The 3 ways the Court could rule against Obamacare’s mandate

The Washington Post, By Ezra Klein –

March 28, 2012: By nearly all estimates, yesterday’s oral arguments were not good for Obamacare supporters. Solicitor Donald Verrilli, who represented the Obama administration, stumbled in his opening defense of the health reform law’s individual mandate. Paul Clement, representing the law’s opponents, proved a strong opponent. Justices aggressively questioned Verrilli, showing some signs of skepticism over Congress’ authority to require Americans to buy insurance.

That all could lend even more gravity to the issue that the Supreme Court takes up today: If it does toss the individual mandate, what else would have to come down with it? In legal jargon, it’s an issue of “severability:” How much of the law could, or couldn’t survive, if the Court rules the mandated purchase of insurance to be unconstitutional. Here are the three outcomes that will be presented to the Court this morning, and what they would mean for the health reform law:

If the mandate falls, the rest of the law stands.

The outcome: The narrowest ruling the Supreme Court could issue would be one where the individual mandate falls by itself but leaves the rest of the law intact. Americans would no longer be required to purchase health insurance – but health insurance plans would still be required to accept all customers. A bevy of insurance reforms, things like barring insurance companies to to charge sick customers significantly more than healthy ones, would remain intact.

The impact: Insurance premiums would increase, as sicker Americans would be more likely to purchase coverage than those who don’t foresee significant health care costs. Various health care economists have estimated that the cost of health insurance, in the individual market, could increase anywhere between 2 to 40 percent without a mandate. The breadth of the insurance expansion would be significantly reduced by as much as 24 million. Congress could pass a variety of policies to patch the hole, but it’s hard to see Republicans voting to fix “Obamacare.”

The backer: Neither the Obama administration nor the law’s opponents wants to see this outcome. The Supreme Court actually had to appoint an outside lawyer, H. Bartow Farr III, to make this argument to them. Farr does have some precedent on its side: When a district court in Virginia ruled the individual mandate unconstitutional, it did so without striking down any other parts of the health reform law.

The mandate takes down the Affordable Care Act’s insurance reforms.

The outcome: The Supreme Court could find that, if they strike the mandate, the rest of the health reform law’s insurance expansion unravels. Insurance becomes too expensive without the mandate, they could find, and increasing coverage to 32 million Americans becomes unworkable. In this scenario, the Court would strike down the health reform law’s requirement that insurance companies accept all applicants, allowing them – as they do now – to reject sicker Americans who would cost more to cover.

The impact: Health reform’s insurance expansion gets pared back significantly, but not totally wiped out. If the expansion of Medicaid up to 133 percent of the Federal Poverty Line, for example, survives unscathed, that would be expected to bring coverage to 16 million more Americans. Insurance subsidies, if also left standing, may do some leg work to make insurance more affordable. This outcome would likely be the worst for the sickest Americans, who could still face very expensive premiums.

The backer: This is the argument that the Department of Justice will present this morning. “The minimum coverage provision is essential to ensuring that the Act’s guaranteed-issue and community-rating reforms advance Congress’s goals,” the administration argued in its brief to the Supreme Court. Without it, those provisions would create an adverse selection cascade…because healthy individuals would defer obtaining insurance until they needed health care leaving an insurance pool skewed toward the unhealthy.”

If the individual mandate falls, so does the entire Affordable Care Act

The outcome: When Congress wrote the Affordable Care Act, it left out one crucial provision: A severability clause. Quite often, legislators include a boilerplate language specifying that, even if a small portion of it is determined unconstitutional, the bulk of it still stands. But the Affordable Care Act doesn’t have that clause, leading the law’s opponents to argue that, if the mandate falls, so does the entire 905-page bill.

The impact: Overturning the entire law would, unsurprisingly, have the most wide-reaching effect. It would eliminate the private insurance expansion, the Medicaid expansion and a slew of Medicare payment reforms. Some of those changes have already begun taking effect, changing the way doctors get paid. If those got repealed by the Supreme Court, and the financial incentives to do medicine differently were taken away, those changes could get rolled back.

The backer: The 26 states opposing the law will make this argument in front of the Supreme Court this morning. While many constitutional scholars think that such a ruling is unlikely, because of its sweeping nature, the opponents also have precedent on their side: The Eleventh Circuit Court of Appeals struck down the entire health reform law in its ruling, because it lacked a severability clause.

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