The United States Supreme Court recently heard oral arguments regarding whether all or part of the Patient Protection and Affordable Care Act – the law we have come to call “Obamacare,” is constitutional. There are three possible outcomes: (1) The entire law will be ruled constitutional; (2) the entire law will be ruled unconstitutional; or (3) the law’s requirement that everyone, including particularly the young and healthy, purchase insurance or pay a penalty – the “mandate” portion of the 2,700 page law – will be ruled unconstitutional and severed from the law, with the remainder preserved. This viewpoint focuses on what might remain if only the mandate is stricken.
Here are some of the key provisions at stake: the Act requires health insurance plans to cover pre-existing conditions. This requirement is already in effect for children, and is set to go into effect in 2014 for adults. The Act also currently lets parents keep their children insured under their current plans up to age 26, under certain conditions. Before the Act, most plans did not allow this. The Act will prohibit insurance plans from placing lifetime or annual limits on certain essential services, beginning in 2014, and has a number of provider choice requirements that are more expansive than many plans currently allow. The Act subjects some insurance rate increases (over 10 percent, mostly) to “review” for reasonableness. The Act also requires insurance to cover a number of preventive services without charging a co-payment, such as routine screenings like mammograms and colonoscopies, vaccines, flu shots, healthy pregnancy counseling and screening, well-baby and child visits, and counseling on smoking cessation, weight loss, nutrition, and alcohol use and abuse. Importantly, the Act prohibits insurers from cancelling coverage except for fraud or intentional misrepresentation, and non-payment of premium.
These requirements are likely “severable” from the mandate, meaning they can stand alone as required without the mandate. However, most commentators think these additional or enhanced levels of required coverage will increase the cost of insurance across the board without the mandate because the larger and healthier risk pool the mandate creates allows these expansions of benefits to be cost-effective.
Right now, adults with pre-existing conditions can get coverage if they meet certain conditions, including having been denied coverage due to a pre-existing condition and being uninsured for six months. This portion of the Act is funded with federal money independent of the mandate. For that reason, the current pre-existing condition portion of the Act could stand alone without the mandate, without negatively affecting the cost of insurance. However, this benefit is set to expire in 2014 when pre-existing condition coverage for adults becomes mandatory. Also, the Act has some enhanced appeal rights over and above those that most plans currently offer. These could stand without the mandate and may not have much impact on the cost of insurance.
The Act creates “insurance exchanges” beginning in 2014. These will be run by the states, and their details are still being worked out. The goal of the insurance exchanges is keeping premiums low for everyone, including employers, by increasing competition among insurers, giving small and large businesses the same purchasing power, and streamlining administrative costs. The insurance exchanges can still stand without the mandate. While many of the Act requirements will likely increase costs without the mandate, the hope with the insurance exchanges is that they will decrease costs from where they would be without the exchanges, even without the mandate.
The Act makes some changes to Medicare and Medicaid. Medicare will now require no-cost sharing for preventive care and reduce the out-of-pocket costs for prescriptions within the prescription coverage gap or “donut hole.” Medicaid will require access for people with income at or below 133% of the poverty level, instead of 100%. These Medicare and Medicaid provisions are funded independent of the mandate, and can stand without the mandate without negatively affecting the cost of private insurance.
Everyone is affected in some fashion by the new Act, and we all wait with great interest how the Supreme Court will interpret the mandate and the other provisions of the Act.
Susan G. Chappell practices in health law, employment and occupational health and safety law, and commercial litigation. Reach her at 505.883.2500 or sgc@sutinfirm.com.