Insurers 'terrified' of Supreme Court ruling on healthcare reform law

The insurance industry is terrified that the Supreme Court will strike down the individual mandate to buy insurance next year while leaving the rest of the healthcare reform law intact.

For insurers, the death of the mandate alone — one of many plausible outcomes in the blockbuster case — is the nightmare scenario, one Republican healthcare lobbyist told The Hill. 

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“They’re terrified they’re going to be left holding the bag,” the lobbyist said.

In arguing for the mandate, the insurance industry points to the experiences of eight states that tried and failed to reform their insurance markets without one in the 1990s. They say the law’s requirements are unworkable unless everyone in the country purchases insurance.

But that argument might not sway the Supreme Court, which must decide the “severability” of the mandate from the law, along with a host of other legal and constitutional issues.

In an amicus brief filed last month with the high court, the insurance industry said keeping the law’s reforms in place without a mandate would create “widespread … instability in the insurance market and, over time, would substantially reduce access to affordable coverage.”

“The difference between … a mandate-less [health law] with market reforms intact, and without some or many of those market reforms is night and day,” America’s Health Insurance Plans (AHIP) said in the brief.

Insurers’ best-case scenario, one insurance lobbyist said, would be for the court to uphold the mandate. Barring that, the industry would rather see the whole law crumble.

“I’m not sure there’s a solution there that’s acceptable other than, it’s all or nothing,” the source said.

The healthcare law imposes a number of new rules on insurers, most notably a ban on rejecting people with pre-existing conditions or charging them more. It also created a mandate for buying insurance that the architects of the law said was aimed at getting millions of young, healthy people into the system to spread costs and prevent people from waiting until they’re sick to get insurance.

But opponents of the law decry the requirement to buy insurance as a dramatic expansion of federal authority that flies in the face of the Constitution.

AHIP is expected to file a brief with the Supreme Court early next year that spells out its position on the severability of the mandate. Several lobbyists told The Hill that the group is keeping silent for now in order not to upset either party. 

On the surface, the Obama administration and the insurance industry seem to have staked out similar positions. Both have told the high court that the mandate works hand in hand with other parts of the law and said the justices need to consider the issue of severability. 

But lobbyists said it would eventually become clear that insurers are not in complete agreement with the Obama administration, which declared as far back as last November that “the vast majority of the healthcare law’s provisions are severable from those challenged by plaintiffs.”

The Republican lobbyist said insurers would “be basically declaring war on the administration” if they argued the law must either stand or fall in one piece.

It’s not clear the industry has a choice, however.

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The law contains numerous market reforms — limiting how much older people can be charged, requiring family plans to cover young people up to age 26, mandating coverage of a broad package of “essential health benefits” in state-based exchanges — that the administration argues can survive without the mandate. 

But insurers say sticking to those rules without a mandate would drive up the cost of premiums while leaving insurance plans as the villain, since the law requires plans to justify rate hikes of 10 percent or more.

“It’s clear to me that from the administration’s perspective, even if the mandate goes away ... you’ll still have the boogeyman of the plans, because the plans will have to react accordingly,” the insurance lobbyist said. “The law was supposed to keep premiums down, so the administration is just going to start hammering the plans.”

Democrats have already made clear they’re not going to go out on a limb for the industry.

“Worst-case scenario, the mandate falls. No Democrat is going to shed a tear for the insurance industry on that,” Sen. Sheldon Whitehouse (D-R.I.) told The Hill recently. “My view is if the mandate falls, the insurance industry has to go and get it restored state by state, where everybody concedes it’s totally legitimate.”

Lobbyists dismiss as ridiculous the notion that governors are going to push the massively unpopular mandate.

Republicans, meanwhile, are unlikely to seek to strike the law’s most popular reforms without repealing the whole law. 

That leaves the industry stuck in the middle, and hoping for a favorable outcome from Justice John Roberts and company.

“I think they don’t want to [anger] one [side] or the other right now,” the insurance lobbyist said. “We’re in a divided-government situation, and the administration still has the ability to come and sort of sit on AHIP’s head if they want to. And I wouldn’t put it past them if the opportunity arose.”