Today’s Supreme Court Healthcare Ruling: Possible Scenarios, Effects

June 28, 2012

The U.S. Supreme Court’s ruling on President Barack Obama’s 2010 healthcare law, expected on Thursday, may have wide-ranging political and economic implications.

Here is a look at possible scenarios for Americans, healthcare providers, insurers, the law and the presidential campaign.

How would different rulings affect the average American?

• IF THE LAW IS UPHELD: Working families with annual household incomes up to nearly $90,000 would be able to purchase private insurance through new state insurance markets at prices subsidized according to income level, beginning in 2014. People with household incomes of around $29,000 and below would qualify for coverage under the Medicaid government health insurance program for the poor. Preventive healthcare measures including mammograms and other cancer screenings would be available without deductibles or co-pays. Adult children up to age 26 could remain on their parents’ health insurance plans. Senior citizens could expect to continue receiving discounts on prescription drugs aimed at closing the Medicare coverage gap known as the “doughnut hole.” Health insurers would continue to pay rebates on premiums not sufficiently targeted at healthcare services. Beginning in 2014, insurers would no longer be able to deny coverage to adults with pre-existing medical conditions and would be required to stop or curb discriminatory pricing based on gender, age and health status.

• IF THE ENTIRE LAW IS STRUCK DOWN: The benefits listed above would disappear unless extended by an act of Congress or executive order. The number of uninsured people in the United States, estimated at 50 million, would continue to rise as employers cope with rising healthcare costs by cutting away at healthcare benefits for workers and as the social safety net frays under the weight of federal and state fiscal pressures.

• IF THE INDIVIDUAL MANDATE IS STRUCK DOWN: If the individual mandate requiring most Americans to obtain health insurance is struck down, families could have a harder time finding affordable health coverage through the new state insurance markets because the federal government would no longer be able to require younger, healthier people to purchase coverage. Their absence would leave state markets with a higher proportion of sicker, older people, creating considerable new financial risks for insurers and driving insurance costs up. Subsidies in the form of tax credits would defray higher costs initially for those who qualify. But a family’s share of subsidized premiums would rise over time in the face of bigger-than-expected cost increases, and those without subsidies would feel the full brunt of higher prices. Federal and state governments could take steps to stabilize markets. But given the prospect of financial trouble for insurers, the court could also accept the Obama administration’s advice to eliminate new risks by striking down measures intended to ensure affordable coverage for people who would otherwise face access barriers due to gender, age or health history including pre-existing conditions. If the court fails to act in this manner, those same consumer protections could still be vulnerable to action by Congress after the November U.S. election. However, the rest of the law’s benefits – from low-cost preventive care and drug discounts for seniors to Medicaid coverage for a wider number of low-income people – would still remain in place.

How might different options impact healthcare providers?

• IF THE LAW IS UPHELD: The ruling would remove one cloud of uncertainty over the future of healthcare reform and would help the administration’s efforts to implement it fully by Jan. 1, 2014, when the law is scheduled to go into effect. Under such a decision, physicians and hospitals would continue to move away from the traditional fee-for-service healthcare business model and toward more efficient systems that coordinate care. For healthcare providers, an affirmation could represent millions of potential new patients, either through private plans or the government’s Medicaid program for the poor. Some, however, would be under added pressure to enact more savings, which could cut into revenues. The administration would still face some fairly tall hurdles, such as establishing regulated health insurance markets in all 50 states so consumers can purchase subsidized coverage. Up until now, over a dozen states have done little or nothing to create such exchanges, partly because of the uncertainty over the fate of the law. Down the road, if Republicans succeed in taking control of the White House and the Senate in November (they already control the House of Representatives), they would likely try to repeal the law in 2013.

• IF THE LAW IS STRUCK DOWN: Such a ruling would create chaos for healthcare providers who have worked to accommodate the law’s provisions since March 2010 when Obama signed the legislation. Providers would be unsure whether – or how – to move ahead on initiatives that replaced traditional fee-for-service healthcare with more efficient models, since the federal government’s authority to push for such innovations would have been eliminated.

• IF THE INDIVIDUAL MANDATE IS STRUCK DOWN: Such a ruling could still leave in place a broad range of healthcare reforms, including innovations intended to lower costs of care. But in striking down the individual mandate, the high court would create a major challenge for the administration as it tries to establish regulated insurance markets at a state level. The purpose of the markets is to provide subsidized coverage for consumers who need it. But since the government would not be able to require younger, healthier individuals to purchase insurance, those state-level markets could become dominated by riskier individuals and higher premiums. Another wrinkle depends on consumer protections banning coverage denial based on pre-existing conditions and higher insurance costs for older people and women. If the justices preserve them, but strike down the individual mandate, Congress may need to eliminate those consumer protections to guard insurers from unnecessary risks. If the justices eliminate the protections, Congress may act to restore them, since they have proven popular with voters.

What are possible outcomes for health insurers?

• IF THE WHOLE LAW IS STRUCK DOWN: Insurers would lose access to millions of potential new members gained through Medicaid expansion and state insurance exchanges. Those exchanges, designed to provide subsidized insurance to consumers who need it, would be dead. On the upside for the industry, such a ruling would scuttle regulations that would have scrutinized insurers’ rates, mandated certain levels of spending on medical claims and levied more fees on the companies.

* IF THE MANDATE ONLY IS STRUCK DOWN: While some insurance executives dismiss the individual mandate as too weak to compel people to buy coverage, striking down the mandate alone is seen as the worst-case scenario for the industry. Executives worry that such a ruling could lead to an influx of sick, high-cost policy holders, and that insurers would not have healthier members to counter those costs. That, insurers say, would drive premiums higher. A more neutral outcome for the industry would be for the court to strike down the mandate as well as provisions requiring that insurers enroll people regardless of health status.

How might federal laws be affected by the decision?

• IF THE INDIVIDUAL MANDATE IS STRUCK DOWN NARROWLY: This would mean that Congress could not force citizens to buy a product – such as health insurance – from a private vendor. Such a decision would not be retroactive, so it would not affect prior rulings or law. But it would probably discourage lawmakers from considering further legislation to buy private goods or services.

* IF THE MANDATE IS STRUCK DOWN BROADLY: In the past, the high court has recognized that Congress has the ability to regulate interstate commerce. If the court strikes down the mandate, the justices for the first time would have created an exception by ruling that Congress cannot regulate inactivity. Going forward, the decision could limit the ability of lawmakers to regulate interstate commerce and alter the balance of legislative power between the federal government and the states. Such a ruling also would call into question a series of laws that penalize people for inactivity, including those governing drug possession cases in which people who are found to have illegal drugs belonging to others inside their homes can be found liable.

* IF THE COURT STRIKES DOWN THE LAW’S EXPANSION OF MEDICAID: Healthcare reform sought to extend health coverage to an estimated 16 million uninsured Americans by expanding the Medicaid program for the poor, which is jointly funded by the federal and state governments and overseen by the administration. If the court strikes down the Medicaid expansion, it would undermine long-established precedents that allow the federal government to require states to adopt certain policies in exchange for some federal funding. The ruling could call into question a broad range of other federal programs, from highway construction to environmental projects, homeland security and civil rights, experts said.

* IF THE WHOLE LAW IS OVERTURNED: Historically, Congress and the president have been able to pass and implement laws similar to healthcare even in the face of opposition in the courts. If the Supreme Court overturns the entire healthcare law, it would dramatically extend the scope of the judicial branch of government. Much of the law has also been in place for more than two years and has nothing to do with the individual mandate or the Medicaid extension, the two provisions that some state governments challenged on constitutional grounds.

How might the ruling influence the presidential campaign?

• IF THE LAW IS STRUCK DOWN IN ITS ENTIRETY: Such a ruling would erase Obama’s signature domestic policy achievement and could harm his prospects for re-election on Nov. 6. That would be good news for Republican presidential challenger Mitt Romney, who has called for the healthcare law to be repealed and replaced. The decision also could bolster critics who accuse Obama of adopting policies that are wrong for the country. But at the same time, Obama and his fellow Democrats might capitalize on the image of an out-of-control conservative court. Such a prospect could mobilize the votes of on-the-fence Democrats and Democratic-leaning independents.

• IF THE LAW IS UPHELD IN ITS ENTIRETY: This would be a big victory for Obama, who has weathered years of conservative criticism about his reforms. That decision could energize Obama and his supporters, while undercutting Romney, who introduced similar reforms as Massachusetts governor but opposes their use as national policy. It also could deliver a blow to critics who have complained that healthcare reform is an overreach of federal power. As for a silver lining, the opinion could light a fire under Republican voters who want a president who would repeal the law in 2013.

• IF THE INDIVIDUAL MANDATE IS STRUCK DOWN: If the high court strikes down the individual mandate, it might seem like a win for Romney and Republicans in general, but it is not so clear cut. On the upside for Republicans, the elimination of the mandate could provide an “I told you so” moment in which the party could point to its long-held contention that the concept was misguided as nationwide policy. What’s more, Obama’s ability to extend health insurance to more than 30 million more Americans clearly would be curtailed, since younger, healthier citizens would likely opt out of buying into a plan in the near-term. However, if the justices eliminate the mandate, they would have removed the provision that voters found most objectionable. Potentially, that could neutralize healthcare reform as a campaign issue with which to bludgeon Obama and the Democrats in November.

(Reporting by David Morgan and Lewis Krauskopf; Editing by Howard Goller and Will Dunham)

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