The biggest Supreme Court Ruling in a decae is expected this Thursday before the Summer recess.  Yet thats when the fun begins.Possible outcomes:

  • Delay hearing the legal issues associated with case for several years due to the Tax Issue.
  • Invalidate the Individual Mandate.
  • Invalidate all or part of the Medicaid Expansion requirements.
  • Uphold PPACA as is.
  • Declare the entire Act unconstitutional due to the lack of a Severability Clause if any of the key provisions such as the Individual Mandate overturned.

If individual mandate is repealed but leave other PPACA provisions in place, this outcome could greatly limit the coverage goals underpinning the Affordable Care Act and cause significant problems in the health insurance markets. For example, MIT economist Jonathan Gruber said, “Without a mandate the law is a lot less effective. The market will not collapse, but it will be a ton more expensive and cover many fewer people.”

While States such as NY may follow Massachusetts and set up their own Individual Mandate this becomes challenging with less Federal funding.   Funding for the individual market place subsidy with subsidies could collapse. See subsidy calculator here.

Eliminating the mandate would increase premiums and mean that far fewer of the uninsured would be covered. This is known as adverse selection where the sick population would be willing to pay higher premiums and forcing the healthy population to opt out of exchange.  States such as NY in fact have seen the Individual Market spiral out of control as they are high risk adverse group in order to supplement the preferred guaranteed non-preexisting condition group marketplace. Furthermore, NYS requires guaranteed issue for pre-existing condition for individual members with prior coverage.
If the court invalidates the individual mandate and leave rest of Act in tact it may lead to a death spiral.  Popular reforms such as overage 26 dependent coverage and expected pre-existing condition waiver in 2014 would possibly be dismantled.

The decision would punt health-care reform back to Congress, which “isn’t doing anything this year” and thus create major uncertainty going into the November elections. Taxes on pharma and medical devices would remain, while managed-care and hospital companies would suffer big losses. Insurers would be forced to take on sick patients without benefitting from the healthy ones who would have been enrolled under the mandate.

In this scenario, a lot of companies would simply cut their losses and leave the individual insurance market altogether; the law would essentially “run them out of business.

Either way the lack of uncertainty has delayed hospitals and insurers from new hires and taking decisive actions.  Same time next week we hope to celebrate July 4th with certainty.

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