If the entire Affordable Care Act gets struck down tomorrow, that would trigger a fair bit of chaos, with lawsuits and scrambling for reauthorization of programs like the Indian Health Service expected. But if the Supreme Court just throws out the individual mandate – and even if they toss insurance regulations like guaranteed issue (the bar on denying coverage due to a pre-existing condition) – the nation’s biggest state is prepared to move forward with the law, and even prosper, according to a leading health advocate.
“Our message is full-speed ahead,” said Anthony Wright of California Health Access, one of the top health care adovcacy groups in the state. “Even if they strike down the mandate, that allows 95% of the bill to go forward, and allows for state-specific fixes on the rest. If Congress won’t act, CA can and should and will.”
Unique among many states, California has advanced pretty far in their efforts to implement the Affordable Care Act. They are one of seven states to begin the Medicaid expansion process early, providing coverage to 400,000 low-income Californians. Another 11,000 with pre-existing conditions are enrolled in the high-risk pools, the bridge to the full implementation of the ACA in 2014. And they have set up their insurance exchange framework. Tens of thousands of others receive coverage thanks to a small business tax break for providing insurance and other programs. In all, Wright estimates that half a million Californians are receiving coverage right now through programs related to the Affordable Care Act. So if the law gets overturned entirely, “half a million getting tangible coverage would be dumped immediately with the stroke of a pen,” Wright warns.
This impact of half a million with coverage, before full implementation, also informs Wright’s thinking on why the ACA is well-positioned in California even without the mandate. “It’s been my belief that the mandate is a relatively small part of it,” Wright said. “It was a means to an end of expanding coverage. The things that do the most work toward that goal is the subsidies.”
Those insurance subsidies for the purchase of coverage begin in 2014. A world without a mandate, then, would look much like the kind of policy then-candidate Obama promoted in the Democratic primaries, where some coverage is affordable and therefore attractive to the population who needs it. Anyway, the mandate is fairly weak – just $95 a year in the first year, inapplicable for anyone making under 200% of the poverty level, as well as for anyone who doesn’t file taxes or doesn’t get a tax refund. Losing a weak penalty won’t fundamentally affect the policy if the subsidies are affordable enough to expand coverage, Wright says.
A similar debate occurred in California in 2007, when then-Governor Arnold Schwarzenegger attempted a subsidize/mandate/regulate scheme for insurance that looks much like the federal policy today. [cont’d] Many Democrats in the state opposed the mandate because the subsidies were not robust enough. “The question is always, is insurance available, affordable and administratively simple,” Wright said. He argued that the exchange framework satisfied the administrative simplicity, and that the subsidies satisfied the affordability (though he acknowledged that there was an argument to make on whether the coverage was affordable enough, given what it provided).
As for availability, if the Court strikes down the mandate and the regulation on guaranteed issue, that would hamper that leg of the stool. However, Wright said that California could still move forward. He partially addressed this in a blog post yesterday:
Even the goal of guaranteed issue access to coverage for people with pre-existing conditions can be achieved, if not by Congress, then by California. The striking down of one provision is easily fixed–for example, just rename the mandate a tax and tax credit. With no Congressional action likely, California can (and should, and will) move forward with a state-specific version or alternative to the mandate and/or guaranteed issue.
There have already been discussions among the leading stakeholders to move forward with this kind of state-based fix. The result could look a lot like what children’s health coverage looks like in California (at least for now; the new state budget proposes moving the entire Healthy Families program, California’s version of SCHIP, into Medicaid). “Children have guaranteed issue access to coverage in California without a mandate,” Wright said. This is enforced in a variety of ways.
First, the Healthy Families program provides coverage for kids up to 250% of poverty. For the population left, two steps are in place. California forces insurance companies to cover kids, or forego covering adults in the state. In addition, while federal law doesn’t put any limits currently on charging children, in California, there is an incentive for signing a child up in their birthday month. If they do so, they cannot be charged more than two times the average rate.
You could see something similar for the individual marketplace, with either an incentive to sign up for coverage, or a minor tax penalty. “The mandate penalty (in the federal law) is under $100 the first year. You could make a late penalty, a couple hundred dollars, that encourages people to sign up early,” Wright said. He pointed to a report from the Government Accountability Office that offered 9 potential alternatives to the individual mandate, some punitive, some more carrots than sticks.
Indeed, this is something the insurance industry might want to put into place, if California were able to pass guaranteed issue, because they fear the “adverse selection” possibilities. In 2007, insurance companies in California like Kaiser and Blue Shield did come to the table to work on a new structure for insurance, because they believed that the entire business model was unsustainable. That doesn’t mean they would be great allies to consumers and their advocates, but it does mean that in select cases, you could see a lack of resistance to cleaning up guaranteed issue in some states.
Obviously, every state will not seek to move forward with more equitable fixes to the Affordable Care Act in the wake of a Supreme Court ruling striking some of it down. “Some states that will not want to do anything at all will use this as an excuse to not implement health reform,” Wright said. However, he added that “California and other states will want to fulfill the promise of health reform, including the goal of no denials for pre-existing conditions. We do have in California the urgency of the problem, and the political will to continue to move forward regardless.”