If individual mandate’s struck, what next?

In Sunday’s edition of the New York Times, blogger Maggie Mahar responded briefly to the question, “What would the future hold if the Supreme Court strikes down the most controversial part of the health care law, the individual mandate?” We asked Mahar to elaborate on the question in this post.

Betting the individual mandate will be upheld

Ezekiel Emanuel says he has been betting on how the Supreme Court will decide the case challenging the constitutionality of the Patient Protection and Affordable Care Act (PPACA).

Speaking at the annual meeting of the Jewish Social Policy Action Network in Philadelphia not long ago, Emanuel, who served as Special Advisor on Health Policy to the Obama administration when the bill was being drafted, confided that he has placed five wagers expressing his optimism that “the mandate will survive” along with the rest of the legislation.

“I think the vote will be 6:3 in favor with Kennedy and Roberts voting for.” There is “No doubt it is constitutional,” he declared. “Legally, this is an open and shut case.”

Emanuel, now chair of the Department of Medical Ethics and Vice Provost for Global Initiatives at the University of Pennsylvania, also revealed that he recently had dinner with Supreme Court Justice Antonin Scalia. Emanuel says Scalia will not vote for the reform bill. (No surprise there.)

For reasons I have explained in earlier posts here and here, I tend to share Emanuel’s optimism. Nevertheless, I could easily be wrong.

As Emanuel observes, there remains the danger that the Justices will overturn the mandate. In that case, the vote “will be 5:4 against. If that happens, the country will have bigger problems because then it will be a partisan ruling along party lines,” he noted, referring to polls showing that the American public is losing confidence in the integrity of the Supreme Court as an institution that stands above the political fray.

Fat carrots and skinny sticks

If the Justices do declare the mandate unconstitutional, what happens next? Will this spell the end of reform? Absolutely not.

The goal of the mandate is to draw more healthy people into the insurance pool, so that the cost of care when we become sick can be spread over a larger group. But the mandate is only one of many provisions in the PPACA that makes health insurance more attractive and more affordable.

Here are some of the “carrots” that should draw people into the pool:

• Under the law, middle-income and low-income families purchasing their own insurance will receive tax credits to help them pay premiums. The subsidies will be calculated on a sliding scale for households with income up to four times the poverty level ($92,200 for a family of four and $44,680 for a single person).
• The PPACA limits how much insurers can ask patients to pay out-of-pocket.
• Insurers selling policies to individuals and small groups will have to cover all “essential benefits.” No more “Swiss cheese” policies filled with holes.
• Insurers won’t be able to hike your premiums because you’re sick.
• They also won’t be able to charge you 30 percent more simply because you are a woman.
• When covering a large group, insurers must pay out 85 percent of the premiums they collect for medical care. When insuring a small group, administrative costs are higher, so they can keep 20 percent. If they don’t spend the required percentage of premiums on care, customers will receive refunds.
• There will be no co-pays for preventive care, and the deductible will not apply.

These provisions should encourage many young, healthy Americans to purchase insurance. Research shows that younger people don’t buy insurance – not because they think they’re invincible, but because they can’t afford it. Subsidies will help many of them.

Making the hard sell

But the majority of Americans are totally unaware of the ways that reform makes insurance more affordable and more attractive. This is why Washington & Lee Law Professor Timothy Jost suggests that if the mandate is overturned, reformers should launch “an aggressive, televised marketing campaign.” As Jost explained to me in a recent phone interview, “if you really look at who is subject to the mandate, a lot would have every reason in the world to get insurance, and no reason not to even if there is no mandate.”

Would the carrots be as effective as the financial penalties in persuading healthy people to buy insurance? Probably not. Many observers argue that without the penalties, people just won’t sign up – no matter how many carrots you dangle under their noses.

I’m not convinced. It’s impossible to predict human behavior, especially over a period of years. It remains to be seen how younger Americans will respond to the tax credits, and the rules that require insurers to offer more comprehensive protection, including maternity benefits and preventive care without co-pays.

Moreover, if you read the PPACA, the mandate was a pretty skinny stick. Those who oppose the mandate object that it “forces” Americans to buy insurance. But the truth is that in 2014, someone who decides to opt out would pay a fine of just $95 or 1 percent of taxable income – whichever is higher – up to $285 per household.

This hardly constitutes “force.” Even in 2016, when the penalty peaks, it amounts to only $695 or 2.5 percent of taxable income, up to $2,086 per household – much less than the cost of insurance.

No question, if the mandate is eliminated, fewer people will be insured. But if reformers do a good job of communicating the benefits of reform, they could draw millions into the pool.

Losing the mandate may not be nearly as great a blow to reform as some suggest.

Note to readers: I welcome reader comments and questions, and will try my best to reply in a timely manner. I ask only that you do your part to keep our discussion both reasoned and polite. – MM    

Maggie Mahar is an author and financial journalist who has written extensively about the American health care system. Her book, Money-Driven Medicine: The Real Reason Health Care Costs So Much, was the inspiration for the documentary, Money Driven Medicine. She is a prolific blogger, writing most recently for TIME’s Moneyland. Previously she wrote and edited the Health Beat blog for the progressive think tank, The Century Foundation. She also recently provided background on Congressional health care legislation for HealthReformVotes.org, a special project of the Health Insurance Resource Center.