by Bryan Morben, UMN Law Student, MJLST Managing Editor
A major criticism about the Patient Protection and Affordable Care Act of 2010 (“Affordable Care Act” or “ACA”) is that it will lead to a premium “death spiral.” Because the Affordable Care Act proscribes health insurance companies from discriminating against individuals with preexisting health conditions, some believe that people might just wait until they’re sick before signing up for coverage. If that happens, everyone else’s premiums will rise, causing healthy people to drop their coverage. With only sick individuals left paying premiums, the rates go up even more. And so on . . .
On the other hand, supporters of the ACA cite its other provisions to safeguard against this scenario, specifically, the subsidy/cost sharing and “individual mandate” sections. The former helps certain individuals reduce the amount of their premiums. The latter requires individuals who forego buying minimal health insurance to pay a tax penalty. The penalty generally “is capped at an amount equal to the national average premium for qualified health plans which have a bronze level of coverage available through the state Exchange.” Therefore, the idea is that enough young, healthy individuals will sign up if they would have to pay a similar amount anyway.
States that have guaranteed coverage for everyone with preexisting conditions before have seen mixed results. New York now has some of the highest individual health insurance premiums in the country. Massachusetts, which also has an individual mandate, has claimed more success. But it still leaves some residents wondering whether breaking the law might make more sense.
There are notable differences between the ACA and the Massachusetts law as well. For example, the subsidies are larger in Massachusetts than they are with the ACA, so there’s less of an incentive for healthy people to sign up for the federal version. In addition, the ACA’s individual mandate seems to have less of a “bite” for those who elect to go without insurance. The penalty is enforced by the Treasury, and individuals who fail to pay the penalty will not be subject to any criminal penalties, liens, or levies.
Finally, the unveiling of the HealthCare.gov website, a health insurance exchange where individuals will learn about insurance plans, has been a catastrophe so far. There is also some concern that “only the sickest, most motivated individuals will persevere through enrollment process.” Since high enrollment of young, healthy participants is crucial to the success of the marketplace, the website problem, and any negative effect it has on enrollment, are just the latest contributor to the possible looming spiral.
In all, it remains to be seen whether the Affordable Care Act will succeed in bringing about a positive health care reform in the United States. For an excellent discussion on the ACA’s “right to health care” and additional challenges the law will face, see Erin C. Fuse Brown’s article Developing a Durable Right to Health Care in Volume 14, Issue 1 of the Minnesota Journal of Law, Science & Technology.
Proponents of the Affordable Care Act breathed a collective sigh of relief in June 2012 when the U.S. Supreme Court upheld most of the law in its decision in National Federation of Independent Business v. Sebelius. As