Hot Topic: Supreme Court Takes Up the Health Care Law and the Individual Mandate

The Supreme Court will begin hearing arguments this week in a challenge to the most significant overhaul of the nation’s health care system in nearly 50 years. The suit brought by 26 states, several individuals, and a national business group challenges the Affordable Health Care Act, which President Obama signed into law two years ago. The law requires nearly all Americans to obtain insurance or pay a penalty by 2015. The court will dedicate six hours to hear arguments over three days, the most time given to any case since 1966. Joel C. Cantor, director of Rutgers’ Center for State Health Policy and a professor of public policy, explains the issues the court will consider, components of the law, and what’s at stake if it’s struck down. 

Rutgers Today: What issues will the Supreme Court consider this week?

Rutgers Today: What other issues will the court consider?

Cantor: The court will review whether the individual mandate, to take effect in 2014, is constitutional and that is a very big issue. Most health insurance analysts believe that without the mandate the law would be ineffective: it would not cover nearly as many people and it would cause harm to the stability of the health insurance market.

The Commerce clause of the Constitution gives the U.S. Congress the power to regulate commerce among the states. But is this interstate commerce? The plaintiffs are arguing this mandate regulates inactivity, not activity, and therefore is not interstate commerce. But there is a body of law that suggests it is interstate commerce, and there are previous cases. For example, the court has decided that a wheat farmer growing wheat for his own use affects interstate commerce. He is not selling it, but it affects the market and the market is interstate. 

Rutgers Today: What happens if court strikes down the individual mandate?

Cantor: If the justices were to strike down the mandate as unconstitutional, the question becomes: Do they have to strike down the whole law or would they strike down only pieces of the law, and if so which pieces? Opponents of the law say the court should strike down the whole thing, but proponents say if they strike down the mandate, there are a few pieces that have to go but the bulk of it can stand. The administration argues that the regulations requiring insurance companies  to take everybody regardless of their health, and some of the rules for setting premiums that say insurers can’t charge sick people more would have to go but the rest can stand. Legal scholars suggest that it’s the tendency of the court to make its decision as narrow as possible, so the likelihood that the whole thing will be struck down is small.

Rutgers Today: Why is the individual mandate an important part of the law?

Cantor:  Fewer people would end up enrolling in coverage when the main parts of the law go into effect in 2014, even with subsidies available. The other implication is the price of health insurance is driven by who buys it. The people who are least likely to buy coverage are people who are comparatively young and healthy and don’t believe they will have health care costs. The people remaining in the risk pool will require more services and, therefore, premiums will go up. Right now there is a large number of people without health insurance coverage, and many will get sick or injured and incur catastrophic costs that they can’t pay. Some estimates say that for the average family health insurance plan, about $1,000 a year goes to subsidize the uninsured, so that drives up premiums.

Opinion polls show the individual mandate is by far the most unpopular part of the act. But the new rules that require insurance companies to cover everybody regardless of their health are enormously popular. I think in the mind of the public, they haven’t made the connection between the two, but you can’t have one without the other. Imagine a world where you can get health insurance no matter how sick you are. You would be irrational to buy health insurance until you are sick and the insurance industry simply can’t exist with that model.

Rutgers Today: What about the expansion of Medicaid? Why is that being challenged as part of this case?

Cantor: The law will reduce the number of uninsured people in the United States by 32 million and about half of that is through the expansion of the Medicaid program. Right now Medicaid covers low-income adults who have children, are elderly, or who have certain disabilities. The act does away with eligibility categories and creates a single income threshold, making able-bodied low-income single adults are the biggest part of the expansion.

For this group, the federal government will pay 100 percent and eventually phases it down to 90 percent.  The last issue the court will consider is whether the Medicaid expansion part of the law is an unconstitutionally coercive imposition of federal power over the states. The 26 states argue they don’t have a choice but to implement a big Medicaid expansion that will cost them money.  States have the option of dropping their Medicaid programs altogether, but if they keep their program they have to expand them.  There is a long history of federal expansions of Medicaid, and the court will have to decide whether this one is different and unconstitutional.

Rutgers Today: Are there other parts of the law that are not part of this challenge?

Cantor: One of the early pieces of the law to be implemented requires employers and health insurers to allow young adults to stay on their parents plans until their 26th birthday. It’s widely popular and as of June 2011, 2.5 million young adults have gained coverage. If the whole law gets struck down, and as I said that’s unlikely, this could go away. The other thing the law slowly does is close the “doughnut hole” Medicare prescription gap. There is an estimate that in 2011, New Jersey Seniors saved $95 million. Health insurance also now has to cover preventative services with no deductibles or cost sharing. If the whole law gets struck down, and as I said that’s unlikely, all this could go away.