If the Coverage Mandate Falls, How Much of Health Reform Must Go With It?

by Rebecca Farley on March 28, 2012

The final installment in our series analyzing the Supreme Court case on the Affordable Care Act deals with the “severability” of the coverage mandate from the rest of the law. The question of severability relates to the constitutionality of the coverage mandate: if the mandate is struck down, can the rest of the ACA still stand?

Lawyers for the health law opponents argue that the mandate is a critical and inseparable component of the rest of the law; if it is found to be unconstitutional, the entire ACA must go. Their case is bolstered by the fact that the ACA did not include language that is standard to most laws saying that if any part of the law is struck down, the rest may still stand. The ACA’s lack of a severability clause, as it is called, already led one lower court to throw out the entire law after finding the coverage mandate unconstitutional.

On the other hand, lawyers for the Obama Administration have made the case that most of the ACA is unrelated to the coverage mandate. In fact, they say, only a few provisions must be struck down if the mandate is found to be unconstitutional. These include the guaranteed issue provision (requiring insurers to provide coverage to anyone regardless of their pre-existing health conditions) and the community rating provision (preventing insurers from charging sharply higher rates for individuals with poor health).

Ezra Klein of The Washington Post has detailed three ways the Court might rule on the severability issue in the event it declared the mandate unconstitutional:

  1. The mandate falls, and the entire ACA is struck down.
  2. The mandate falls, and only the insurance reform provisions are struck down.
  3. The mandate falls, and the rest of the law stands.

The Court’s decision on the severability issue could have a profound effect on the U.S. insurance market. Insurance markets are premised on the assumption that a sufficient number of healthy people will pay into the insurance pool (through their premiums) to offset the costs of health services for those who need the care. If healthy people waited until they got sick to purchase insurance, premiums would skyrocket as insurance pools became filled only with people who were high utilizers of services. This phenomenon is known as “adverse selection.” The coverage mandate arose as a way to ensure the viability of the insurance market in a new age of reforms that prevent insurers from denying coverage to people who are sick.

If the mandate is declared unconstitutional but the rest of the law stands, Congress will have to find an alternative way to ensure that the insurance market does not collapse from adverse selection. If the mandate and the insurance reforms are struck down together, many people may once again find that they cannot purchase health insurance due to a pre-existing health condition, or that their premiums have been risk-adjusted so high as to be unaffordable. Of course, if the Court finds that the mandate is not severable from the ACA, the entire law and its myriad coverage and delivery system reforms will go with it.

Did you miss the other posts in our Supreme Court series? Click to view a summary of the 4 issues at stake and our in-depth analyses of each one: the coverage mandate, the Medicaid expansion, and the Anti-Injunction Act question.

 

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