Insight, analysis & opinion from Joe Paduda

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What happens without a mandate?

That depends on whether the rest of the reform bill survives without that clause. I’ve heard from a couple of sources that the Accountable Care Act doesn’t include a severability clause. If that is true, than the entire bill may be thrown out if the mandate is ruled un-Constitutional.
That’s for others steeped in the details of the ACA and law to figure out. As I’m sure they will.
(Lest we get all excited about the Virginia case, note that there have been about twenty suits filed so far re the ACA, 12 have been dismissed and in two other cases both judges ruled the mandate is Constitutional.)
If the rest of the ACA does survive the demise of the mandate, we’ll have a very, very interesting situation. Health insurers will be required to take all comers, the rates they can charge will be highly regulated, benefit plans consistent across most insurers and employers, and there will be no upcharging or medical underwriting or discrimination based on age, pre-existing conditions, or sex.
It would be tough to design a better recipe for disaster for insurers.
Nonetheless, that’s what we’ll be faced with if the mandate is removed; the rest of the Act will become law, and individuals and employers would – at least theoretically – be able to buy insurance when they need health care, and drop it when they don’t.
There’s already a precedence for this – in the Massachusetts experiment, loss ratios in the individual market for at least one health plan were about 600%.
The White House recognizes the problem – in a response to the latest court challenge to the mandate that is notable for its focus on individual responsibility for the costs of their care:
“However, unless every American is required to have insurance, it would be cost prohibitive to cover people with preexisting conditions. Here’s why: If insurance companies can no longer deny coverage to anyone who applies for insurance – especially those who have health problems and are potentially more expensive to cover – then there is nothing stopping someone from waiting until they’re sick or injured to apply for coverage since insurance companies can’t say no. That would lead to double digit premiums increases – up to 20% – for everyone with insurance, and would significantly increase the cost health care spending nationwide. We don’t let people wait until after they’ve been in a car accident to apply for auto insurance and get reimbursed, and we don’t want to do that with healthcare. If we’re going to outlaw discrimination based on pre-existing conditions, the only way to keep people from gaming the system and raising costs on everyone else is to ensure that everyone takes responsibility for their own health insurance.”
Whether the President and/or Congress would try to overturn the ACA, or remove the underwriting language is to be determined. While the White House’s statements to date acknowledge the issue, AHIP et al have few friends left among Democrats, and those friends would be hard pressed to convince the Administration to be nice to an industry that has been anything but to the Democrats.

Joe Paduda is the principal of Health Strategy Associates




A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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