Did Judge Tauro Kill ObamaCare?

On July 8, a federal judge in Boston, Joseph Tauro, took it upon himself to find the Defense of Marriage Act (DOMA) unconstitutional. His decisions in two cases might have unwittingly facilitated the legal challenges to Obamacare.

Read entire article here.

RomneyCare vs. ObamaCare: Adverse Selection

The Wall Street Journal’s Joseph Rago recently wrote an indictment of the Massachusetts health reform, generally viewed as the model for recently enacted federal health reform. One of the criticisms he notes is that people in Massachusetts who do not have employer-based benefits can wait until after they have become sick to apply for health insurance via the Commonwealth Connector. This is because the fine levied by the state for not having health insurance is much less than actuarially fair premiums.

Many fear that this will also happen under ObamaCare. As of 2016, unless a person has qualifying coverage from his employer or through an exchange, the IRS will levy a penalty of the greater of $695 or 2.5% of a taxpayer’s household income. On its own, this would hardly seem enough to dissuade people from waiting until after they have become sick to buy increasingly expensive health insurance. Furthermore, people with incomes under 133 percent of the Federal Poverty Line (FPL) will now be eligible for Medicaid, which means they will be exempted from the penalty, as will anyone whose health insurance costs over 8 percent of his gross income.

Responding to Mr. Rago, Professor Jonathan Gruber of MIT asserted that ObamaCare will not suffer the same adverse selection as RomneyCare, because ObamaCare limits people who wish to apply for coverage in an exchange to an annual open-enrollment period. This is true: The U.S. Secretary of Health & Human Services has the authority to define annual open enrollment periods, as well as special enrollment periods similar to those that currently exist under the Health Insurance Portability and Accountability Act (HIPAA)]. Furthermore, people with incomes up to 400 percent of the federal poverty level are eligible for refundable tax credits to subsidize their premiums.

John Goodman has concluded that households with incomes up to $80,000 will receive bigger subsidies in the exchanges than under employer–based health benefits. So, the combination of limited open enrollment and huge subsidies for buying health insurance via an exchange surely mitigates adverse selection.

On the other hand, ObamaCare will give a three-month grace period before levying fines on people without coverage. If the affected persons find the open enrollment too difficult to navigate, political pressure may force the Secretary to make the window very wide. (This is the case in Medicare Advantage. Although the open-enrollment period for the following year’s coverage is from November 15 to the end of the current year, beneficiaries have the free option of switching again until March 31 of the new year.) If this is what ObamaCare’s open enrollment will look like, every individual will have up to six and a half months to gain some benefit from adverse selection: Either waiting to buy health insurance or switching to a richer plan after becoming sick.

The Herd Instinct Encourages Gaming the System

Does the fact that some people are gaming the system in Massachusetts mean that the health care law there is in trouble? (Since ObamaCare builds on the Massachusetts model, the question is of national importance.)

Megan McArdle considers the calculation that “gaming the system” — people buying insurance only temporarily while taking advantage of the price controls inherent in the law — costs each person who has insurance another $47 a year.

No big deal? For one thing, it’s a leading indicator. “The more people you know who are gaming the system, the more likely you are to engage in the behavior itself ….” In other words, the problem could easily get worse over time.

A Democrat-controlled Legislature Opposes Individual Mandate

Good news from Louisiana. From a friend of mine who has been watching these matters:

“Moments ago, the Louisiana Senate passed HB 1474, the Health Care Freedom Act. And with that action, Louisiana became the first state with a Democrat-controlled legislature to oppose an individual mandate.”

Republicans, The Heritage Foundation, and the Individual Mandate

Are the politicians who are advocating a reinvigorated Tenth Amendment true champions of federalism, or merely reading the political tea leaves? I suspect that both possibilities are true.

Jonathan H. Adler, in writing about the role of The Heritage Foundation and Republican politicians in establishing the groundwork for an individual mandate, wrote two months ago, “back in the 1990s , the Heritage Foundation and many Republican office-holders called for an individual mandate as part of a GOP alternative to the Clinton Administration’s proposed health care reforms.”

Mitt Romney aside, Republicans have been opposed to the mandate of late, and the Heritage Foundation vigorously voiced its opposition to ObamaCare generally. That’s made for some cluck-clucking, including in a piece by NPR in February, which noted in March, “[Sen. Orrin G.] Hatch [R-Utah]  and several other senators who now oppose the so-called individual mandate actually supported a bill that would have required it.”

So what happened between 1993 (ClintonCare) and now? For one thing, United States v. Lopez (1995) signaled that just perhaps there are limits on the regulatory powers of Congress. Lopez changed what people thought was possible in the legal climate of the United States.

That’s the optimistic view. Here’s the more cynical one:  ”it’s also fair to argue that many Republican office-holders and partisans are simply opportunistic, opposing ideas today they supported before merely to oppose the President.  In many cases, I am sure this is true.”

The various calls for challenging aspects of ObamaCare (or the package as a whole) through state constitutional amendments, lawsuits, or other means, vaguely reminds me of the value that sometimes accrues to being a pro-life politician: In the right spot you can gain votes by touting a pro-life position, but know that you’re not likely to be called to do anything about it as long as the Supreme Court upholds Roe v. Wade and related decisions. But when push came to shove, pro-life convictions, at least for some politicians, gave way to other political concerns. Exhibit A: Rep. Bart Stupak (D-Mich.), whose public embrace of ObamaCare (when some people thought he would vote against it out of pro-life considerations) removed the final barrier to passage of health “reform.”

Fortunately, I don’t see any analog for the “Stupak Surrender” among politicians now calling for a legal challenge to ObamaCare.

Is an Auto Mandate Like the Personal Insurance Mandate?

Defenders of the personal mandate to buy insurance sometimes invoke the analogy to car insurance. David Racer offers a thorough rebuttal (PDF) of that argument.

The Federal Case in Pensacola that Could Strike Down ObamaCare

Some good news from the New York Times:

In the seven weeks since the legislation passed, at least a dozen lawsuits have been filed in federal courts to challenge it, according to the Justice Department. But the case that could carry the most weight, and may be on the fastest track in the most advantageous venue, is the one filed in Pensacola, Fla., by state officials, just minutes after President Obama signed the bill.

Some legal scholars, including some who normally lean to the left, believe the states have identified the law’s weak spot and devised a credible theory for eviscerating it.

And that weak spot is? Something we’ve hammered on in this space–mandating the purchase of a good or service.  The headline I’ve put in here overstates the case. ObamaCare would continue on in some way, but the law’s most offensive portion would be struck down.

Gaming the Health Insurance Mandate

Democrats claim their newly passed health insurance reform will eventually provide health coverage for more than 30 million uninsured people. Don’t bet on it.

The key to achieving that goal, Democrats believe — along with expanding Medicaid and subsidies for buying coverage — is the individual mandate, which requires individuals to have health insurance or pay a fine. The mandate is supposed to push nearly everyone into the pool to minimize free-riding on the system. But what if millions of Americans decide it’s a better deal to pay the fine and remain uninsured until they need coverage?

It appears that’s exactly what’s happening in Massachusetts, which passed its own ObamaCare-like reform with an individual mandate in 2006.

Last year, Charles Baker, former CEO of Harvard Pilgrim Health Care, one of Massachusetts’s largest health plans, noticed some health insurance brokers posting comments on his widely read blog. They were suspicious that people were applying for health coverage after a medical condition developed, got the care they needed, and then dropped the coverage.

Coverage for an individual, noted Mr. Baker, now a Republican candidate for governor, might be $2,000 to $3,000 a year, while the penalty was only about $900. So he asked his finance people to see if they noticed any discernible patterns. Boy, did they.

From April 2008 to March 2009, 40% of the individuals who applied to Harvard Pilgrim stayed covered for less than five months. Yet claims were averaging about $2,400 a month, about six times what one would expect.

Blue Cross and Blue Shield of Massachusetts has now confirmed it is experiencing similar problems. The company says that in 2009, 936 people signed up for three months or less and ran up claims of more than $1,000.

The disparity between the cost of expensive coverage and the fine for not getting it encourages individuals buying their own coverage — i.e., those not in an employer plan — to game the system by paying the fine and remaining uninsured until they need coverage. (more…)

ObamaCare Supporters Nervous

I like this headline in the Huffington Post: Repeal health care reform? 41 states think so. Linda Bergthold spends most of the article, though, defending the individual mandate.

She says, “One of the reasons we have such high costs right now is that we are not all ‘in.’” Actually, a major cause of high costs is that most people think of their health care services as “free” (or at least highly subsidized), which removes the price-restraining power of an alert group of consumers.

Support for Individual Mandate Fells Utah Senator’s Career

The individual mandate–a requirement that you purchase health insurance, as a condition of living–has claimed a political victim: Sen. Robert Bennett, a Republican from Utah. Over the weekend, Bennett was denied the Republican Party nomination for the seat he currently holds. He is currently in his third term.

The media theme is that this is a testimony of the strength of the tea party movement, and there’s truth in that. But for the purposes of this site, it looks like the wrong kind of health care “reform” is part of what got the senator in trouble. As the Wall Street Journal put it in a story, “The senator was ultimately felled because of questions over his conservatism. He voted for the 2008 bank rescue and co-authored a bipartisan health-care proposal that included a requirement for individuals to buy insurance.”

As the Christian Science Monitor cautions, Bennett’s rejection came not from voters at large but from a couple of thousand delegates at the state party convention, “the purest of the pure, ideologically speaking.” So it’s not clear whether voters at large in Utah, let alone a less conservative state, will react this fall.