The Supreme Court’s decision to uphold or strike down the 2010 health care law could bolster – or undo – the most far-reaching changes ever legislated for the insurance industry and its customers.
A host of popular consumer protections are riding on the outcome, many of them aimed at the estimated 18 million Americans who buy their own coverage and who face greater obstacles and costs than those who get coverage through their jobs.
Other rules, already in effect, allow parents to keep their children on their policies until they’re 26 years old and compel insurers to refund money to consumers if they spend more on administrative costs and profits than is allowed.
“Individuals who don’t have affordable group coverage through their employers will be extremely harmed if the whole law is scrapped,” said Amy Gordon, a partner in the Chicago office of law firm McDermott Will & Emery who focuses on group health insurance and welfare benefits. Those who have pre-existing illnesses would be among the most vulnerable, she said.
Insurers, too, have a lot at stake: While the law saddles them with new regulations and taxes, it also positions them to reap an additional $1 trillion in gross revenue over eight years, largely from new customers, according to one forecast by Bloomberg Government, a for-profit news and research firm.
The court’s options are upholding all, none or just selected parts of the law.
A decision to void the entire law would allow insurers to go back to the pre-2010 status quo, when some canceled policies retroactively if policyholders fell ill with expensive conditions. New taxes on the industry and a requirement that insurers accept all applicants starting in 2014, even those who have pre-existing medical conditions, also would be gone. Currently, most states allow insurers to reject less-than-perfectly-healthy applicants, unless they’re part of group policies offered through employers.
If the law is struck down, on the other hand, insurers would lose tens of millions of new customers, partly because there’d be no requirement that most Americans carry insurance, and no government subsidies to help them purchase it.
“A lot of insurers were excited that the individual mandate would open a whole new area for them as far as coverage,” Gordon said.
Robert Laszewski, a former industry executive who runs a consulting firm, said he and others in the industry weren’t enthusiastic about the 2010 law, but they saw it in pragmatic terms: It could have been a lot worse.
“If the whole law is thrown out, we start over, and who knows what the political lineup will be,” he said.
One option before the court is to throw out only one provision: that all Americans buy coverage or pay a fine. The Obama administration and the opponents of the law who made the court challenges have argued that if the justices strike that requirement, they also should eliminate related provisions that require insurers to enroll applicants with pre-existing conditions and to charge them essentially the same rates as healthy people.
Those three pieces go together, they say, because it would be financially ruinous to require insurers to sell to everyone without mandating most people buy coverage. In the handful of states that have tried that, premiums skyrocketed because not enough healthy people bought insurance.
The worst outcome for the insurance industry – and possibly for consumers as well – might be if the court tosses the requirement that all Americans carry coverage but still requires insurers to take all comers and to charge the healthy and the sick comparable rates.
In that case, experts predict, many insurers would raise premiums in anticipation that more sick people would sign up for coverage. “You’d have an insurance company nightmare,” said Len Nichols, the director of the Center for Health Policy Research and Ethics at George Mason University.
“We would have ridiculously high prices or no one to buy insurance from,” Laszewski said.
Some insurers probably would stop selling coverage on the so-called individual market. New marketplaces, called exchanges, in which individuals and small businesses would buy insurance, might see a disproportionate number of unhealthy people apply, thus raising prices and perhaps dooming the exchanges.
If the court strikes just the three related coverage provisions, many other parts of the law – including subsidies to help lower-income people buy coverage –would continue. Insurers probably would still face increased scrutiny of rate increases over 10 percent and would be required to refund consumers if they didn’t spend at least 80 percent of insurance premiums on medical care. This year, insurers are expected to return about $1.3 billion to individuals and small employers for failing to meet that target.
Subsidies, in the form of tax credits, still would be available to help people who earn up to 400 percent of the poverty level – that would be about $44,680 this year for a single individual – to buy coverage. But the scenario would be “bad for a family making more than that, because there would be little or no subsidy” along with rapidly rising prices, Laszewski said.
Experts say that some of the other insurance industry and consumer provisions already in effect are likely to continue even if the entire law is scrapped. Last week, for instance, United Healthcare, Aetna and Humana committed to keeping several of the most popular provisions, such as allowing adult children to stay on their parents’ policies until age 26, not charging co-payments for some preventive services – such as cancer screenings – and allowing consumers third-party appeals of treatment denials.
The insurers made no promise to insure people with pre-existing conditions, however.
In addition, 23 states and the District of Columbia have enacted laws that incorporate at least one of the early requirements of the federal law, according to a study by the Georgetown University Health Policy Institute.
Some of those state laws have an “escape clause,” allowing the rules to expire if the court rejects the federal law, but others do not, said Sabrina Corlette, one of the authors of the Georgetown study.
It’s also unclear what, if any, accommodations might be made for the nearly 62,000 people who are enrolled in the special high-risk pools the law created to cover those who are unable to buy insurance because of pre-existing illnesses.
“I have no idea what I would do,” said Haley White, a 22-year-old in Wauconda, Ill., who had Hodgkin’s lymphoma as a teenager and lost her coverage when her father was laid off. “No one will insure me because of my health history.”