• The Obama administration goes all in

    I’ve long argued that the nightmare scenario for the insurance companies is that the mandate gets struck down, but the rest of the law stands. After all, if we force guaranteed issue and community ratings, but remove the mandate, then we stand the risk of adverse selection and gaming and, well, read this. But it appears that’s not going to happen:

    The Justice Department argues that without the mandate, there is no way to keep the law’s requirements that insurance companies accept all applicants regardless of their medical history and cannot charge more to sicker and older patients. That’s because without the mandate, there won’t be enough healthy people paying health insurance premiums to cover the costs of the sick people. And insurers could raise everyone’s premiums sky-high to pay for those costs.

    It’s a legal high-wire act that could have substantial consequences for the White House in an election year: If they lose the mandate, they’ll most likely lose one of the law’s greatest selling points, too.

    The article makes the point that this might be the administration’s way of trying to make it harder for the Supreme Court to strike down the mandate. Perhaps they feel like the justices might not want to remove the popular parts of the law, so therefore they might be more willing to let the unpopular parts stand. I just don’t know. I doubt many Supreme Court justices are so easily swayed.

    Personally, I think that this may be more the work of the very powerful insurance lobby that convinced the administration (correctly) that if there is guaranteed issue, community ratings, and political pressure to keep rates down, the private insurance industry will get crushed.

    Either way, the Obama administration is going all in on this hand. Should be an exciting next few months!


    • Excellent observations.

      It is correct to start to talk about things like ‘adverse selection’ because that is at the heart of the mandate and the concept of insurance.

      Think about an analogy with residential homeowners insurance. Essentially there is a de facto mandate that requires all homeowners to have insurance (lenders require it) and so the poor risks along with the good risks all go into a risk pool, which makes homeowner’s insurance affordable for all.

      Without this de facto requirement only high risk homes would be insured, and the cost would be prohibitive. The best example of course is Medicare, where a single risk pool spreads the cost over a diversified group resulting in the lowest possible costs for everyone. And that, of course, is the flaw in the Ryan plan to privatize Medicare.

      The comment on the Supreme Court is also accurate. There are four votes against the ACA rgardless of the legal merits and issues, because of anti Obama prejudice by those Justices. Note though that if the vote is 5 to 4 in favor of the ACA, Chief Justice Roberts will change side so it will be 6 to 3. This is so that the Chief Justice can assign the majority opinion to himself, and thus control the law on the subject.

    • I can understand the Justice dept making this argument in order to point out the consequences of invalidating the mandate.
      However, do you think that this argument will encourage the Supremes to invalidate more of the law (community rating) in order to avoid this consequence?