Awaiting the Court’s Decision on Healthcare

The Supreme Court has already decided the fate of the health reform law, and in a few short weeks the rest of us will know whether it is upheld, struck down entirely, or badly damaged. Of the possible decisions, four are the most likely and each would have significant ramifications.

1)  The Court could uphold the law. Prior to oral arguments, this was the conventional wisdom. Justice Anthony Kennedy’s stinging questions led many to change this view, but he has surprised Court watchers before.

If he springs another surprise and supports the individual mandate, the law’s implementation would continue unabated. States that have waited for the Court’s decision would start moving on exchanges and essential benefits.

HHS would issue more regulations: on subsidies, employer penalties, insurance requirements, and others. However, it is common knowledge that many of the more controversial rules are being slow walked until after November 6th so as to not complicate President Obama’s reelection chances.

Upholding the law would certainly raise the stakes of the November elections. Should Democrats hold the Senate and/or President Obama win reelection, it’s likely the law would be permanently ensconced. On the other hand, should Republicans control the House and Senate and Governor Romney win the presidency, they will try to repeal the law or gut it through budget reconciliation before major provisions take effect in 2014.

But based on the “train wreck” of oral arguments, it seems unlikely that the law will escape the Court unscathed. It is more likely that the law will be damaged.  The question is, to what extent?

2)  The Court could rule that the mandate is unconstitutional and such a central piece of the law that it is not severable from the rest, thus striking down the entire law.

When a law is voided, it’s as though it never existed, like the memory hole in Orwell’s 1984. That means all insurance requirements would be gone, including the universal contraception mandate, medical loss ratio, and covering children with pre-existing conditions. Gone, too, would be drug benefit rebates for seniors, quality demonstrations, and every new program.

Providers would have to sue the federal government to recover losses from reimbursement cuts. Pharmaceutical manufacturers would have to file suit to recover the billions of dollars in fees they have paid. HHS could try to recover grant funding.

While we would avoid the catastrophe of a federally-dominated health system, we would pay a huge opportunity cost: the healthcare system would still be broken, and Washington would be so damaged that the prospects of any meaningful reforms in the coming years would be near zero.

This scenario is possible, but precedent on severability seems to make it fairly unlikely.

3)  The Court could rule that the mandate is unconstitutional and also grant the government’s request that if the mandate is overturned, two key provisions should go as well: 1) guaranteed issue, which would require insurers to cover pre-existing conditions, and 2) community rating, which would equalize premiums for everyone.

The Justices seemed very skeptical of the Court deciding which provisions are related to the mandate and which are not, making the likelihood of this decision very slim.

4)  The Court could strike down the individual mandate by itself.  Based on the blistering questions from the five conservative Justices and case precedent, this seems to be the most likely decision.

What would happen in the individual and small-group markets if the mandate is overturned but guaranteed issue and community rating remain? By allowing individuals to sign up for a policy when they are sick and pay a low premium, insurers would take a staggering financial hit. To make up for the tremendous loss, premiums in group or employer plans would skyrocket – the ultimate cost shift.

The individual and small-group markets outside of the exchanges would likely disappear, as the child-only market did in 2010 because of the guaranteed issue requirement for kids.

HHS could try to postpone some implementation dates while it seeks a regulatory solution. Congressional Democrats could try to replace the mandate with stronger high-risk pools or auto-enrollment for employer-sponsored insurance. But given the narrow control either party will likely have in the Senate, a legislative solution would be a remote possibility at best.

It would be a huge mess.

Like the children’s book series Choose Your Own Adventure, all of these potential decisions carry great risks. Let’s hope that through the chaos, we can find our way back to the path that actually improves care, expands coverage, and lowers costs.

Merritt has been a health policy adviser to three presidential campaigns. He is a senior advisor at Leavitt Partners. This post first appeared at The Hill.

13 replies »

  1. JE Pittsburgh–

    Totally agree with one of your comments: Even if the mandate is struck down, the subsidies, along with Medicare, expanded Medicaid, & tax benefits for smal businesses will mean that many more people will have insurance. Health reform will go forward,. Though at the same time, premiums will be higher. (This will be a problem, which is why we will need to find another way to enforce the mandate)

    But I’m afraid that your earlier comment is somewhat misleading.

    I had written that “In New York State, you can’t buy insurance unless you can show that you have been continuously insured”

    You replied ” I used to work in health policy in NY and I have no idea where you are getting this.”

    I am “:getting this” idea from having lived in New York State for the past 26 years and being self-employed during 7 of the past 14 years. Many of my friends also are self-employed writers, artists, and entrepreneurs who own their own businesses.

    At the same time, you are right: I wasn’t clear enough. I shoudl have said that “In New York State you can’t buy AFFORDABLe insurance unless you can show that you you have been continuously insured.”

    Thank you for the catch.

    Here is the law in New York State:: “Insurers in New York must offer you health coverage regardless of your health status. However, state law does not limit the monthly premium you can be charged for your insurance policy. Also, insurers may impose a pre-existing condition exclusion period of up to twelve months upon those individuals who do not have prior continuous coverage. ”

    This is why, when I moved to New York, friends warned me that I must make sure that I am continuously insured.
    Because we have guaranteed issue and communtiy rating in New York (which is a good thing) , insurance in New York is quite expensive (we cover sick people in our pool) . .

    Even if you have been continuously insured , a good policy for a self-employed person now costs $7,000 –or more—just to cover one person (even if he or she is 35 and very heatlhy) . If your income is low enough, you can qualify for Healthy New Yorkm but your rincome must be very low.

    If you live in N.Y., have not been continuously insured, and your heatlh record shows a pre-existing condition,, Insurance is, For All Practical Puposes, Unaffordable and thus Unavailable to Middle-Class and Even Upper-Middle Class New Yorkers.

    For instance, a middle-class working couple earning $69,000, , joint income, before taxes, wouldl not qualify for a subsidy., woudl have to pay premiums, and out of-pocket expenses of $15,000 to $$18,000 even uif they ran into no major health probems.

    Even an upper-middle clalss couple with two children earning $95,000 a year (joint income,,before taxe,s ) woudl have hard time finding the
    $15,000 –or more– that they would have to lay out for a a comprehensive family policy that covered “Essentail Benefits.” In additoin, they would face co-pays and deductibles.

    That said, –you’re right, and thanks for the head’s up. i shoudl have made it clear (and I mean this) that wealthy New Yokers can buy insurance even if not continuously insured.

  2. I have spent 20+ yrs in healthcare and health policy and I have always thought that the individual mandate was a key part of the ACA. However, a recent study by the Robert Wood Johnson Foundation showed that only 6-7% of people are impacted by the individual mandate.

    This number is derived from the fact that the other 93% are covered by employer based insurance, existing individual insurance, Medicare, Medicaid and the new subsidies in the ACA. Where eliminating the mandate has a big impact is premiums – the report found that premiums would increase between 10-25% without the mandate mainly because the people not participating due to the mandate tend be the good risk individuals you want in the pool.

    The full report is available here – http://www.rwjf.org/coverage/product.jsp?id=73812

  3. “In New York State, you can’t buy insurance unless you can show that you have been continuously insured”

    I used to work in health policy in NY and I have no idea where you are getting this. I think you are confusing purchasing health with pre-existing condition exclusions b/c there is nothing stopping a person from buying coverage b/c they have been uninsured. Quite the opposite – NY has community rating and guaranteed issue in the individual insurance market making it virtually impossible for an insurer to turn anyone down.

    You are correct NY does have some good programs to help the uninsured including Family Health Plus and Healthy NY.

  4. If only the mandate is struck down, the court will be saying that it is
    unconsitutional to charge people a penalty if they dont’ buy insurance.

    But there are other ways to persuade nearly everyone to buy insurance.

    In New York State, you can’t buy insurance unless you can show that you have been continuously insured– as I recall if you lose your job and your insurance, you have 3 months to get new insurance through Cobra or in the market. For low-income people, New York offers “Healthy New York”– relatively low-cost insurance. Meanwhile insurers cannot charge you more
    based on age, pre-existing conditions or sex. In other words we have
    communitiy rating.

    The system is far from perfect–13% of New Yorkers remain uninsured, but that’s a much lower percentage than in most states.

    If the mandate is struck down, other states could adapt the “continuous insurance” model. Congress might vote for it as federal law: Romeny supports continuous insurance along with guaranteed issue and
    community rating fo those who remain continuously insured.

    Alternatively, insurers might refuse to pay for pre-existing conditions for six months after a customer signed up. This would make people warier about going without insurance until they get sick.

    Finally, rather than charging a penalty, the government could tax people who don’t buy insurance by raising income taxes across the board and then giving tax credits to those who do buy insurance. Under the constitution it is clear that the federal government has the right to tax, even if it doesn’t have the right to charge a penalty if you don’t buy a product.

    These are just a few solutions: if the Court only strikes down the mandate, reform will go forward. As this post reveals, have already gone too far to turn back: it would be a mess.

    Finally, STEVE H.– thanks for pointing out that Western European countries don’t have single payer. Only Canada and the UK have single-payer and their health care isn’t as good as in Germany, France, Denmark, Switzerland, etc.

    Western Euorpean countries pay far less for care while getting better outcomes because they are not over-treated (not nearly as many screening tests, surgeries, etc.); they practice evidence-based medicine (most stopped doing PSA tests years ago); and they don’t overpay doctors,
    drug-makers, device-makers etc. They also make much better use of nurse midwives (who deliver most babies) pedicatirc nurses (who, in many countires, see healthy children for ear-aches, etc.) and, by and large, they don’t overspend on resort-like amenities in their hospitals.

    Over-paying and over-treating are what make our healthcare unaffordable, not the lack of single-payer.

  5. “a country not willing to move to the single-payer model”

    Most countries don’t have single-payer models. Germany doesn’t, Japan doesn’t, the Netherlands doesn’t, France doesn’t. Need I go on? The idea that the rest of the world has single-payer and the ACA is a botched job because it’s not single-payer is pernicious.

  6. Watch George Carlin’s show Back in Town, 1996, last 5 minutes. Sums up politics perfectly for me. We are governed by Republocrats, all that is different is the mascot and color every 4 to 8 years these past 20 plus years.

    What a choice, the blatant greed of the right, or the clueless redistribution of wealth to eventually go to the few from the left.

    Who is worst, the guy who robs you with a knife, or the guy who picks your pocket? Still out the money at the end of the day.

  7. I just finished reading David Graeber’s “Debt: the first 5,000 years.”

    The U.S. is SO far in denial. We are screwed. Not gonna be pretty.

  8. No, just tired of bullshit run amok amongst a society that has no clue what really is needed done to try to rectify the black hole we skirt the periphery now. Dependency is the real cancer that is devouring Americans. Money, toys, quick outs, drugs are fourth or lower on the list.

    And the usual suspects here just want it presented in a pretty box and a flamboyant bow that is Obamacare.

    Society has to contract to survive. But, the public can’t handle the truth.

    As does most of the usual commenters here.

  9. “If someone reacts extremely against this growing tide of dictating without representation, I won’t feel much pain or anguish. I would feel for innocent bystanders caught in the wrong place at the wrong time though.”

    Is that an advocation of violence? Against the President, maybe? Or, Democrats in Congress. You goin’ all Ted Nugent on us here?

  10. Wow, what choices we have, first a partisan congress and president that concocted this crap legislation without accepting important input from parties directly involved in what was politically crafted, and now 2 years later await what appears to be equally partisan decisions to stop the legislation.

    Does anyone who reads at this site think and act like a true moderate, an invested independent, who just sees the two polar extremes that run the Democrat and Republican parties as merging into one minority group trying to run this society as their own monarchy?

    If someone reacts extremely against this growing tide of dictating without representation, I won’t feel much pain or anguish. I would feel for innocent bystanders caught in the wrong place at the wrong time though.

    Really, is anyone else out there tired of this ping pong match feeling like the ball?

  11. David, thanks for putting the four main possibilities in such an easy-to-understand format. I’ve been sorting through the information on the web to determine the possible outcomes, because my career as an insurance agent hinges on the outcome of this decision. I was quite happy to see your article show up on my smartphone rss feed. Thanks for presenting it so clearly.


    Jared J. Balis

  12. The Affordable Care Act is a miserable compromise in a country not willing to move to the single-payer model and not willing to address the true cost hiding relationship between health insurance and healthcare providers. I’m not sure that a court decision against isn’t all that bad because it would cause us to examine the crisis with greater care and insight.