Monday, August 22, 2011


An alarming article in looks at what could happen if the Supreme Court determines that the Affordable Care Act’s individual mandate provision is unconstitutional—something that the current conservative leaning of the Court seems to indicate is somewhat more likely than not.

Assuming that such a possible decision by the Court follows that of the Eleventh Circuit Court of Appeals in ruling that the mandate is unconstitutional but the remainder of the ACA may stand, the article anticipates some potentially disastrous consequences.

The provisions of the ACA—some of them already in force—include guaranteed issue, elimination of annual and lifetime limits, and a ban on basing premiums on health status, essentially decoupling coverage and premiums from insurance risk. Without the requirement for almost everyone to have coverage, there will be nothing to ensure that the risk pool contains a large percentage of individuals in good health as well as those with medical problems, and nothing to stop anyone from waiting until they’re sick or injured to demand coverage.

Without a subsequent change to the ACA, the consequences of full implementation in 2014 with no individual mandate would be dramatic jumps in premium rates in the individual and small group markets. These, in turn, would lead to further drops in enrollment, especially by those least in need of coverage, leading to additional premium increases as all but the sick retreat from the insurance market—the classic adverse selection-fueled death spiral.

As premiums for all but major employers shoot through the roof, those unfortunates who work for marginally-profitable small businesses or, worse still, pay for their own coverage will find insurance either unobtainable—as insurers exit the small group and individual markets—or unaffordable.

In a more politically rational world, a possible high court ruling against the mandate would be followed by Congressional action to modify other parts of the law—for example, by modifying the guaranteed issue provision. However, no-one who watched the cliff-edge battle over the debt limit can be confident that extremists in either party would compromise on any reasonable solution. What’s to stop lawmakers from continuing to refuse to modify their positions regardless of the impact on the insurance market? After all, the ACA is anathema to Republicans, while there are plenty of Democrats who despise the private insurance industry and who might be happy to see it close to collapse.

Even leaving political adversarial issues alone, Democrats will not be eager to renege on their promise that health insurance will be available to anyone, while many Republicans may also hesitate to revoke such an apparently attractive provision for fear of a subsequent electoral backlash.

The article doesn’t try to guess the outcome, but it’s hard to be optimistic. A reasonable supposition—given the current inflexible mood in Congress—is that there will be no compromise until the insurance market is on the edge of disaster—or maybe already slipping over that edge. Insurance industry lobbyists are likely to find few votes for a rational solution until there is sufficient public outcry over skyrocketing premiums and cancellations of coverage by carriers abandoning the market to put politicians’ reelection chances at risk.

Sunday, August 21, 2011


The Affordable Care Act’s medical loss ratio issue (requiring insurers’ administrative and other non-medical costs to remain below prescribed percentages) has dropped out of the limelight recently, but that doesn’t mean that it’s been forgotten.

Up until last week, the Department of Health and Human Services had approved three MLR waivers (for Maine, Nevada, and New Hampshire) and rejected none, leaving some observers anticipating approval of all waiver requests. It’s now apparent that that isn’t going to happen.

North Dakota became the first unlucky state last week, when HHS rejected its waiver request on the grounds that the state’s three largest insurers are already meeting, or are very close to, the target MLRs, and that accordingly the MLR provision would not disrupt the state’s insurance market (the requirement for a waiver to be issued).

HHS also showed that it is willing to issue partial waivers. Both Iowa and Kentucky were given waivers allowing them to apply lower thresholds than those specified in the ACA, and only for a limited time.

The MLR requirement has continued to result in insurers leaving marginal markets, especially for individual coverage. Aetna has announced it is leaving the individual market in Colorado and also in Indiana, where it becomes the fifth carrier to depart while the state’s waiver request is being considered by HHS. So far, however, none of the exiting insurers in any state could be considered a major player in that state, so that the number of policyholders required to switch coverage is small.

Meanwhile, in addition to that of Indiana, waiver requests from Georgia, Louisiana, Michigan, Kansas, South Carolina, and Florida remain on the HHS desktops awaiting resolution.

Monday, August 15, 2011


The Washington Post reports that the Affordable Care Act’s Independent Payment Advisory Board, intended to constrain Medicare spending increases, is under increasing pressure from Republicans, health care lobbyists—and a significant number of Democrats.

As specified by the ACA, the IPAB will consist of fifteen health care “experts” to be appointed by the president and confirmed by the Senate, with authority to make cuts to Medicare if spending exceeds specified targets, starting in 2015. Congress could overrule the panel, but only by mustering a super-majority in the Senate or by creating an alternate plan to save the same amount.

The ACA imposes narrow limits on the IPAB. By law it cannot ration care, cut benefits, change eligibility rules, or raise revenue by increasing beneficiary premiums or cost-sharing, nor can it—until 2020—reduce payments to hospitals. This means that the brunt of any IPAB-proposed savings will fall on physicians and drug and medical device companies.

Not surprisingly, the targeted provider groups are lobbying fiercely against the IPAB’s powers. As the Post reports, the AMA and dozens of other industry groups are actively fighting the IPAB in Washington, while a series of national TV ads denouncing it is to air starting this week. Congressional Republicans—eager to attack any part of the ACA—have jumped on the bandwagon and, with the support of a handful of Democratic House members dependent on provider financial contributions, have introduced a bill to eliminate the IPAB.

There are some ironies in all of this frantic activity—along with indications that everyone involved may be wasting their energies:

1. The IPAB is likely to have far less impact on Medicare physician payments than any possible reworking of the Sustainable Growth Rate formula, and be considerably less broad than anything the newly-named bipartisan deficit super-committee may propose.

2. Given that its fifteen members are subject to Senate confirmation, Republicans can probably prevent the IPAB from ever convening.

3. The Congressional Budget Office estimated in March that, in part due to other cuts to Medicare in the health-care law, spending will be within the ACA’s targets for the next 10 years, thereby eliminating the need for the IPAB to make any recommendations at all.

Sunday, August 14, 2011


The second of three federal Appeals Court decisions on the constitutionality of the Affordable Care Act was handed down on Friday, and it was a defeat for the Obama administration.

The Eleventh Circuit three-judge panel in Atlanta ruled 2-1 that the individual mandate violated the Constitution. The majority opinion described the administration’s argument for the ACA’s constitutionality as a “wholly novel and potentially unbounded assertion of congressional authority.” The opinion went on to state: “What Congress cannot do under the Commerce Clause is mandate that individuals enter into contracts with private insurance companies for the purchase of an expensive product from the time they are born to the time they die,” and commented scathingly: “We are unable to conceive of any product whose purchase Congress could not mandate under this line of argument.

The Atlanta appeals panel did provide ACA advocates with a few crumbs of good news. In spite of a reputation as a conservative court, the panel ruled unanimously against a lower court decision that the entire ACA should be struck down because its various components were so intertwined with the individual mandate requirement. It also produced a minority opinion from the third judge that “Congress’ commerce power has grown exponentially over the past two centuries, and is now generally accepted as having afforded Congress the authority to create rules regulating large areas of the economy.”

The White House now has the option of appealing the three-judge panel’s decision to the full Eleventh Circuit Court. While the conservative reputation of the full court suggests that no different decision would result, the potential advantage of an appeal is that it could delay the inevitable Supreme Court hearing and ruling until after the 2012 election.