The only Americans desperately watching court decisions regarding the insurance mandate portion of the Accountable Care Act of 2010 (often called ObamaCare) are those who work for insurance companies! In August, a federal appeals court ruled on a challenge to the healthcare law brought by 26 states. It declared that the mandate itself is unconstitutional, but the rest of the law can stand. To insurance companies, this is the ultimate unthinkable decision: no individual mandate for the young and healthy uninsured, but a mandate that compels insurers to cover the sick. If the Supreme Court affirms this ruling, Congress will be left to fix the problem.
The Supreme Court is expected to take up the question of the statute’s constitutionality early in 2012. If the justices agree with the lower court and strip out the mandate, that would be the worst of all worlds for insurers. There has to be some way to ensure that healthy people sign up for coverage to offset the cost of insuring sicker people. The Obama administration says if the mandate is struck down, much of the law—including Medicaid provisions and requirements that employers offer insurance—could still function and should remain intact.
However, in a rare show of solidarity, both administration officials and insurance companies insist that removing the mandate undermines other provisions, especially the requirement that insurers issue policies to people with preexisting conditions and prohibit insurers from charging them higher premiums. Without healthy people’s premiums, insurers would likely raise rates on everyone as they’d anticipate more high-cost patients will enroll, while low-cost policyholders (young, healthy people) would not enroll. The administration agrees that if the mandate falls, the other provisions must fall, too. Thus, the most egregious practices of health insurers will continue.
Obviously, the appeals court saw things differently, ruling that the insurance reforms and other provisions in the law do enough to increase coverage without the mandate. A Supreme Court ruling affecting only the mandate would spark an immediate effort to find something to replace it before the law takes full effect in 2014. Congress could devise feasible alternatives to an individual mandate that would make this construct stick together, but it’s not clear it’s capable of doing anything. And even if it did, it’s unlikely to induce millions of people to buy insurance. The bottom line: If the Supreme Court finds the mandate unconstitutional but leaves the rest of the law intact, it will be up to Congress to find a fix–and that’s a frightening thought!