Without Individual Mandate, Obama and Insurers Will Call For Overturn of Key Coverage Provisions

It’s great that so many Americans across the political spectrum support two of the most important provisions of the health reform law. According to the latest poll from the Kaiser Family Foundation, 70% feel favorably about guaranteed issue—the part of the Affordable Care Act that prevents insurers from rejecting individuals or businesses because of age, sex, occupation or health status. Americans also support the idea of using community rating when setting insurance premiums; meaning that older people, women or those with chronic illness or pre-existing conditions shouldn’t have to pay more for their coverage.

It’s just too bad that these could be the first consumer protections to go if the Supreme Court overturns the Affordable Care Act’s individual mandate. That’s because, as Uwe Reinhardt, an economics professor at Princeton points out, “The aim is to create a risk pool in which younger and healthier enrollees subsidize through their community-rated premiums the health care of older or sicker individuals.” Otherwise, people wait until they are sick to buy insurance, quickly using up all the resources of a plan they haven’t contributed to when they were healthy. This inevitably drives up premiums for everyone. The ACA without an individual insurance mandate says Reinhardt, “is about as sensible as the idea of manufacturing two-legged stools.”

Americans haven’t grasped that connection; most consumers still believe that all the things they like about health reform—such as keeping their children on their health plans until they are 26, free preventive care, no lifetime limits on coverage and the promise of subsidies to help lower income people afford insurance—will still be available without the mandate. In fact, the Kaiser poll found that two thirds say they continue to have an “unfavorable view of the individual mandate, including 54 percent who take a ‘very unfavorable’ (up from 43 percent last November)” opinion of the provision.

How do we know that insurer coverage mandates won’t work without an accompanying mandate for all Americans to buy insurance? Just take a look at what Ian Millhiser, a policy analyst at the Center for American Progress calls “Seven Horror Stories” from states that already tried to implement community rating without a requirement that everyone purchase insurance:

• Kentucky: Forty insurers left Kentucky’s market by some estimates, and only two remained before the law was repealed

• Maine: Thirteen of Maine’s 18 major insurance carriers stopped issuing new individual policies. Many also doubled their premiums

• New Hampshire: New Hampshire’s insurance law left it with nearly no carriers in its individual insurance market. The state enacted an emergency tax to compensate insurers for the costs of the law, which was repealed in 2002

• New Jersey: Premiums rose as much as 350 percent in New Jersey after its pre-existing conditions law took effect. Even HMO plans, which tend to resist premium increases, nearly doubled in price

• New York: The percentage of nonelderly New Yorkers without insurance grew 21 percent, with premiums increasing as much as 40 percent per year.

• Vermont: Vermont fared better than other states with similar laws, but its premiums spiked an average of 16 percent in two years.

• Washington: Nonmanaged care options disappeared entirely from Washington’s individual market. Eventually, entire counties had no private individual insurance options at all.

(source: Center for American Progress )

Insurers are already working on contingency plans if the Supreme Court finds the individual mandate unconstitutional. According to the Wall Street Journal;

“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 next step, they say, would be to set rewards for people who purchase insurance voluntarily and sanction those who don’t.”

Insurers are also likely to lobby for an end to restrictions on gender rating; i.e. charging women more than men for insurance coverage. According to a new report from the National Women’s Law Center,  in the 37 states that haven’t already banned this practice, 92% of best-selling plans charge women more for coverage. These excess charges vary between states and even between policies in the same state. For example, one plan offered in Arkansas charges 25-year-old women 81% more than men for coverage while another plan in the same state charges women only 10% more for coverage. The Affordable Care Act would prohibit gender rating; a practice that the NWLC report estimates costs women $1 billion a year.

The Obama administration agrees with insurers on the economic ramifications of the Supreme Court striking down the individual mandate. It has filed a brief arguing that if this happens, the requirement that insurers cover everyone who applies and that they use community rating should be overturned.

Despite the contingency plans, many legal and health policy experts believe they will be unnecessary—at least for now. “Most of us who supported the individual responsibility provisions feel the court is going to sustain [the individual mandate],” Ron Pollack, executive director of Families USA tells Kaiser Health News. “There’s no urgent need to define an alternative course at this point.”