Unless you've been living under a whole pile of rocks, you heard about the Supreme Court’s oral arguments in Florida v. Department of Health and Human Services—the Obamacare case. You’ve probably heard by now from a dozen reporters and pundits who claim that they know which way the Court will rule.
I’m not going to make that claim. There are understandable arguments on both sides, and it’s incredibly difficult to predict how this Court will decide on such an important, divisive, politically charged issue.
Instead, I want to provide a little perspective. Even if the Court decides that the individual mandate is not a Constitutional exercise of Congressional power, the consensus of Courtwatchers is that they’re unlikely to toss the entire law down the drain with it. If the mandate is unconstitutional, there are two main options without throwing out the whole thing: the mandate might get thrown out on its own, or two crucial insurance reforms (community rating and guaranteed issue) might go with it.
Guaranteed issue and community rating are the key pieces of the law—they require insurers to give insurance to anyone who comes asking, and limit the amount that prices can vary between people, respectively. The individual mandate was designed by the Heritage Foundation during the last health care debate (over President Clinton’s health care reforms, in 1993), and it's designed to attack two economic problems that can emerge when people have that protection: moral hazard and the insurance “death spiral.” Moral hazard is the economics term for the danger that healthy people might go without insurance, only to buy it (at the low, community-rated price) if they get sick. If people can do that, insurance costs have to be higher for responsible buyers who get in at the beginning. The “death spiral” is a similar phenomenon, where people who buy insurance are sicker than average, which drives up the price of insurance. That price increase makes more healthy people drop their coverage, leading to an even sicker risk pool and higher costs. Eventually, the insurance market falls apart because the only people left wanting to buy insurance are too sick to afford their own health care costs.
The mandate works by pushing healthy people to buy insurance even when they’re likely to stay healthy—thereby preventing moral hazard, and avoiding death spirals. The thing is, any policy mechanism that makes going without insurance less appealing will work the same way. That means even if Congress isn’t allowed to create an individual mandate, there are a whole slew of other options for what they could do. Several mechanisms have been proposed that would achieve exactly the same result as the mandate penalty, but would do it through the tax code, where Congressional power is less restricted. Those might still be challenged in court, but would have a better chance of survival. Alternatively, Congress could just force people who choose to go without insurance to stay that way, even if they get sick: it would be entirely within Congress’s power to say that an individual who could have gotten insurance and didn’t, would: 1) not be eligible for insurance subsidies if he wanted to get insurance on the exchanges; 2) not have guaranteed coverage for any pre-existing condition; 3) not be protected by guaranteed issue and community rating, so he might have to pay an incredibly high premium if he could get insurance at all. Those penalties might be in effect for five years from the date when he declined insurance, in order to strongly discourage people from making rash choices because they feel healthy this month.
That would, in effect, create a universal insurance system, with an opt-out for the very confident and those who genuinely wish to self-insure. It would be indisputably within Congress’s Commerce Clause power, too—it would be a direct regulation of insurers and participants in the insurance market. If the mandate gets struck down, it would be a relatively simple legislative task (although perhaps a heavy political lift) to fix the law and restore its universality.
As an eternal reminder: the Affordable Care Act didn’t fix the American health care system—it aimed only at the health insurance system. Researchers have documented unnecessary care that costs hundreds of billions of dollars each year, and the law does little to attack that waste. Correcting the delivery system will require hard political and practical conversations about global budgets, evidence-based care, and getting control of the outrageous growth in health care resources. Depending on how the Court rules, health care might fall off the political radar this year, but you can be sure it’ll be back soon enough. The system has too much waste—and too much opportunity for improvement—to let it go when the Justices rule.