Tomorrow is the big day, when the United States Supreme Court (“Supreme Court”) will decide whether or not the Patient Protection Affordable Care Act commonly known as the “Healthcare Reform Act” is constitutional, partially unconstitutional or completely unconstitutional. One of the main issues at stake is a foundational tenet of the Healthcare Reform Act to increase the number of individuals who have insurance coverage. In fact, one of the most controversial provisions requires for each individual citizen to maintain health insurance coverage unless an exception applies. Specifically, the individual mandate as set forth in the Healthcare Reform Act requires for individuals to pay a penalty to the United States Government in the event the individual fails to maintain health insurance coverage. The amount of the penalty increases each year from 2013 through 2016. These payments are paid as a penalty with the filing of individual tax returns. . However, even if the Healthcare Reform Act and its requirement for each individual to purchase insurance is upheld by the Supreme Court, there will still be millions of individuals who do not have insurance.
Specifically, individuals who have a religious conscience objection or are involved in a healthcare sharing ministry will not be required to purchase insurance. Likewise, the individuals who are not citizens of the United States or are not lawfully living here will not be required to purchase insurance. Citizens that are incarcerated are also excluded from the individual mandate. In addition to the excluded individuals, there are multiple exemptions that individuals can utilize to avoid purchasing insurance. First, individuals who would have to pay at least 8% of their monthly household income to obtain health insurance are generally exempt from the requirement. Second, individuals with an income below 100% of the federal poverty level are also exempt from the requirement. Members of Indian Tribes and citizens that suffer hardship in obtaining coverage are also exempt.
In today’s economy with the millions of people who are unemployed, and with an unemployment rate of 8.2% nationwide, it is possible that a significant portion of the population will not have to purchase insurance, even if the individual mandate is upheld as constitutional. Moreover, even though individuals who are here illegally do not have to buy insurance, dedicated emergency departments are required to provide healthcare stabilization services to the individuals under the Emergency Medical Treatment and Labor Act (EMTALA). Therefore, the exclusions and exemptions to the individual mandate may materially adversely impact the ultimate goal of the individual insurance requirement.
The goal of requiring individuals to purchase insurance is designed to reduce the overall costs to the healthcare industry. In the Healthcare Reform Act, Congress stated that the requirement for all applicable individuals to buy insurance was necessary due to the impact on interstate commerce. Congress recited statistics of how the healthcare industry represents 17.6 percent of the economy and when there is a requirement to purchase insurance this will significantly impact the marketplace. In addition the practical impact is that when healthcare providers must provide care to the uninsured, the providers lose money and must raise their charges to off-set the losses. Therefore, when all individual patients are insured, this will increase the pool of funds to pay for care and ultimately reduce the costs to provide healthcare services.
Because the individual mandate, if upheld, still leaves millions uninsured, it will not fully resolve a the underlying issue of rising healthcare costs. On the other hand, if the individual mandate is struck down by the Supreme Court, losing the ability to require insurance coverage will impact the healthcare providers and insurance payers. Each provision of the Healthcare Reform Act has a rippling effect on the other requirements imposed on insurance payers and healthcare providers. It is imperative to evaluate what other provisions the Healthcare Reform Act will also be struck down, if any. This week’s decision by the Supreme Court of whether any, none or some of the Healthcare Reform Act will be upheld will materially change payers and providers’ future programs and the way in which healthcare is delivered and reimbursed for all individuals regardless of their insurance coverage.