Today was the deadline for filing briefs on most of the key issues in the Obamacare challenge. As Kevin mentioned earlier, on behalf of Texas Public Policy Foundation, I wrote a brief with Prof. Richard Epstein and the Cato Institute’s Ilya Shapiro. We argue that the health-insurance reforms and subsidy provisions of Obamacare are inseparable from the unconstitutional individual mandate and should be struck down along with it.
The main insurance reforms in Obamacare — guarantee issue, age-based premium compression, and a host of other “improvements” — were attempted in a handful of states in the 1990s. The results were an unmitigated disaster; in most cases the individual insurance market collapsed in just a few years, and within ten years most of the states had repealed their ill-conceived “reforms.”
The reason for the disaster was the “adverse-selection death spiral.” Once you require insurance companies to provide insurance to all comers, healthy people start waiting until they’re sick to get health insurance. As healthy people leave the risk pool (“adverse selection”), premiums rise to keep up with the rising per-person cost of insuring people; rising premiums in turn drive more healthy people out of the market, and vice versa (the “death spiral”). To prevent this, the states generally allowed insurance companies to exclude preexisting conditions. That helped, but not nearly enough.
Now, if you want to appreciate a little more fully what a disaster Obamacare really is, consider this: Unlike the state reform efforts (with the exception of Massachusetts) Obamacare has an individual mandate, which is meant to prevent the adverse-selection spiral. Congress thought it could run the huge risk of prohibiting exclusions for preexisting conditions. In other words, Obamacare — without the individual mandate — is a more complete recipe for disaster than any of the state-based insurance reforms.
Its main “reforms” depend vitally on an unconstitutional insurance mandate. If the mandate disappears, but the rest of the law is sustained, healthy Americans above 400 percent of the federal poverty level ($43,561 income for a single individual) will be driven off health insurance altogether, and will wait until they’re sick to sign up. Insurance premiums will rise dramatically, and for those making between $15,028 and $43,561 for an individual the cost of federal subsidies will skyrocket. In short, without the mandate Obamacare will result in some combination of (a) devastation for health insurers and (b) skyrocketing federal deficits.
In our brief, we urge the Court to avoid foisting that disaster on the country and to strike down the individual mandate along with those provisions that are inextricably connected to it — i.e., the main provisions of Obamacare. If the Court agrees, it will eviscerate Obamacare of its most dangerous provisions.
Beyond the great contributions that Prof. Epstein and Cato Institute made to the brief, I’d like to thank my friend Ed Haislmaier of the Heritage Foundation for his selfless patience in guiding us through the myriad of ways in which the main provisions of Obamacare depend upon the unconstitutional individual mandate. All great movements have their unsung heroes, and Heritage has more than its share.
— Mario Loyola is director of the Center for Tenth Amendment Studies at the Texas Public Policy Foundation.
The adverse selection death spiral is a feature, not a bug. That's why I am surprised that DOJ didn't argue for severability. Eliminating the individual mandate while keeping the rest of the bill intact means adverse selection gets worse and the destruction of the private insurance industry comes faster. In short, the best of all possible worlds from the administration's point of view, as the utopia of single payer arrives sooner.
Reply to this commentLinkReport AbuseI agree with ML's analysis, but wonder how SCOTUS will rule. I can envision some justices reasoning that it's too political to throw out the whole law, while the brief makes such a compelling case that ruling against just the mandate would be a disaster that it's better to just let the whole thing stand.
Reply to this commentLinkReport AbuseThat's quite the conspiracy theory there. Wouldn't it rely on the DOJ attempting to lose on the constitutionality of the individual mandate but win on the nonseverability of the mandate? Do you have any evidence at all of such a strategy?
Reply to this commentLinkReport AbuseYou're right - without the mandate, we're stuck with the unmitigated disaster that we had before the ACA. Wouldn't that be great?
Luckily, the majority of judges who have considered the matter have found it constitutional, so it looks like we won't have to return to the unmitigated disaster that we had before the ACA.
As Einer Elhauge wrote:
"For decades, Americans have been subject to a mandate to buy a health insurance plan -- Medicare. Check your paystub, and you will see where your contributions have been deducted, whether or not you wanted Medicare health insurance."
Reply to this commentLinkReport AbuseThe adverse selection death spiral is prevented by the individual mandate: it forces low risk people to participate, keeping premiums down.
Reply to this commentLinkReport AbuseThe Adverse Selection issue only exists if the mandate is unconstitutional; and adverse selection is an economic problem, not a constitutional one. Thus, to say that the rest of the Affordable Care Act is unconstitutional because, if the mandate is removed, the rest of the changes cause economic problems is not about the legality of those changes. This line of argument also tends to be revealing of how little thinking has gone into improving health care among conservatives, because Loyola and company's line of argument basically guarantees that people who can't afford insurance now will never really see a solution which provides the coverage that might go some of the way to reducing their cost of care. And no one, left or right, is seriously addressing the issues around cost of care. If conservatives succeed in dismantling the ACA, lacking a viable alternative, that just seems like a recipe for further rejection of the right by voters.
My guess is that the Supreme Court will come down to a narrow decision on the wording of the mandate. one way or the other; I don't think politics alone will decide this, but also practical considerations about what, essentially causes less chaos. I'm not particularly convinced that the mandate is really all that dramatic a step beyond other provisions, nor am I convinced by anyone, left or right, who says the mandate, in itself, will have dramatic impacts on large numbers of people. Most people are insured. Few people actively want to be not insured, and Massachusetts seems to suggest that the penalties affect a remarkably small percentage of the total population. All of which leads me to think that a 5-4 upholding of the whole Affordable Care Act is more likely than some narrow tossing of the mandate (or, if it is tossed, I tend to suspect that the Court would give some idea of mandate wording it could accept). Aside from the mandate, it's hard to see how the Court can get to overruling vast parts of the rest of the Act, or the whole of it. "Adverse Selection", surely, is no answer.
Reply to this commentLinkReport AbuseThe mandate wouldn't be so bad if there was a public/government option so we are not forced to buy insurance from a private company -- that is where the mandate breaks down for me. People are forced to buy car insurance in my state, and many things are compulsory in our nation. We can even be drafted into the military, which is a much greater invasion of individual freedom than making me pay health insurance premiums. The problem arises for me because it is not right to make us buy a policy from a for-profit private company. This "principle" destroys free market incentives by creating a captive audience for insurers, who, since their only drive is profit, can simply gouge us with sky-high premiums. With a public option at least there will be an alternative to the gouging which would force the private insurers to compete in a more honest way. At least with car insurance, you don't absolutely have to own a car so there is an opt-out. In this case we will all be captives. Wonderful.
Reply to this commentLinkReport AbusePonzi's right.
"In short, without the mandate Obamacare will result in some combination of (a) devastation for health insurers and (b) skyrocketing federal deficits."
Based on everything I've heard, that result is the desired outcome by the Left. The whole point of ObamaCare was to drive all but the largest insurers out of the market, until only one is left that the gov't can take over because it's too big to fail. Voila: gov't single-payer health care. That's the main objective of the law, not an unintended consequence.
"(b) skyrocketing deficits," are desired to force huge tax increases on "the rich." Of course, by that time, the "rich" will be defined as anybody working full-time.
Reply to this commentLinkReport AbuseWhile Obamacare’s individual mandate is screwing us, there is one special interest group that will make out like bandits – health insurance companies. Wait a minute! I thought Obamacare was supposed to protect us poor, hapless saps from those wickedly evil health insurance companies and their greedy multi-millionaire CEOs? The reality is that Obamacare’s individual mandate drives hundreds of billions of dollars in new revenue to private health insurers. Obamacare forces Americans who formerly chose not to purchase health insurance to buy it or face the rabid dogs of the IRS. Obamacare is a premium bonanza for health insurers who will no doubt lavish more extravagant perks on their CEOs while screwing the public. Not only do we get screwed to the tune of $200 billion in higher premiums, we get doubly screwed as Obamacare provides $46 billion a year in taxpayer subsidies for parasites to purchase health insurance.
Learn the lies and the propaganda used to shove Obamacare down our throats. Obamacare: Dead on Arrival is Close Enough for Government Work External Link
Reply to this commentLinkReport Abuse