The Supreme Court steps were abuzz Tuesday morning with supporters, opponents and onlookers, as they either championed the Patient Protection and Affordable Care Act, called it a major setback to religious freedom and personal liberty, or simply wanted to observe the scene surrounding the historical arguments first-hand.
The core focus of today’s oral arguments before the justices is the individual mandate, which requires individuals to buy health insurance or pay a penalty. Should the court strike down the mandate, and deem it unseverable from the rest of the law, PPACA would be invalidated. The law is being challenged by 26 states and an independent business group.
“In a sense, if it’s kept, then the rest of the law makes a little more sense. If it’s found to be unconstitutional, things start to not make sense,” says Steve Wojcik, vice president of public policy at the National Business Group on Health.
The administration said the insurance requirement was part of a comprehensive effort by Congress to address a crisis in the U.S. health care market, which accounts for nearly 18% of the nation's economy. They argued the federal government essentially will be regulating inactivity by American consumers who choose not to buy health insurance.
The states and the independent business group opposing the individual mandate said the power of Congress to regulate commerce does not include the authority to force individuals to enter into commerce and buy insurance. If Congress can take the unprecedented step of requiring that individuals buy insurance, then it can mandate the purchase of American-made cars or any other product, whether people want it or not, the challengers argued.
But at this point, several provisions have already been rolled out and major funds have been put into implementation and compliance.
“At the time, it was a hassle and expensive addition to plans, but there’s not much commitment to undo it,” Wojcik says. “Some feel they went through the trouble, so let’s keep it that way.”
Another PPACA provision, known as guaranteed issue, requires insurers to accept all applicants, regardless of health status. If the individual mandate is struck down but guaranteed issue stays, there is a chance healthy individuals won’t enter the market and the market would be inundated with a bigger pool of higher risk. For smaller employers with less leveraging power than larger self-insured employers, this might mean spiked rates. The government might also have to pay more for subsidies paid to employees put in the exchanges.
Such chaos may not be bad news for investors in the short term. Many health care analysts say shares of large insurers — such as Aetna, UnitedHealth Group Inc and WellPoint Inc. — stand to immediately jump at least 5% should the court strike down the legislation as a whole. The law's regulations put greater scrutiny on the insurance premium increases that help fuel industry profits. They require insurers to spend at least 80% of their premiums on medical costs as opposed to administrative expenses and impose higher fees on insurance plans in the years ahead.
Along with this are several provisions that have changed the way benefits managers have control over their plan administration, to the frustration of practitioners.
“My employers are wishing they had control over their plan like they used to,” says Lee Doble, managing director at Frank Crystal & Co., Inc. Still, he says, “I do think there is a place for health care exchanges; they’ve existed in modest ways.” Other than small employers, Doble doesn’t think there will be a big rush to place employees in exchanges, mainly because of the penalties associated and the loss of control over employee health.
“Once they look at the cost of not doing a plan, it doesn’t make sense and it becomes much more expensive for employees and themselves as a plan sponsor.”
Lisa Gillespie is the associate editor of Employee Benefit News, a sister publication of Health Data Management. Additional reporting by Reuters reporter Lewis Krauskopf.
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