The Democrats Had Better Hope the Supreme Court Overturns the Individual Mandate Before the Middle Class Understands How Bad It Is For Them

This post first appeared as a column at Kaiser Health News

Is The Individual Mandate Really A Lynchpin In The New Health Law?

If the Supreme Court does rule the individual mandate unconstitutional will it really bring down the whole law?

I don't see it.

First, the individual mandate isn't even close to what it has been made to be -- a provision that would protect the integrity of the health insurance market by forcing people to buy health insurance before they became sick. At best, it's a tepid attempt at that.

The individual mandate's fine for not buying coverage is 1 percent of family income or $95 for each family member not covered, whichever is greater in 2014; 2 percent of income or $325 per family member, whichever is greater in 2015; and $695 or 2.5 percent of income or whichever is greater in subsequent years (kids are half price!).

These are meaningful fines for not buying insurance, but only a fraction of what a consumer would pay for health insurance.

Here's how the individual mandate's fine for non-compliance actually works for a number of representative family income levels based upon 2010 incomes and poverty levels:









Alternatively, here is what families would be required to pay under the health law toward their health insurance premiums based upon their total family income -- net of the federal subsidy -- in 2010 dollars:









A family of four making $55,000 per year is at 250 percent of the federal poverty level this year. Based upon today's incomes, the maximum they would pay in the exchange for health insurance is 8.05 percent of their income, net of the federal subsidy -- $4,428 annually.

So, under the health law's individual mandate, this $55,000 family would likely pay no more than $1,100 ($550 for each adult) in fines the first year, $2,200 the second year and $2,750 in fines the third and subsequent years; or, alternatively, have to pay $4,428 for insurance net of the federal subsidy in the exchange.

A family making $85,000 a year (400 percent of poverty) would have to pay $8,075 for their share of the cost of health insurance in the exchange or likely pay a fine in the first year of $1,700 that would likely cap out at 2.5 percent of $88,000, or $4,250, in later years.

Families would also have to pay their share of deductibles and co-pays within the insurance policies they purchased.

The fine families would pay for ignoring the individual mandate to purchase health insurance is significant but only a fraction of what the insurance would cost.

If the individual mandate is eventually held unconstitutional by the Supreme Court there will be attempts to substitute an alternative means to protect the insurance market from the "anti-selection" that would occur as people held back on purchasing health insurance until they needed it.

One possible alternative to the individual mandate would be to allow consumers to purchase coverage only at limited open enrollment periods -- buy it now or you won't be able to get it when you get sick.

Given how tepid the current individual mandate penalties are--the penalties don't even apply if health insurance costs more than 8% of a families income--such an alternative scheme could be much more effective in protecting the insurance markets, as well as far more politically palatable for consumers faced with paying either an unaffordable insurance fine or an even more unaffordable insurance premium, than the current weak individual mandate before the courts.

All of the focus on the recent Richmond federal court ruling misses the big picture on health insurance affordability under the new law: Many middle class families will not be happy with or be able to afford the fines nor will they be able to afford the much higher cost of health insurance -- even after the federal subsidy.

Back to the Future—Biggest Health Plans Reported to be Building Their Own Political Coalition

I had a real sense of déjà vu this morning reading Bara Vaida’s story in Kaiser Health News:

Five of the nation's largest health insurance companies are taking a key step toward building their own inside-the-Beltway coalition to influence implementation of the new health law and congressional efforts to change it. The companies – Aetna, Cigna, Humana, UnitedHealthcare and Wellpoint – are shopping around Washington for a public relations firm to represent them…

Several industry observers said the companies want their own "subcommittee" within AHIP to influence the group's political and policy choices in 2011. "I think some of the companies felt the small and non-profit company interests were getting more attention within AHIP and they wanted to make sure their interests were considered too," said one health insurance executive whose company is a member of AHIP. "I think this is just about normal tensions within trade associations…"

Others speculated that the health insurers were seeking a way to reestablish ties with congressional Republicans, who were angered that the companies, via AHIP, worked with the Obama administration for much of 2009 on health care legislation.

This reminds me of the early 1990s. In the wake of the insurance industry being made to be the bad guys during the Clinton Health Plan debate, many of the largest members exited the historically dominant Health Insurance Association of America (HIAA) for the competing HMO dominated trade association.

At the time, many observers saw a cynical irony in the move; it was those dominant members that drove much of the policy that got the industry in trouble. Once the brand [HIAA] had been spoiled, many felt at the time, the big guys declared themselves the innocent ones and used the move to begin anew their Washington lobbying from a new platform.

Ironically, some years later HIAA and the HMO trade association merged to form AHIP.

Guess the largest health insurance companies once again were outflanked by a bunch of little guys and not-for-profits, this time on the AHIP board, and forced, once again, into a failed political strategy that was not of their doing.

What Would Happen If You Were To Pass a Big Health Care Bill Without Bipartisan Support?

During the recent health care debate I heard many people on both sides of the debate worry out loud about passing a heath care bill that did not enjoy broad support.

I guess this question is no longer a theoretical one.

December will be a big month when it comes to seeing some of the fallout accruing from the very partisan passage of the Patient Protection and Affordable Care Act.

First, the White House is worried big time about a Richmond federal judge who has said he will rule by year-end on a suit brought by the Virginia Attorney General, and a number of others, on the constitutionality of the individual mandate. This Republican appointee has already telegraphed a cynical view of the administration’s constitutional defense of the bill. More problematic, the Senate staff forgot to put a “severability clause” in the new health care law. That means the whole thing (2,800 pages) can get thrown out if a core element of the law is found unconstitutional. And, there are lots of people in this town worried this judge just might do that.

We all know this is going to be finally decided by the Supreme Court—make that by Justice Anthony Kennedy in what could well be a 5-4 decision—but getting the whole thing thrown out in even one of the many pending suits could send shockwaves of uncertainty into the health care industry trying to figure out just what it will finally have to implement, taxes it will have to pay, and which people it will have to cover. A bad decision for the new health law will also present lots of fodder for its conservative critics.

Second, we’ve got the infamous 1099 requirement in the new law that will have every business going crazy sending out tax forms to everyone it does business with beginning in 2011. I keep hearing this will be repealed but no one can tell me where the money is going to come from—$17 billion will be needed over ten years to do it.

Then there is the doc fix. Now the docs are scheduled to get their Medicare fees slashed on January 1, 2011. Again, everyone says the Congress is going to fix this one for the docs but no one knows where the money will come from—about $1 billion for each month they patch the problem and a total of $300 billion over ten years.

The Congress, both Republicans and Democrats, are intent, make that desperate, to find the money for both the small business and physician lobby. It also looks like Republicans are bent on blackmailing the Dems over where to get it by demanding billions come out of the new health care law—from places like preventive health care spending to insurance subsidies—in order to come up with the cash needed to get the small business and doc lobby off everyone’s backs.

I will suggest that while many of those eager to ram this new law through didn't see the need for bipartisan support a year ago they may understand its value now.

"Care and Cost"

Good friends David Kibbe and Brian Klepper have finally started their own blog--aimed at becoming a forum for many contributors to the health care debate.

I suggest you add, "Care and Cost"––"Health Care Conversations About Hard Choices and Emerging Solutions" to your bookmarks.