Lines Drawn as Individual Mandate Heads to High Court

If the U.S. Supreme Court strikes down the individual mandate of President Barack Obama’s health care reform law, employee health insurance will become more expensive for many employers, a new study suggests.

The study by the Robert Wood Johnson Foundation, a Washington, D.C.-based philanthropic organization that focuses on health care issues, and the Urban Institute assesses the possible effects on premiums, coverage and uncompensated care of eliminating the mandate, which requires a person to acquire health insurance or pay a penalty tax.

The Supreme Court is expected to rule by June on whether the individual mandate is constitutional. And if not, can it be severed from the rest of the Patient Protection and Affordable Care Act?

Among other things, the study estimates 40 million to 42 million people would remain uninsured if the mandate is eliminated compared with 26 million if it stays in place. Since the majority of those remaining uninsured would be younger, healthier individuals, insurance costs would climb as insurers adjust their risk models to accommodate a pool of insured people that skews toward those who are older and less healthy, the study says.

Without a mandate, the premiums charged for coverage by health benefit exchanges could rise by roughly 10 percent with high exchange participation and 25 percent with low participation, according to the study.

“This could have a significant and adverse impact on employer health costs, since many employers are considering using the exchanges to provide future health coverage for their employees rather than continue to sponsor group health plans,” says Bob Christensen, a partner at the law firm Fisher & Phillips in Atlanta who chairs the firm’s Employee Benefits Practice Group.

According to the federal government’s Agency for Healthcare Research and Quality, individuals in the age brackets of 45 and 64 and the elderly (65 and older) are disproportionately represented among the top 10 percent of spenders on health care.

Another new study, by RAND Corp., predicts that without the individual mandate, premiums on exchanges would go up by 2.4 percent but it used “different assumptions” than those used by other researchers in computer-modeling premium prices. Based on the assumptions of other modelers, RAND says, the premium increase would be 9.3 percent.

Whatever the different price predictions may be, the National Federation of Independent Business, which is a plaintiff in one of the lawsuits challenging the health care reform law, doesn’t see the study as evidence for keeping the mandate in place.

“What this points up is that the entire law ought to fail,” says Karen Harned, executive director of the NFIB’s Small Business Legal Center. Since it can’t function without the mandate, “The entire law has to be overturned so Congress can do something that is constitutional and also reduces costs.”

In a brief filed with the Supreme Court, the NFIB called the mandate “an unprecedented and draconian regulation that fails to accommodate the states’ traditional regulatory role and compels individuals to subsidize legal strangers through economically disadvantageous contracts.”

“We want free-market reforms,” Harned says. “Our members have been asking for reform for two decades. They just don’t think this is the way to do it.”

Obama administration lawyers have argued against the “all-or-nothing” approach, saying that nearly all of the health care reform provisions can survive without the mandate. “Many provisions of the act, focused on controlling costs, improving public health and other objectives, have no connection to insurance coverage at all,” Solicitor General Donald Verrilli wrote in a Supreme Court brief. Only two provisions—which bar insurers from refusing to issue coverage to a person because of a pre-existing medical condition and from charging higher premiums based on a person’s medical history—would have to go.

“They’re hedging their bets in case something happens,” Christensen says. “They’re saying that if the individual mandate is stricken, you can still have reform in this format.” wƒm

Matthew Heller is a writer and editor based in Los Angeles. To comment email editors@workforce.com.

Workforce Management, March 2012, p. 6-7 — Subscribe Now!