Tuesday, March 20, 2012

Health Insurers' Position on the Individual Mandate

In the debate over the constitutionality of the federal health care reform law, health insurance companies have maintained a low profile.  The individual mandate was their idea; they wish that the mandate was stronger than it is; and now they are signalling that if the individual mandate is struck down by the Supreme Court, they can not and will not go along with the other insurance reforms in the PPACA.

The health insurance companies and the principal trade group that speaks for them, AHIP (America's Health Insurance Plans), have not explicitly supported the constitutionality of the individual mandate before the Supreme Court.  From a policy standpoint that is inexplicable. In 2008 the insurance industry embraced the concept of achieving universal heath care coverage through the private insurance market, and proposed that the law should require everybody to have health insurance. In its December, 2008, report entitled “Now is the Time for Health CareReform: A Proposal to Achieve Universal Coverage, Affordability, QualityImprovement and Market Reform,” the AHIP Board of Directors took a courageous position:
Combine guarantee-issue coverage with no pre-existing condition exclusions with an enforceable individual mandate: For guarantee-issue to work, it is necessary for everyone to be brought into the system and participate in obtaining coverage. Achieving this objective will require specific attention to the mechanisms for making the mandate enforceable and may require coordinated action at multiple levels of government. Indeed, the importance of combining guarantee issue with an enforceable individual mandate is borne out by research and experience from the states. For example, a report by Milliman, Inc. found that states that enacted guarantee-issue laws in the absence of an individual coverage requirement saw a rise in insurance premiums, a reduction of individual insurance enrollment, and no significant decrease in the number of uninsured.
Why hasn't the health insurance industry more vigorously supported the constitutionality of the individual mandate? There may be several reasons. First, the mandate is not as strong as the industry wanted.  In its 2008 report it called for an "enforceable" individual mandate, but the PPACA will penalize people only $695 for not having health insurance, far less than such insurance would cost. The health insurers would prefer that the penalty be much higher, and even if the Supreme Court does uphold the law the industry will probably ask that the penalty be increased.

Political considerations may also lie at the base of the reason that the health insurance industry has muffled its support for the individual mandate. At this point in the election season it may not make sense for the pick sides between Republicans who oppose the individual mandate and Democrats who regard it as a necessary evil.  However, that does not mean that the industry is neutral on the subject. Quite the contrary.

On January 6 the insurance industry filed an amicus brief in the Supreme Court on the issue of severability in which the industry advised  the Court that if the individual mandate is struck down, other insurance reforms like guaranteed issue (the requirement that insurance companies sell policies to persons with preexisting conditions) and guaranteed coverage (the requirement that those policies cover preexisting conditions) and community ratings (health insurance must cost the same for all persons in the community) should also be struck down because they are not "severable" from the individual mandate. In a press release announcing the filing of the brief, AHIP stated:
The brief is intended to serve as a resource to deepen the Court’s understanding of the real-world economic implications for consumers of delinking major provisions of the law that were widely understood to be companion solutions as the nation debated health care reform.
Yesterday the insurance companies issued yet another warning to the Court. In a press release the industry noted that:
opinion leaders of all stripes and news outlets have been noting the inextricable link between the market reforms included in the ACA and the individual mandate.
The press release quoted Senator Joe Lieberman stating, "Unless you have a mandate ... the Affordable Care Act has to change;" Paul Krugman: "Simply requiring insurers cover people with pre-existing conditions ... doesn't work;"  CBS News: "If the mandate is struck down, the requirement that insurance companies cover those with pre-existing conditions would become unworkable;"  Kaiser Health News: "Keeping the premiums affordable - for both individuals and the government - hinges on making sure health people enroll in insurance too."

Also yesterday the health insurance industry sent an even stronger signal to Congress through a story published in the Wall Street Journal. In an article by Louise Radnofsky entitled Insurers Set Plans in Case Mandate is Quashed, the author quoted several spokespersons for the health insurance industry as stating that if the individual mandate is declared unconstitutional then popular reforms like guaranteed coverage will have to be repealed. Radnofsky states:
Several officials from large health insurers said that if the mandate were struck down, their first priority would be persuading members of Congress to repeal two of the law's major insurance changes: a requirement to cover everyone regardless of his or her medical history, and limits on how much insurers can vary premiums based on age.
The health insurers' position is bolstered by a January, 2012, report from the Robert Woods Johnson Foundation by Matthew Buettgens and Caitlin Carroll entitled Eliminating the Individual Mandate: Effects on Premiums, Coverage, and Uncompensated Care. Buettgens and Carroll estimate that if the individual mandate is eliminated health insurance premiums would increase between 10% and 25% and the number of uninsured persons would increase by more than 50%.

There may be alternatives to the individual mandate. There may be other ways to encourage people to purchase health insurance. But the bottom line is that if the individual mandate is stuck down, guaranteed coverage and community rating will disappear with it.  People who are unable to procure or afford health insurance will either have to go without medical care or the taxpayers will have to pick up the tab.

Wilson Huhn is a professor of Constitutional Law at The University of Akron School of Law.

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