What Happens to Health Insurance If ObamaCare is Overturned?

Sometime late next month, the Supreme Court of the United States (SOTUS)will give its ruling on the Affordable Care Act (also known as ObamaCare). Specifically, SOTUS will rule on whether or not the health care mandate included in ACA is constitutional. That’s the part that, beginning in 2014, requires every adult U.S. citizen under 65 to purchase health insurance or pay a fine. In addition, SOTUS will also consider whether the entire ACA law falls if a portion of it is ruled unconstitutional. Without delving deeply into constitutional law, that second point is under consideration because Congress failed to write a severability clause into ACA, which typically allows the rest of a law to stand even if specific clauses are struck down.

The politics and legal aspects of the ultimate SOTUS ruling aside, what would the practical impact be if the Supremes strike down the mandate?

Writing for The Atlantic Wire (March 27, 2012), in “What Happens If the Individual Mandate Is Struck Down” John Hudson envisioned three possible outcomes, paraphrased below:

  • SOTUS strikes down the mandate and the whole of ACA unravels. Without the mandate to pay for them, other provisions of ACA would be unsustainable. Congress would have to go back to the drawing board, hopefully to draft a better solution for affordable health care, perhaps one that allows health insurers to sell across state lines creating more competition.
  • SOTUS strikes down the mandate, but only some parts of ACA go away. In this case, the guarantee issue clause requiring insurers to sell policies to everyone who applies, regardless of pre-existing condition would stay in place. So would the community rating requirement that
    insurers offer plans within the same price range to all comers, no matter their age, sex or other factors. According to a March 19, 2012 article in the Wall Street Journal, “Insurers Set Plans in Case Mandate is Quashed,”survival tactics being considered by insurers for this scenario include charging penalties for anyone who enrolls outside of a narrow annual window and lower premiums and similar rewards for younger and healthier policy holders.
  • SOTUS strikes down the mandate, but the rest of ACA stands. This terrifies the insurance industry because they surmise (and probably rightly) that nobody would buy insurance until they had to. In that case, the rest of us could expect our premiums to spiral out of sight. The worse-case outcome for this scenario could be bankruptcy for the health insurance industry and the end of private health insurance as we know it.

In an article posted March 13, 2012 on The Week, Dr. Bill Frist, heart surgeon and former U.S. Senator, commented on the second scenario mentioned above. Assuming SOTUS doesn’t toss out the entire ObamaCare baby with the bath water, Frist wrote that the Congressional Budget Office (CBO) projects that 16 million Americans would be ineligible for the new coverage, which could cause non-group individual health insurance premiums to increase by 15 to 20%. At that point, the individual states could decide
whether they want to adopt the individual mandate. Frist also claimed that if the court decided to allow the expansion of Medicaid under ACA, nearly a quarter of all Americans would be covered by that program. In other words, a program originally intended largely to provide basic health care for low-income individuals and families would become the default health care provider for large portions of the middle class.


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