The Obama administration last week filed its brief supporting the Patient Protection and Affordable Care Act’s (PPACA) requirement that every American be covered by public or private health insurance effective Jan. 1, 2014. Opponents of the requirement, referred to in the administration’s brief as the “minimum coverage provision,” contend it’s an unconstitutional exercise of Congressional authority over commerce and taxation.
The minimum coverage provision is the keystone of the PPACA and the product of a political tradeoff leading up to the 2010 enactment of the legislation to address what the brief terms “a crisis in the national health care market.” The provision was aimed at quelling opposition from health insurers who opposed the PPACA’s requirement to shift from their existing medical underwriting risk selection model to a community-rating model that requires all applicants be accepted and charged standardized premiums regardless of their medical histories. Unless everyone is required to be in the insurance market in some form or another, payers argued, they would be exposed to adverse selection because only those who needed coverage would purchase it, driving up claims costs. That would lead to adverse selection since the insurance pool would have a disproportionate number of sick people needing costly medical treatment while healthier people who go without coverage don’t contribute premiums to cover those costs.
The administration argues in its brief that this results in cost shifting in which those who have coverage end up paying additional premium dollars to pay for the uncompensated care of the uninsured, many of whom cannot obtain affordable coverage due to pre-existing conditions. “The Act breaks this cycle through a comprehensive framework of economic regulation and incentives that will improve the functioning of the national market for health care by regulating the terms on which insurance is offered, controlling costs, and rationalizing the timing and method of payment for health care services,” the brief states.
In sum, the administration asserts, the market needs community rating to sustainably provide coverage to all Americans. But it cannot work without what effectively functions as a community insurance requirement. Everyone gets in the pool regardless of medical history — and everyone pays to enter.
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