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Continued: Insurers say reform will flop without a mandate

  • Article by: JIM SPENCER , Star Tribune
  • Last update: March 17, 2012 - 2:35 PM

WASHINGTON -- Trade associations representing America's biggest health insurance companies have asked the Supreme Court to repeal the most important patient protections of the health care reform bill if the justices decide Americans cannot be forced to buy health policies.

The trade associations, whose members collectively insure 299 million Americans, aren't taking a stand on the constitutionality of the so-called "individual mandate" that would require uninsured Americans to either purchase a policy or pay a fine. The mandate will be the centerpiece of Supreme Court arguments March 26 to 28.

But the insurance industry has adopted an all-or-none position on reform. Without the mandate pushing millions of healthy customers into the risk pool, the industry says it cannot comply with provisions of the 2010 Affordable Care Act (ACA) that require insurance companies to offer health insurance to anyone who applies and forbid companies from discriminating against policyholders on the basis of preexisting conditions, health status or age.

"We intended our brief to be factual, based on experience, to make the point that those reforms go hand-in-hand with the mandate," said Justine Handelman, the Blue Cross and Blue Shield Association's vice president of legislative and regulatory policy. "If the mandate were struck, those reforms need to be struck with it."

America's Health Insurance Plans (AHIP), which represents for-profit insurers, joined the Blue Cross and Blue Shield Association, which represents nonprofit insurers, in the request.

Minnesota-based UnitedHealth Group, an AHIP member, and Blue Cross and Blue Shield of Minnesota declined requests for interviews.

In declining to take a stand on the individual mandate, the health insurance industry says constitutional questions are beyond its expertise. Handelman and AHIP spokesman Robert Zirkelbach would not say if the trade groups think members are better served by killing or keeping the mandate.

AHIP and Blue Cross and Blue Shield expressed concerns with the ACA in 2010, but neither took a formal stand on it.

Some health economists say striking the entire package would return the United States to where it was before reform, with health insurance companies reaping large profits while millions of people are priced out of or excluded from the insurance market.

They say the industry's Supreme Court brief suggests that it wants the guts of health care reform to go away.

"AHIP is clearly making a case for repeal by throwing the whole thing out," said Steve Parente, a health insurance specialist at the University of Minnesota. "You're kind of betting large."

Parente contributed to four other briefs in the health care cases the Supreme Court is set to hear, including one opposing the individual mandate.

Retired University of Rochester professor Chuck Phelps, whose college textbook "Health Economics" is in its fifth edition, believes the mandate is legal under the Constitution's necessary and proper clause. But Phelps agreed with Parente about the insurance industry brief.

"I gather that they are hoping that the court concludes that the individual mandate is an unconstitutional expansion of the commerce clause and, hence, kills the whole thing," Phelps said.

At the heart of the debate is whether insurance companies can profitably expand coverage without the mandate.

"There's been quite a bit of experience in reforms without a mandate," Handelman said. "Twelve states have actually tried it, and nine states repealed because premiums skyrocketed. People had less choice because insurers left the market and had less access to coverage."

If the individual mandate disappears, experts believe healthy young people will continue to forgo coverage, as many now do, and others will wait until they became sick to buy policies. The ACA requires insurers to insure anyone who pays premiums.

"It's like applying for homeowners insurance after you smell smoke," Handelman explained.

The health reform law also states that people cannot be excluded from coverage for preexisting conditions and sets premiums based on the costs of medical care in a region, not by the medical history or age of individuals.

"Without a balanced risk pool of sick and healthy alike, premiums would skyrocket ... ," the industry brief argues. "Estimates are that just 5 percent of the population accounts for almost 50 percent of all health care costs.... At the same time, half of the population accounts for just 3 percent of health care spending."

Insurance companies have a financial stake, since the mandate guarantees millions of new customers. Without them, Phelps said, "some of the money the health insurance industry makes would go out the door to the poor. That may be one of the concerns that leads them to want the act to go away."

If the Supreme Court dumps the individual mandate, but leaves in place other market reforms, Parente and Phelps believe universal health coverage is doomed, and the economic and political fallout will be significant.

Killing the mandate would make health care "a huge part" of the 2012 elections, Phelps said. "A lot of mechanisms to get [the health reform law] going are already in place," he said. "You can't say, 'Whoa, we're back to square one' without making a lot of people unhappy .... If the court rules this unconstitutional, it's really going to scramble up the presidential and House and Senate races."

Ana Gupte, a health insurance analyst with Bernstein Research, thinks the Supreme Court may delay action until the government actually fines someone for not buying insurance.

"There is a lot of emotion and division, and it is an election year," she said.

Even if the individual mandate goes away, but access and premium rules stay, Gupte thinks insurance companies will make money. She is skeptical of claims of actuarial disaster.

"If you are lobbying, you have to shout pretty loud to get what you want," she said. "If you put in a weak request, you get nothing."

Jim Spencer • 202-408-2752

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