Justices Ask Tough Questions on Individual Mandate

Several U.S. Supreme Court justices appeared skeptical March 27 about whether Congress had the authority to require most U.S. residents to enroll in a qualified health plan or pay a penalty under the health care reform law.

The Obama administration, which is defending the Patient Protection and Affordable Care Act, said Congress had such authority due to its constitutional power to regulate interstate commerce.

But during the second day of oral arguments about the law, several justices were dubious of that position.

“Can you create commerce in order to regulate it?” asked Justice Anthony Kennedy, who has been cited as the key swing vote on the individual mandate and whether the law itself is constitutional. His question responded to Solicitor Gen. Donald Verrilli’s arguments that the individual mandate is necessary as part of reform of the insurance market.

“If I am in any market at all, my failure to purchase something in that market subjects me to regulation?” Justice Antonin Scalia questioned.

Distinguishing this case from other court rulings involving commerce, Scalia said, “There was no doubt that was what regulated was commerce, and here you’re regulating somebody who isn’t covered.”

Chief Justice John Roberts asked: If the government has the power to require buying health insurance, could it also require the purchase of cellphones?

On the other hand, Justice Ruth Bader Ginsburg defended the individual mandate, noting that “the people who don’t participate in this market are making it much more expensive for those that do.”

“Is this commerce?” Justice Stephen Breyer asked referring to the individual mandate. “Well, it seems to me more commerce than marijuana,” he said, referring to laws making that substance illegal.

The individual mandate is a cornerstone of the health care reform law. It requires most individuals to either enroll in a qualified health plan or pay a financial penalty. Initially, the penalty would be a modest $95, or 1 percent of an individual’s income, whichever is greater, starting in 2014. In 2016, the penalty would increase to $695 or 2.5 percent of income, whichever is greater.

Insurers in particular say the requirement is crucial to prevent adverse selection. Without it, younger, healthier individuals would not get coverage until they developed medical problems, driving up premiums for everyone, insurers argue.

Without an individual mandate, insurers would continue to be required to accept everyone regardless of their health status and forbidden from using health history as a gauge to determine premiums, but “there would be little incentive for people to carry coverage at all times,” according to an analysis last year by the Blue Cross Blue Shield Association of North Carolina.

“If the mandate were struck down but the broader law allowed to stand, there would be a death spiral. It’s the nightmare scenario for the insurance industry. Young, healthy people will avoid buying insurance until they get sick—unless they’re forced to,” said Royal Oakes, a partner with law firm Barger & Wolen L.L.P. in Los Angeles, in commenting on the issue. “And if only sick people have insurance, premiums will spiral until they’re unaffordable,” he said.

Others, though, say if the individual mandate were struck down but not the entire health care reform law, there could be remedies to reduce the likelihood of adverse selection.

For example, Congress could amend the law to add premium surcharges if individuals did not purchase coverage during a specified enrollment period.

But it isn’t clear how interested lawmakers would be in making such changes, especially if Republicans continue to control at least one branch of Congress. The vast majority of Republicans oppose the PPACA and want the law repealed.

Jerry Geisel writes for Business Insurance, a sister publication of Workforce Management. To comment, email editors@workforce.com.

Stay informed and connected. Get human resources news and HR features via Workforce Management’s Twitter feed or RSS feeds for mobile devices and news readers.