Like most Americans, Lauren Woodard has mixed feelings about President Obama’s healthcare law. She’s glad the law guarantees that she’ll always be able to get insurance. But she doesn’t like the requirement that most Americans buy coverage.
“I don’t want the government telling me that I have to buy something,” the 23-year-old mother from western Massachusetts said. Two-thirds of Americans share that view. So did Obama when he was a candidate.
But most Americans also like the idea that they’ll be able to get medical insurance, even if they sustain a devastating accident or a serious illness.
The problem, many experts say, is those provisions are inseparable.
Guaranteeing affordable health insurance to everyone is nearly impossible without a way to induce younger, healthier people to get covered and offset the cost of insuring older, sicker ones.
That means that if the Supreme Court strikes down the much-maligned insurance mandate as unconstitutional, it might also toss out the promise that all Americans can get health coverage, even if they have preexisting medical conditions.
“Without some kind of a penalty, markets unravel,” warned Len Nichols, a health economist at George Mason University who worked on the law. “If insurers have to take all comers, and all comers are sick and old, insurance premiums skyrocket. … That leads to disaster.”
Woodard, who works with developmentally disabled adults and gets health coverage through her employer, said she never thought about the connection between the insurance mandate and other protections in the law. “I suppose if I was sick, that might be different,” she said.
Many initiatives in the sweeping legislation aren’t connected to the mandate, including billions of dollars for community health centers, new programs to track how well doctors and
hospitals are caring for patients and new initiatives to train more medical providers.
The Obama administration and other supporters of the health law argue that scrapping the whole overhaul would be unnecessary, even if the mandate is rejected. Only one federal judge — out of more than two dozen who have reviewed the law over the last two years — has backed such a drastic move.
But even the administration, which has vehemently defended the law in court over the last two years, contends that if the justices invalidate the mandate to obtain insurance they should also ditch the guarantee of health coverage.
The experiences of several states over the last two decades suggest what can happen if health insurance is given to all comers without some incentive to get everyone to sign up.
“It’s what we call a death spiral,” said Mark Wagar, chief executive of New York-based Empire Blue Cross Blue Shield, that state’s largest carrier.
New York enacted a “guaranteed issue” law in 1992, prohibiting insurance companies from denying coverage to any customer. Since then, the state has struggled with skyrocketing premiums as sicker customers signed up for coverage, driving up costs and driving away younger, healthier people.
Average premiums for a health plan on the individual market have nearly tripled over the last decade, according to the state insurance department. In some New York counties, it is impossible to buy an individual plan for less than $12,000 a year.
Other states, including Kentucky and Washington, were forced to roll back consumer protections in the 1990s after insurance companies stopped selling policies in those states.
Such problems explain why former Massachusetts Gov. Mitt Romney, a Republican, championed a mandate as part of landmark legislation in 2006 that made his state the first in the nation with near-universal healthcare.
It is also why other conservatives, including the Heritage Foundation, backed a mandate until many turned against it after Democrats put an insurance requirement in their healthcare legislation.
Because of differences between state reforms and the national healthcare overhaul, it is unclear whether the so-called death spiral scenario would unfold if the Supreme Court invalidates the mandate alone.
The healthcare law would provide millions of low- and moderate-income Americans with subsidies to help buy a health plan starting in 2014. That might encourage more young, healthy people to get coverage, even without a mandate.
It would be harder for insurance companies to simply flee a national market, as some left state markets.
The mandate in the federal law is also relatively weak, raising questions about whether it would even work as intended. The penalty, which goes into effect in 2014 at $95 a person annually, is due to rise to $695 per adult in 2016 (and $2,085 per family), just a fraction of a typical premium’s cost.
But several independent studies suggest that eliminating the insurance requirement could nonetheless be devastating. That is especially true in the current political environment, in which it is unlikely Democrats and Republicans would agree on an alternative way to encourage all Americans to sign up for coverage, such as a penalty for waiting to enroll, as exists in Medicare.
The nonpartisan Congressional Budget Office estimated that if the mandate alone were struck down, insurance premiums could jump 15% to 20%, and the number of people who would get insurance under the law would be cut in half.
A similar analysis by Rand Corp. projected that it would cost the federal government nearly twice as much per person to subsidize insurance for low- and moderate-income Americans.
“The value of the reform dramatically falls,” said Christine Eibner, a lead author of the Rand study.
That leaves the Supreme Court with a dilemma. Scrapping the mandate alone may be chaotic, but ditching the linked consumer protections would almost certainly upset legions of Americans like Woodard.
“If you’re sick, you shouldn’t be discriminated against,” the Massachusetts mother said. “That’s when you need insurance most.”