Throwing the Individual Mandate Under the Bus

Florida U.S. District Judge Roger Vinson has allowed six additional states to join the multi-state challenge to the individual mandate provision of PPACA. The mandate would require all individuals, starting in 2014, to secure insurance coverage for themselves and their dependents, either through an employer plan, or on the state-run exchanges (subsidies are available). The addition of Ohio, Kansas, Wyoming, Wisconsin and Maine bring the total number of states challenging the law to 26, more than half of all states.

The basis for the challenge is that the federal government, through PPACA, would violate the commerce clause of the U.S. Constitution. The commerce clause allows the federal government to regulate commerce with other nations, and commerce “among” the individual states, but it protects intrastate business dealings from federal government interference. The essence of the objection to the individual mandate is that it allows the federal government to, in effect, reach into the pockets of state residents and require that they pull out money to purchase insurance within state borders.

The individual mandate is seen as one of the cornerstones of health care reform because it will require young, healthy people to purchase coverage, and the influx of their premiums to insurers will allow overall premium costs to stabilize. It is widely recognized that premium costs are in something of an upward death spiral, because they higher the go, the sicker a person has to be before they are impelled to purchase coverage, and the more carriers have to charge to cover all the claims they are paying. Take away pre-existing condition exclusions, as the PPACA has done, and you can see that, for insurers, a “perfect storm” of sorts is brewing on the near horizon.

Last year a Virginia district court found that the mandate did violate the commerce clause, but this argument failed in a Detroit district court. The Detroit district court judge found that cost-shifting to – providers and governments – that results from lack of insurance coverage does cross state boundaries and thus was a federal-level issue; he also noted that cost-shifting also makes the health care market different from other markets, because care is still provided to those who “opt out” of the market by not buying insurance. Eventually this issue will move up through the circuit courts to the Supreme Court, where it faces an uncertain fate.

Even if the individual mandate survives constitutional challenge it may not have the desired impact, because the tax penalties that apply to those who forego coverage simply aren’t high enough.

As it happens, health care reform probably could still work without the individual mandate. At least, that is the balance of opinion among seven health policy experts polled by Kaiser Health News. Limiting enrollment availability to a window of time each year, or each couple of years, could encourage healthy people to enroll rather than risk getting sick well before the next open enrollment period. A further incentive would exist if coverage of pre-existing conditions is excluded for a period of time for those who defer on initial enrollment. (Currently the PPACA disallows any application of pre-existing condition exclusions.) Mark Pauly, one of those polled by Kaiser and a former adviser to the first President Bush, thinks that coverage significantly could be expanded just through the subsidies provided to individuals and families towards coverage under an exchange. These subsidies will be available to those earning up to four times the federal poverty level (approximately $44,000 for a single person and $88,000 for a family of four). Other options mentioned by those polled include high risk pools for certain populations (the very sick, children, those bridging the gap between employment and Medicare), reduced exchange subsidies for those who delay enrollment, and “rewards,” presumably in the form of premium discounts, for those who enroll early and retain coverage. A higher premium penalty for late enrollment is already working to encourage early enrollment in Medicare Part B.

Finally, for a historical perspective, Washington Post blogger Ezra Klein observes that the 5th Congress, in July 1789, passed a law that included a mandate, funded by a payroll tax on private merchant ships, requiring that privately employed sailors purchase health care insurance. (The law also created a government-operated marine hospital service.) Ezra notes that the 5th Congress, unlike the 112th Congress, “did not really need to struggle over the intentions of the drafters of the Constitutions in creating this act as many of its members were the drafters of the Constitution.” (Emphasis added.) You can read Ezra’s post here, which links to a more detailed discussion of the earlier mandate.

Bottom line, it would be encouraging if the debate over the individual mandate recedes to the background of the discussion over health care reform, so that other points of compromise can come to the fore.

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