ObamaCare: Flawed Policy, Flawed Law

The Supreme Court is expected to meet Thursday to discuss whether to hear challenges to last year’s Patient Protection and Affordable Care Act—particularly concerning the constitutionality of the law’s “individual mandate,” which requires all Americans to have health insurance. With a split in appeals court rulings, including Tuesday’s D.C. Circuit Court of Appeals decision upholding the mandate, it now seems clear the Supreme Court must weigh in.

A poll taken this August by AP-National Constitution Center found that 82% of Americans say the federal government should not have the power to require Americans to buy health insurance. But what about the mandate as a matter of policy?

The law would never work as the drafters intended. The 11th Circuit Court of Appeals, which ruled against the individual mandate in August, accurately described it as “toothless.” The penalties—$695 a year or 2.5% of income once fully implemented in 2016—are too weak to induce people to sign up for insurance policies that the Congressional Budget Office estimates could cost $20,000 a year for a family of four.

The mandate is also weak operationally because few believe that the federal government will have the political will to actually seek out and penalize people who don’t sign up for insurance.

Health insurers warned that provisions in the law requiring health plans to sell policies to anyone anytime (“guaranteed issue”) at artificial rates (“community rating”) would drive up premium costs dramatically unless the individual mandate were included in the law to require both the healthy and the sick to purchase and maintain coverage.

But the mandate isn’t enough to make the scheme work. ObamaCare’s weak fines and enforcement provisions, coupled with the high cost of the mandated insurance policy, will encourage millions of people to wait, pay the fine, and get insurance only when they need it.

Many people who have insurance today will decide to go bare, exacerbating the disruption in the health insurance marketplace. Massachusetts—where Mitt Romney passed a scheme similar to ObamaCare—is already seeing this phenomenon, with people purchasing health insurance when they anticipate high medical costs, then dropping it when their treatment is done.

In defending ObamaCare, the Justice Department told U.S. District Judge Roger Vinson at least 14 times in lower court arguments last year that the mandate was an “essential” part of the Act and that its reforms cannot survive without it. The act itself says that “[I]f there were no [individual mandate], many individuals would wait to purchase health insurance until they needed care. . . . The [individual mandate] is essential to creating effective insurance markets in which improved health insurance products that are guaranteed issue and do not exclude coverage of pre-existing conditions can be sold.”

Judge Vinson declared, in the Florida case in which 26 states are challenging the law, that the whole law is unconstitutional because he was convinced by the administration’s insistence that the individual mandate was essential and the mandate was therefore not “severable.” The 11th Circuit Court of Appeals upheld him on the unconstitutionality of the individual mandate but not on severability.

Meanwhile, ObamaCare is steaming toward implementation in 2014, with more than 10,000 pages of regulations already issued. Each week, there is new evidence that none of the major promises the law’s backers made to the American people to argue for its passage is holding true.

The law already is increasing costs for workers and taxpayers. Millions of people will lose the coverage they have now. Its massive new entitlement spending will blow apart any efforts to trim the federal deficit. And states are rebelling against implementing its coverage expansions.

The failure of the law’s long-term care program—the Community Living Assistance Services and Support Act, or Class Act—is a precursor of the demise of ObamaCare. The administration pulled the plug on implementing the Class Act in an acknowledgment that it couldn’t make it work without mandating that everyone purchase the coverage and with employers compelled to collect premiums.

Republicans should be doing everything they can to explain their proposals: a better set of incentives that will encourage—not require—people to purchase health insurance by offering targeted assistance and creating a broader, more competitive marketplace where consumers can purchase affordable, portable health insurance of their choice.

Published in The Wall Street Journal, November 9, 2011.

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