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Gaming Out a Mixed SCOTUS Decision

As recently as a week ago, everybody watching the Supreme Court seemed convinced of one thing: The justices had made up their minds about the Affordable Care Act. They hadn’t issued a decision and, perhaps, they were fine-tuning the legal arguments they would make in their written opinions. But they knew how they were ruling. They just weren't telling anybody about it.

Now a new rumor is making the rounds: Five justices have decided to invalidate the individual mandate but they have not settled on what else, if anything, to invalidate along with it. Does the story have any basis in fact? I have no idea. But I can tell you that this rumor, which I mentioned on Monday and appeared in the blog of Avik Roy at Forbes, is one of several tales of deliberations I've heard since oral arguments ended. 

Some of these stories had the justices upholding the law. Some had the justices overturning it. One even had a beleaguered, dejected justice taking clerks out to get drunk. Yeah, that doesn't seem very likely. Truth be told, every single story was told fourth- or fifth- or sixth-hand (as Roy noted his was) and no story seemed terribly convincing, as fun as it might be to imagine Ruth Bader Ginsburg or Antonin Scalia doing tequila shots. Most likely, Ginsburg was correct when she said, a few days ago, that "Those who know don't talk. And those who talk don't know"—which means we may never get the real story, although I'm hoping Jeffrey Toobin can suss it out in time for his new book.

But whether or not the new rumor is correct—and, again, for all I know it is—the scenario it presents seems plausible. If so, I hope the justices (or justice) anguishing over this question of "severability" realize that invalidating the mandate would be really bad—and that invalidating the rest of the law, including the insurance reforms, would be significantly worse.

I know—I'm repeating myself. But many people still don't grasp the point, in part because the government didn't actually put forward this argument. That job fell to an independent lawyer, Robert Farr, whom the Supreme Court appointed specifically to make the case. Plenty of people in the courtroom came away from oral arguments thinking Farr was the most persuasive advocate they saw. I was among them.

Readers know how I feel about the mandate. I think it is plainly constitutional, given the way the Court has traditionally interpreted the federal government’s authority to levy taxes, to regulate interstate commerce, and to do what is “necessary and proper” for the execution of its duties. I also think the mandate serves a vital purpose: It will help stabilize the insurance system by drawing in young, healthy people who would otherwise take their chances without coverage, thereby making it possible for insurers to offer lower premiums. You cannot get even close to a universal system without some kind of mechanism for making sure everybody participates. 

The best evidence for this comes from the states, two of which Sarah Kliff recently wrote about for the Washington Post. One was Washington, which enacted laws prohibiting insurers from denying coverage or charging higher rates to people with pre-existing medical conditions. Sick people signed up for coverage, healthy people stayed away, and insurers responded by jacking up premiums or exiting the market altogether—the classic “death spiral.” (The same thing happened in other states, such as New Jersey, that tried the same thing.) The other state was Massachusetts, which enacted the same reforms but also enacted a mandate. The results have been largely positive: Nearly everybody has insurance, while insurance premiums are going up no faster than they are in the rest of the nation. (And premiums for people buying on their own, the ones affected most directly by the mandate, actually came down substantially.)

But, as Kliff observes, Massachusetts did more than simply impose a mandate. It also offered generous subsidies, making insurance coverage far less expensive for lower- and middle-income residents. Those subsidies drew in a lot of the healthy people who might otherwise have turned down coverage because of the price. The subsidies weren't enough to coax everybody into the system: Only when the mandate phased in did healthy people sign up for coverage at the same rate as the unhealthy. (A key New England Journal of Medicine article revealed that.) But the subsidies clearly helped. Even before the mandate was in place, they were making a difference.

And the best projections we have suggest the same thing might happen nationally. The forecasters (Congressional Budget Office, MIT economist Jonathan Gruber, Rand, the Urban Institute) all have different estimates. But the general conclusion is the same: Without the mandate, the law would reach far fewer people and insurance premiums would be higher. In other words, striking it would be a huge blow. But, even without the mandate, the Affordable Care Act would still help many millions get health insurance and the higher premiums wouldn't be as problematic as they might seem. (Because of the law's tax credits, only people buying coverage on their own and with household incomes above four times the poverty line, or about $90,000 a year for a family of four, would pay more.) For all of its imperfections—and there'd be way more of them than if the mandate stayed in place—such a system would still improve access significantly. It would also put in place a regulatory system that, with subsequent adjustment from state or federal lawmakers, could evolve into a true universal coverage scheme.

Gary Claxton and Larry Levitt of the Kaiser Family Foundation just posted a new blog item explaining all of this more rigorously than I just have:

When compared with implementing the ACA in full as planned, there's a consensus that eliminating the mandate would increase premiums and mean that far fewer of the currently uninsured would become covered. But, it is by no means inevitable that the individual insurance market will enter a spiral of death. In fact, there are some good reasons to believe that may not happen. …
First, and most importantly, the ACA includes federal tax credits to make insurance more affordable for people buying on their own in the new health insurance exchanges. This means that for many people, health insurance will be a very good deal, even if they are healthy. The primary reason that people remain uninsured is because they believe they cannot afford to buy insurance, and the subsidies address that directly. Our analysis of Congressional Budget Office (CBO) estimates suggests that over half of people in the individual insurance market beginning in 2014 will be receiving a tax credit towards their premiums. …
Second, the ACA allows significant variation in premiums due to age. Young people generally have less need for health care services, and they will pay lower than average premiums as a result. This was not true under insurance reforms in New York and (originally) in New Jersey, where insurers were required to charge "pure" community rates, meaning the same premium to everyone, irrespective of age. Predictably, younger people fled the market and older people remained. This should not generally happen under the ACA. (Note that the ACA does limit the variation in premiums due to age, requiring an insurer to charge its oldest enrollee no more than three times the premium for its youngest enrollee for equivalent coverage. In the current market, age-based premiums can vary by a factor of five to one or more. This could lead to some adverse selection based on age, but the effect should be relatively modest because there will still be significant variation in premiums allowed for age.)

This was Farr’s argument, more or less. And it seems, finally, to be sinking in more broadly. Linda Feldmann of the Christian Science Monitor, for example, just wrote a terrific story that got the point just right. Taking out the mandate would be a huge blow to the law. Taking out the mandate and the insurance reforms? That'd be huger. 

Of course, the justices could find other ways to rule against the mandate, in a way that would circumscribe federal power but truly minimize disruption to the health care law—which, in theory, they should be striving to do. They could, for example, strike the mandate and keep the penalty. (This is the option Joey Fishkin, of the University of Texas, has suggested.) They could declare the mandate invalid under the Commerce Clause but justify it as a tax, an option the pundits have dismissed but the justices might be taking very, very seriously. (More on that shortly.)

Or, you know, they could just uphold the whole thing—as even many conservative thinkers, and the majority of legal experts in most surveys, believe they should.

Update: I am worried readers are taking the rumors more seriously than I am, so I reworded the paragraphs above to make clear they really have no basis.

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