2012 Commentary: What Happens if the Supreme Court Only Invalidates the Individual Mandate?

Abstract: This week, the Supreme Court is hearing oral arguments with regards to the Obama administration's healthcare legislation. I examine the consequences for Americans if the Court chooses only to invalidate the individual mandate portion of the bill.

The front of the United States Supreme Court building (1).
In 2010, the Democratic-controlled Congress and Senate passed two bills, The Patient Protection and Affordable Care Act and The Health Care and Education Reconciliation Act, which made sweeping changes to America's healthcare system. The legislation has engendered passionate feelings on both sides. Proponents claim that the bill is a constitutionally sound measure that will improve the healthcare system, while critics deride it as undemocratic.

This week, the Supreme Court is listening to oral arguments from both proponents and critics of the healthcare legislation in an effort to determine, once and for all, which side is correct. It is possible that the Court will choose either to throw out the entire piece of legislation or to rule that every element in the current bill is constitutional. However, it is just as likely that the Court will decide to eliminate the individual mandate (requiring all individuals to purchase health insurance) from the legislation while leaving the remainder of the bill virtually untouched. If the latter scenario plays out, what impact will it have on Americans?

If the Court throws out the individual mandate, the federal government, per a CBO report, will lose the billions of dollars in revenue it would likely have gained from tax penalties imposed on Americans who refuse to purchase healthcare. If this happens, the U.S. may have to borrow money to fund the healthcare program, thereby adding to the national debt. Alternatively, it could choose to cut corners when it comes to implementing portions of the legislation, which would be detrimental to all Americans. Finally, government agencies and hospitals would likely have to expend significantly more than expected on charity care for the uninsured.

Perhaps more dire, if the Court only invalidates the individual mandate portion of the healthcare legislation, it might create a governmental nightmare of epic proportions. As Merrill Goozner notes in a MedCity article, insurance companies participating in the government sponsored health exchanges can only offer their products at a reasonable cost if their pools include a certain percentage of young, healthy subscribers. If young people do not purchase health insurance in sufficient numbers, the insurance companies might have to exit the health exchanges or risk going under. In that scenario, federal and state governments would be in an untenable situation. They would be required by law to maintain a vibrant health exchange; however they would not be able to convince any insurance companies to offer plans through the system. That is the worst-case scenario. At the very least, according to Goozner, healthcare costs for people using the exchanges will rise by at least 10 percent if the individual mandate is invalidated by the Court.

The Supreme Court will soon decide the fate of the Obama administration's healthcare legislation. If the Court chooses to invalidate only the individual mandate section in the bill, it might create some significant problems that will be difficult for either the federal or state governments to fix.

1. Photographer: Morriswa
    Date: September 2, 2011
    Title/Description: The front of the United States Supreme Court building.
    Location/Permission: Wikimedia Commons - Creative Commons Attribution-Share Alike 3.0 Unported
    license (click on the title/link or caption/link for photo, credits, permissions).

-- Anthony Hopper

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