Losing mandate could double health care law costs

Paul Clement, a lawyer for 26 states seeking to have the Patient Protection and Affordable Care Act tossed out in its entirety, leaves the Supreme Court in Washington, March 28, 2012, at the end of arguments regarding the health care law signed by President Obama.
AP Photo/Carolyn Kaster

(MoneyWatch) The federal government is fighting mightily to maintain the requirement, or "mandate," that everyone buy health insurance under the fledgling Affordable Care Act (ACA). A new Rand study reveals why. Without the mandate, the government's cost of providing health insurance under the 2010 health reform law will double, soaring from $3,659 for each newly insured individual to $7,468.

The cost of insurance for individual Americans would also rise, according to the study. But the increase is not as dramatic. Individuals buying insurance under the law would pay an average of $6,289 in premiums annually if the mandate were repealed, versus $5,755 if the mandate were to be upheld, according to the study.

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The Supreme Court is reviewing whether the federal government can demand that Americans buy insurance, a key component in the health care law. The decision, expected in June, could be pivotal to the law's survival. Without it, many claim that health insurers would go into a "death spiral" because another portion of the law requires that insurers "take all comers" -- in other words, you could not be turned away from buying coverage, no matter how sick you were when you applied for insurance. That could create a worst-case scenario for health insurers, allowing healthy individuals to drop their coverage, choosing to buy it only after they got sick.

The new Rand research looks at what would happen to the total cost of health coverage if the high court tosses out the individual mandate but affirms the rest of the law. The researchers note that some costs would not change, but the burden of payment would shift from one group to another. Current law already demands that hospitals and emergency rooms must provide help to those seeking "acute care," which means that the government (through medical aid programs for the poor) and hospitals already shoulder significant costs for the uninsured. Insured individuals also bear a portion of the load, too, because the cost of covering the uninsured is passed on through higher premiums for everyone.

In addition to doubling the government's cost of covering newly insured individuals, losing the mandate would likely cause some 4.8 million individuals who now have insurance to drop their coverage, according to Rand, a nonprofit policy research institution. A far smaller group of uninsured Americans would buy coverage without the mandate, the study says. Rand estimates that repealing the mandate will cause 12.5 million fewer individuals to gain coverage.

What do you think? Should the Supreme Court repeal or retain the mandate? Can the ACA survive without it? Should the law survive?