If the U.S. Supreme Court severs a keystone element of the Patient Protection and Affordable Care Act that mandates all Americans have public or private health coverage by 2014 but leaves intact another key provision requiring insurers and managed care plans to accept all applicants without medical underwriting, payers would experience adverse selection and premium rates would necessarily rise in response, making coverage less affordable. That undermines a key objective of the 2010 law designed to reduce the number of people who are medically uninsured, the UCLA Center for Health Policy Research concludes in a research note issued this month.
The note determined this scenario would result in only a small reduction in the number of medically uninsured Californians by 610,000 or 13 percent of the eligible uninsured by 2019. Eliminating the minimum coverage requirement while leaving in place the PPACA’s modified community-based rating where coverage is guaranteed to all applicants would not allow payers to avoid covering less healthy individuals more likely to need expensive medical care.
The UCLA research note effectively concurs with an amicus curiae brief in the Supreme Court case filed by health insurers and plans who contend the PPACA’s coverage mandate is designed to work in conjunction with community-based versus individual medical underwriting and therefore cannot be excised from the law. “The result would be a ‘marketwide adverse-selection death spiral’ that would thwart rather than advance Congress’s goal of expanding affordable health care,” they warn.
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.
