Hypothetical Mean

Commentary from an Actuarial and Economic Perspective

Healthcare Reform and Severability: The DOJ’s Brief

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The Department of Justice has weighed in with a novel and rather pathetic argument for PPACA’s severability: that the individual mandate is severable from everything else in the law aside from guaranteed-issue (GI), pre-ex exclusion prohibition, community rating, and, well, that’s basically it.  Although I’m generally amenable to the emphasis on those provisions, it is absolutely ludicrous to think that the federal risk stabilizers, health insurance taxes, and hospital cuts, among other provisions, should all remain if the mandate goes.

If there is no guaranteed-issue bad risk in the market, why does the individual market need reinsurance paid for by all small and large group carriers?  There goes S. 1341 reinsurance and its 1-2% premium load in 2014-2016.

If the mandate gets repealed and the market is again allowed to price to the risk of the individual, what anti-competitive pricing behavior is the risk-adjustment program supposed to prevent?  Poof, there goes S. 1343.  The fact that the DOJ is arguing that it shouldn’t is the level of understanding of risk pricing that got us into this mess of a law to begin with.

What about the tax on health insurers?  A minor eight billion dollars in 2014.  It was levied on insurers in order to sop up all those “excess profits” from the newly insured, remember?  That tax now would be left to be paid by those who remained insured.  This will nakedly raise premiums, undercutting the naive DOJ belief that leaving this provision wouldn’t impact cost.

Lastly, I’m sure all the hospitals will be cool with their Medicare reimbursement cuts despite not having uncompensated care reduced via the mandate.  This means greater cost shifting to the private sector, driving premiums up, again undercutting the naive DOJ.

Need I go on?  I don’t know what’s worse: this silliness or the realization that this is the sort of muddle-headed logic that our Supremes are going to have to wade through.


Written by Victor

January 31, 2012 at 4:17 am

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