The Supreme Court will be hearing three days of oral argument in the lawsuits challenging the constitutionality of the Patient Protection and Affordable Care Act. The issue that’s getting most attention is the constitutionality of the Individual Mandate, but the Supreme Court will also be hearing oral arguments on the question of “severability”: whether, if the Court does strike down the Mandate, the rest of the PPACA should remain in place. This is a significant question, because that Act is very long and complicated and does a lot of different things. Phil Kerpen of Americans for Prosperity explains why it should stand or fall as one. Excerpt:
The guaranteed-issue provision requires insurance companies to issue policies to people who are already very sick, and the community-rating provision requires insurance companies to charge everyone the same premiums. Both are politically attractive, but they have devastating consequences for the economics of the health insurance business. Healthy people have no incentive to purchase insurance, knowing they can always do so after they get sick, and without paying higher premiums than healthy people pay. This adverse selection problem means the pool of people covered by any given insurance company will be smaller and sicker, with healthy people having no rational incentive to buy insurance. That means fewer and fewer people paying higher and higher costs. It’s a death spiral for all but the very largest insurers….
Of course, the individual mandate will do little to address these problems until the penalties are made far stiffer and more coercive, ultimately forcing everyone to participate in the regulated, bureaucratized health care system envisioned by President Obama’s health care law. That level of coercion violates basic constitutional principles, which is why the Supreme Court is very likely to strike down the mandate.
But if it does so while leaving the rest of the law’s structure intact, it will greatly accelerate the damage done to insurance markets, driving smaller insurers out of business so quickly that it may be impossible to contain the damage. Moreover, the rapid collapse of the private insurance system will be misinterpreted deliberately by proponents of outright government control of the health care system as proof that private insurance was given one last chance and failed.