as well as perhaps the insurance reforms, the law would have to be fixed.

But the political environment would have to change markedly before Republicans and Democrats could come together on a comprehensive fix to the new law.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

37 replies »

  1. source and why did you choose non group? Didn’t MA merge its individual with small group which means its a distorted market? Individual also make up the smallest slice of the health market

  2. Today’s actual rates are public and easily accessible. Individual (non-group) insurance for a 35-year old, single person is: MA (2k dedictible, 20% coinsurance) – $239. NJ (2.5k deductible, 20% coinsurance) – $498. New York rates are over $1k/mo.

  3. No, and this is rude and cruel and may be deleted, but, the man needs to just die. Not in a murderous or cruel manner, but just expire! He has no soul. You do not shoot an alleged friend in the face and then expect that victim to apologize to you, the shooter.

    A defining moment of who this man was. Did I miss Cheney’s apology?

    Sorry, I wasn’t in Hell that day!

  4. http://www.boston.com/news/health/articles/2009/08/22/bay_state_health_insurance_premiums_highest_in_country/

    “Massachusetts has the most expensive family health insurance premiums in the country, according to a new analysis that highlights the state’s challenge in trying to rein in medical costs after passage of a landmark 2006 law that mandated coverage for nearly everyone.”

    Doesn’t NJ have enough problems without you accusing them of this as well?

  5. HIPAA will protect someone that played by the rules, they will never be without coverage. High Risk pools are an outlet for those that tried to game the system, are they really our priority?

    How did that 20 something get to 20 something without insurance? Why not continue the insurance they had up until that point? Parents policy, COBRA, HIPAA. Play by the rules you never go without, the way it should be.

  6. Robert et al,

    The legal challenges are political, nearly all of the plaintiffs are via red states with Republican Governors, and their appointed AG’s. The leading edge of this waste of tax payer dollars is none other than the State of Florida, led by the ‘neo-criminal’ as in the architect of record fines paid by Columbia/HCA under the leadership of then CEO now Governor Rick Scott.

    The correlation between political agenda’s and SCOTUS agreeing to hear this case has guaranteed its underlying DNA as a de-facto culture war.

    However, the bottom-line is the Republican alternative to ACA is Paul Ryan’s faith based do nothing and let the market, enabled by HSA’s, HDHP’s correct the excesses.

    Seriously can anyone look at your mother, grandmother and their cohorts and actually think they can become ‘prudent buyers’ of healthcare? That they as individuals can negotiate better deals with docs, hospitals, imaging and surgery centers than a health plan with 100s if not millions of members under their plan? No way Jose. This is a myth.

    Perhaps over time, the empowered consumer will build and assert a tipping point that will somehow restrain and reduce the cost of healthcare and physician services to ‘fair value’, but don’t hold your breath.

    This is a war of narrative. Given its complexity and vocal opponents with mind numbing sound bytes of misinformation have held the upper ground on a law that most American love when presented with the line item details of consumer benefits, it needs foot soldiers to chop wood and carry the water of facts. So count me in as someone who willing to show up and do his part against this disingenuous campaign of dis and misinformation!

    Thanks for the post, my thoughts here: ‘SCOTUS Consideration A ‘Pyrrhic Victory’ Regardless of Ruling’ | http://acowatch.wordpress.com/2012/03/29/scotus-consideration-a-pyrrhic-victory-regardless-of-ruling/#comments

  7. The individual mandate of the Affordable Act is its lifeline. There is one thing that is clear in this article and the comments posted here, there is utter ignorance on how this whole fiasco is going to be funded. My very limited understanding of the extent of the coverage of pre-existing conditions, the coverage of children up to 26 years of age within a family program and additional medicare age pharmaceutical coverage or otherwise may all sound very attractive as they may well be but FOLKS, these things don’t grow on trees. They COST money. This whole conundrum will be solved if we kick the federal government out of our lives and possibly return matters in the hands of the states. When personal responsibility and accountability are in place, one would be surprised how differently we mobilize ourselves in the solutions for problems such as healthcare provision. There are way too many people 1) who don’t understand and 2) way too many people who like FREE stuff and love and enjoy that other people pay for it while they get away with doing absolutely NOTHING.

  8. “With HIPAA why do we need them? Every State has HIPAA policies.”

    High-risk pools are a lot more inclusive than HIPAA policies. They don’t just cover people who have just left employer-based coverage.

    How does a 20-something-year old with a history of Leukemia use HIPAA to get private insurance if he hasn’t had a employer-based coverage before?

  9. “would that also be the State with the most expensive healthcare premiums?”

    Nah, it’s not New Jersey.

  10. It’s highly unlikly PPACA would have covered the 32 million people it claims. It was proven people wouldn’t get to keep their coverage. It’s highly unlikly PPACA would not cost at least twice what they claimed.

    With HIPAA why do we need them? Every State has HIPAA policies.

  11. hum…would that also be the State with the most expensive healthcare premiums? I think their premiums are actually the highest in the world aren’t they?

    I seem to also recall some recent budget issues and them being out of money?

    “Even as Massachusetts celebrates a dip in the growth rate of health care costs, state lawmakers are still working feverishly on cost-control bills.
    The critical question: How much health care spending should the state aim to cut? Two unlikely bedfellows, the state’s largest employer group and a coalition of congregations, are putting the pressure on legislators to go deep.”

    Well that worked for ….. 6 years….whats up next?

  12. Almost half of the states never provided high-risk pools before the ACA. It’s highly unlikely that they’ll keep providing them after 2014

  13. “Any state that wanted to could also open their small group market to individuals.”

    Very good advice. In fact, one state already did this in 2006. It merged the small group market and the entire individual market (not just self-employed) under the same rules. To keep the new merged market from imploding, it introduced this thing called the individual mandate. It was an interesting new concept that was described at the time by the state’s republican governor as a measure to ensure individual responsibility.

  14. States have been providing high risk pools for 10+ years before PPACA was passed. They were State funded long before Obama and they can be State funded long after he his gone.

  15. The high risk pools were only meant to be a temporary measure and is only federally funded until 2014 or so. I suppose states could continue providing them, but the states would have to provide their own funding.

  16. Actually, in some states, the high risk pool rates are quite low. In Pa, the monthly rate for everyone is about $260. That’s not bad.

    So if the mandate is overturned, my guess is that this pool will still stand.

  17. Peter clueless as usualt. I do not think insurance is the most important thing people should buy. I have zero problem with people being uninsured, i just don’t think providers should be required to give them care.

    What point does you comming on here making stuff up serve?

  18. “The problem is not people’s ability to qualify for a policy, its people’s willingness to pay the price of the policy they want.”

    Nate’s right except he’s phrased it in a loaded statement bent toward his insurance can cure all vision. Very few people look far enough ahead to do the right thing, especially in insurance. So what would the policy “they want” look like that would make the mandate unnecessary? I don’t think there’s any policy that could be sold cheap enough AND still provide adequate coverage in a big enough pool that would convince most self made uninsured to buy it. Could the insurance industry cheap down a policy to fit anybody’s “affordability” mind set and still provide comprehensive coverage? Of course in Nate’s mind health insurance is the MOST important product people need to buy, but in the real world that’s not the case, and people should not be forced to decide either health insurance or retirement savings, health insurance or college education, health insurance or the rent.

    I think if the mandate dies the whole ACA dies, but as I’ve always said you should not force people to buy the most expensive product on the planet because you don’t have the political will to control costs.

  19. A-ha,. Nate and I agree. Cheney needs to survive to be VP in another puppet government, say the Palin 2021 Administration, when we need to invade some other middle eastern country to boost Halliburton stock price. So from an “fin d’empire” perspective the cost of the transplant paid for by the Republican’s favorite non rationing program, Medicare, is completely justified!

  20. “but your figure of 6K per month didn’t include any pooling of risk. When you pull risk that rate drop to $1500 per month or so for the sickest person imaginable.”

    It was a PER CAPITA calculation, bro’, just to illustrate the aggregate magnitude (which, then, has to be — or not — “redistributed”).

    Moreover, let’s see, $1,500/mo? $18k/yr? My late mother got $11,256/yr in SS ($938/mo).

    Yeah, shit, no problem. Everyone would have been elbowing each other aside to underwrite her massively comorbid late 80’s Bad Seff via those Ryan vouchers.

  21. but your figure of 6K per month didn’t include any pooling of risk. When you pull risk that rate drop to $1500 per month or so for the sickest person imaginable.

    You don’t look for those people to write coverage, they find you. For example when ever a group adds a new employee you never know what your going to get. We get rare blood disorders, physc issues, or all sorts of huge claims. We didn’t go out looking to write that person, they qualifed for the plan and came on at the same rates as everyone else in the group.

    Just one reason why group pooling is so effective.

  22. “Most people already have coverage when they get sick, insurers don’t individually underwrite people every year. ”

    Stipulated. But, none of which refutes my per capita arithmetic and its implication — i.e.. the pooling of risk within the limits that people can afford.

    Moreover, I do recognize that there is indeed a highly skewed UTIL distribution even within the revolving door 5%’ers (irrespective of the period you choose — I used to mine Nevada Medicare and “all payer” claims data in my work, so I do in fact have a clue or two). So, who would even write “coverage” for the high end of THAT substrate? The actuarial “expected value” would be prohibitive.

    Except, of course, for a geriatric Mitt.

  23. Most people already have coverage when they get sick, insurers don’t individually underwrite people every year. They can only increase rates on the pool as a whole. So those people that get sick will only see an increase equal to all those healthy people also in the pool.

    Further that 5% isn’t the same people every year, they are usually only on the list for 1-2 years then their claims return to normal.

  24. AHRQ data on NHE. Look it up.

    e.g., http://www.ahrq.gov/research/ria19/expendria.pdf

    “Almost all high cost individuals are insured already.”

    Indeed. Principally Medicare, Medicaid. Ryan would give them vouchers and have them “shop for free market coverage” that no one would write them for anything less than mid to high five figures a year.

  25. I think there is an exception here, he is the embodyment of evil and will probably live to be 200. I think this is the first of his 3-4 heart transplants.

  26. Dick Cheney’s heart transplant had to have been one of the most terrible examples to set for his generation. But, it does illustrate the pure narcissism and entitlement that older people have cultivated, and now expecting the under 30 crowd to support without any opportunity for dissention.

    Technically, Dick C is not a boomer, but he is the poster child of “gimme that, it’s mine” that is the boomer credo. Giving hearts to people over 70 years old, what the f— is that about?! And what if the next one is a smoker?

  27. Anything to back up that 5% of population account for half of NHE?

    insuror? who is that?

    Aren’t most of those 5% on Medicare so what profit margin?

    Why would those 5% wait until they were sick to buy coverage?

    Your rant really makes no sense. Almost all high cost individuals are insured already.

  28. OK, Nate, so, 5% of the population accounts for ~ half of NHE (AHRQ data).

    5% of population of 310 million is 15.5 million

    Half of NHE is ~ $1.3 trillion.

    $1.3 trillion divided by 15.5 million = $83,871 per capita in the high UTIL cohort.

    Equivalently, ~$6,989 / month.

    Toss in some profit margin for the insuror….

    Price, price, price.

    Mitt wouldn’t even notice the cost.

    I can see you’re gettin’ on a roll, so, you can take it from here.

  29. http://www.dol.gov/ebsa/faqs/faq_consumer_hipaa.html

    Under HIPAA, a plan is allowed to look back only 6 months for a condition that was present before the start of coverage in a group health plan. Specifically, the law says that a preexisting condition exclusion can be imposed on a condition only if medical advice, diagnosis, care, or treatment was recommended or received during the 6 months prior to your enrollment date in the plan.

    If you have a preexisting condition that can be excluded from your plan coverage, then there is a limit to the preexisting condition exclusion period that can be applied. HIPAA limits the preexisting condition exclusion period for most people to 12 months (18 months if you enroll late),

    Does any Liberal in America ever read the crap we are required to mail them every year?

    “Although HIPAA adds protections and makes it easier to switch jobs without fear of losing health coverage for a preexisting condition,”

  30. Any state that wanted to increase their guarantee issue to cover groups of 100 or 1000 could, why don’t they? Becuase its not a problem that needs solved.

    Any state that wanted to could also open their small group market to individuals.

    PPACA is a completely pointless bill that was terribly written.

  31. “But they would be healthy because the insurance underwriting and pre-existing condition provisions would remain.”

    Wrong again Bob, name a state that doesn’t have guarantee issue small group laws. The problem is not people’s ability to qualify for a policy, its people’s willingness to pay the price of the policy they want. If you keep trying to solve the wring problem your awlays going to have the wrong solution.

    There are very few people that truly can’t get a policy, its a problem that doesn’t exist. Price, Price, Price is the issue.

  32. “Republicans have no interest in helping the administration fix the Affordable Care Act.”

    Its equally accurate to say the administration has no interest in helping Republicans pass an affordable reform bill that would actually work and is Constitutional…oddly its never phrased like that though, why Robert?

  33. Robert your proposing we decrease benefits? Currently if you don’t have creditable coverage pre-ex is not covered for 12 months, is there a reason to increase that?

    Access to coverage is not the issue, its all the people that try to game the system then when cought don’t want to wait 12 months for coverage.

    HIPAA already fixed this 10 years ago.

  34. If the Supreme Court overturns the individual mandate (and does not overturn Medicare/Medicaid), we’ll be living in a bizarre legal framework where the federal government can force you to pay for other people’s health insurance, but cannot force you to pay for your own. And the justification for this will be even more bizarre: the $500 penalty to nudge you to buy a $5K policy of your choice will be, legally speaking, a higher degree of government intrusion than just taking the $5k directly without giving you a choice. Such a ruling will surely make it into the history books.

    From a legal perspective, such a precedent will have no real effect. Future legislatures can still spend on whatever they want. They’ll just have to be careful to not use the words ‘mandate’ or ‘penalty’ while drafting taxing and spending laws.

    But from a political perspective, the implications would be huge. It will be end of the end of the political center in health care policy. Such a ruling will likely unravel the entire ACA, and we’ll be left with two camps: one asking for nothing less than Medicare for all and the other asking for nothing less than deregulation for all and maybe vouchers for some.

  35. I appreciate that the two-year wait period would eliminate most of the antiselection, but it does not solve the political problem. What happens to the person who loses his or her job and the subsidy is not enough to motivate him to keep continuous coverage? What happens to the people who are just not switched on enough to get health insurance, despite the massive subsidies, and stumble into an accident or illness?