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.