If the U.S. Supreme Court throws out the individual mandate in the health reform law, it may not be that difficult to find a replacement, health policy experts told Bloomberg BNA in recent interviews.
And even if the Supreme Court lets the controversial insurance coverage requirement remain after hearing arguments March 26-28, bolstering the mandate with other alternatives may help to strengthen weaknesses in the current law, the experts said.
The individual mandate, otherwise known as the minimum coverage provision in the Patient Protection and Affordable Care Act, has been at the center of public attention—and controversy—since the law was enacted in March 2010. It requires all individuals, subject to certain exceptions based on income, to obtain health coverage or pay a financial penalty beginning in January 2014.
The mandate also requires insurers to accept all applicants, regardless of health status, and prohibits insurers from excluding coverage based on pre-existing conditions.
Proponents of the mandate say it is necessary to bring younger, healthier individuals into the insurance market to avoid so-called adverse selection, a process in which demand for services by less-healthy individuals overwhelms a health plan, sending it into a “death spiral” of claims that cannot be paid with the available premiums.
Mandate opponents criticize it as an unprecedented overreach by Congress, one that improperly attempts to regulate “inactivity” under the commerce clause of the Constitution.
Mandate Alternatives Available
Less controversial alternatives to the mandate are readily available, several health care experts said, pointing to some policies already in existence.
“Medicare Part B, which has been voluntary from the beginning, has been a pretty powerful incentive to get people to enroll,” said Paul B. Ginsburg, president of the Center for Studying Health System Change, a nonpartisan health policy research group.
People who delay enrolling in Medicare Part B, the federal health plan for the elderly, after they reach age 65 must pay a 10 percent Part B premium penalty, unless they have insurance from an employer, Ginsburg noted. Moreover, in most cases, they will have to pay that penalty every month for as long as they receive Medicare, he said.
Agreeing with Ginsburg, Gail Wilensky, a senior fellow at Project HOPE, an international health foundation, told Bloomberg BNA, “The Medicare model is a good one. … You don’t want to encourage adverse selection, and the best way to do that is to increase the pressure on people to obtain insurance.”
“It would have been better and smarter to do it this way in the first place,” added Wilensky, who served as administrator of the Health Care Financing Administration—the predecessor agency to the Centers for Medicare & Medicaid Services—during the administration of George H.W. Bush.
Other Modifications to Medicare Model
Along with higher premiums for those who delay signing up for insurance, Wilensky and Ginsburg suggested adding a couple of tweaks to the Medicare model.
Wilensky would also “lock in” enrollees once they have signed up for insurance. “So not only do you have the penalty, but you would lock them into the purchase of insurance for a certain number of years, so you don’t give them a chance to drop out,” she said.
Ginsburg said he “would also eliminate the right to guaranteed issue” for those who delay purchasing insurance. He referred to the right of any applicant for health insurance to obtain it regardless of their current health status, which PPACA permits during open enrollment periods.
“That would mean the amount of premium you pay would be based on your medical history, including pre-existing conditions,” he added.
Offering a similar proposal, Robert Laszewski, president of Health Policy and Strategy Associates LLC, a health care consulting firm, suggested that people with pre-existing conditions who delay purchasing insurance after Jan. 1, 2014, should not be able to obtain insurance for that condition for at least two years.
“It’s important to understand they could purchase insurance for themselves and their family exclusive of that pre-existing condition,” he explained. “And that condition would be covered after two years.
“That’s adequate protection for the insurance market,” said Laszewski, who has 40 years of experience in the insurance industry. “It’s also an adequate incentive for consumers to purchase insurance,” he added, “because they will know that if they get sick down the road, they’re not going to be covered for that condition for at least two years.”
Thomas P. Miller, a health economist at the American Enterprise Institute, a nonprofit public policy group favoring free enterprise, also proposed an extension of existing law as “the most realistic alternative” to the mandate.
He pointed to the “continuous coverage” requirements under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), which made it unlawful for employer-sponsored plans to impose exclusions on pre-existing conditions for workers when they changed jobs, so long as they maintained coverage in their employer-sponsored health plans.
Miller’s proposal would extend the continuous coverage benefits of employer-based plans to individuals. “That means as long as you maintain your coverage, you would not be exposed to higher premiums or restricted coverage,” he said.
GAO Examines Options
Adding to the mix of mandate alternatives, the Government Accountability Office listed several options to encourage voluntary enrollment, in a February 2011 response (GAO-11-392R) to Sen. Ben Nelson (D-Neb.), who requested information on the issue.
After interviewing 41 experts at 21 health organizations, GAO listed nine approaches:
- modify open enrollment periods and impose late enrollment penalties;
- expand employers’ roles in auto-enrolling and facilitating employees’ health insurance enrollment;
- conduct public education and outreach campaigns;
- provide broad access to personalized assistance for health coverage enrollment;
- impose a tax to pay for uncompensated care;
- allow greater variation in premium rates, based on enrollee age;
- condition receipt of certain government services upon proof of health insurance coverage;
- provide insurers flexibility to compensate brokers and agents for promoting value-based coverage, rather than basing compensation on policy price alone; and
- require or encourage credit rating agencies to use health insurance status as a factor in determining credit ratings.
Existing Mandate Weak, Experts Say
If the high court invalidates the mandate, the fallout may not be all that great because the mandate in PPACA has some major weaknesses, Wilensky and Laszewski told Bloomberg BNA.
“I don’t think there will be nearly as much impact if the mandate is struck down,” Wilensky said. “The penalties are quite small, especially in the early years.”
Laszewski agreed and said, “This is not a good individual mandate.” He added, “Not only are the penalties small for those who do not comply, but if the cost of purchasing health insurance is more than 8 percent of your income, you’re forgiven from the mandate.”
Also, calculating the penalty will be difficult, Laszewski said. For example, beginning in 2014, the penalty will be $95 or 1 percent of a person’s household income, he explained. The penalty will gradually increase to $695 or 300 percent of a family’s income by 2016.
“What’s your income?” Laszewski asked. “The amount you put on your tax return last year or the current year, which we won’t know until April?” he questioned. “It’s a mess.”
Ginsburg suggested that problems with the mandate’s design may force changes at some point, even if the court upholds it. “I think it’s inevitable, even if the mandate continues, that the federal government will be looking at strengthening it,” he predicted.
For example, the health program in Massachusetts, which has had a mandate since 2006, has had to strengthen the insurance mandate at least twice, Ginsburg noted. “I don’t think they increased the penalties, but it used to be you could buy coverage anytime, and they made it twice a year and then once a year,” he said.
Is There Political Will?
Whether the court strikes down the mandate or upholds it and circumstances suggest the need for change, the experts agreed there is little possibility the mandate will be changed any time soon.
“You won’t get a fix from the current Congress because you have a large block who would like to blow up the whole legislation,” Wilensky said.
Echoing her, Laszewski said, “People are not talking about this openly on Capitol Hill because neither the Republicans nor the Democrats want to admit they’re thinking about it.”
Miller suggested work on possible alternatives is being done behind the scenes. “Right now, people don’t want to get ahead of themselves,” he said, adding, “the GOP’s stance is they don’t want to jeopardize the clarity of the constitutional issues.”
However, if the court strikes down the mandate, in a decision which is expected by the end of the June, “Then I think you’ll see a pivot,” Miller said. “At that point, people will want to show there are alternatives and that we can go down a different path.”