By Melissa Attias, CQ Staff

June 18, 2012 -- A decision by the Supreme Court to strike down the health care law would put the subject squarely in the lap of Congress once more, raising a multitude of questions about how to provide medical care to those who cannot afford it, how to constrain the rising cost of care, and who should pay. Most immediately, however, Congress will be faced with decisions about provisions of the law that already are in effect, including two that have turned out to be highly popular with the public.

An estimated 6.6 million adults younger than 26 were able to receive coverage through their parents' health insurance policies last year because of the law, according to the Commonwealth Fund. And roughly 3.6 million seniors and people with disabilities in the Medicare prescription drug plan's coverage gap received discounts in 2011, the Centers for Medicare and Medicaid Services said.

Some insurers already have indicated that they're willing to continue allowing young adults to stay on their parents' plans until they turn 26, no matter how the Supreme Court rules. That would probably take pressure off Congress to act to preserve the benefit should the court strike down the law.

There's far less certainty, however, about the discount provisions for seniors who fall into the coverage gap known as the doughnut hole. Without the 2010 statute, the prospects for the continuation of those discounts are murky. Drug manufacturers could decide to continue providing some of the discounts voluntarily, but the industry already has suggested that barriers may stand in the way. So if the health care law is thrown out, lawmakers may feel pressure to find a way to protect those individuals from once again having to pay the full cost of their drugs.

"You're still talking about millions of people who are going to lose coverage potentially for their prescription drugs in the doughnut hole," said AARP Legislative Policy Director David Certner. "And we've seen what the impact of that is, which is basically that people can't afford their drugs anymore, they stop taking their drugs, and they maybe end up even sicker and therefore have even higher health care costs."

Two Popular Provisions

Theoretically, of course, even the provision that extends dependent coverage until age 26 would end immediately, or on whatever effective date the court might set, if the law were overturned. But many health observers think that young adults would be able to maintain their coverage at least until the end of their plan year. Plus, if a family lives in a state that took separate legislative or regulatory action to implement the provision, insurers there may continue to be required to accept young adults on their parents' policies. The Commonwealth Fund said in a March paper that 22 states and the District of Columbia had passed legislation or issued regulations related to the provision, although the Fund didn't specify how many of those states included language linking the requirement directly to the health care law.

"The bottom line is, if a state has baked this law into their own state code, then the insurers would still be obligated to cover these young adults," said Sabrina Corlette, a research professor at Georgetown University's Health Policy Institute and an author of the Commonwealth Fund paper. But, she said, some states may have tied their statutes to the law, known formally as the Affordable Care Act. "So there's this open question about if the ACA is overturned, then do those state laws still stand?"

Corlette also said insurers may have to allow some young adults to stay on their parents' plans because of a provision in previous law that generally guarantees the renewal of individual coverage.

Even if they aren't required to offer the benefit, some insurance companies will decide to continue it beyond the end of the plan year. Three major U.S. insurers—UnitedHealth Group Inc., Humana and Aetna—announced on June 11 that they would take that approach, no matter how the court rules.

The effect on provisions aimed at closing the coverage gap in Medicare's prescription drug program is harder to anticipate.

Under the 2003 law that established the special benefit, the government helps pay for drugs until a beneficiary's cost reaches a set amount. At that point, the beneficiary falls into the doughnut hole and is responsible for paying the full cost of prescription medicines. Once a beneficiary reaches an annual out-of-pocket spending limit, Medicare drug coverage resumes for the balance of the year.

The coverage gap, which was designed to hold down costs to the new Medicare Part D system, was never popular with seniors and people with disabilities, many of whom live on fixed incomes. So the writers of the health care overhaul decided to find a way to rework the policy. They came up with a phase-out plan that started in 2010, with a $250 rebate for anyone who fell into the doughnut hole that year. In 2011, a series of incremental increases in subsidies began.

This year, drug companies are providing a 50 percent discount on brand-name drugs to eligible beneficiaries whose drug costs fall in the doughnut hole. Next year, the government will begin subsidizing additional coverage of those drugs; that coverage will gradually increase, until enrollees are responsible for only 25 percent of the costs in 2020.

Currently, individuals in the doughnut hole also receive a 14 percent discount on generic drugs covered by Medicare. That benefit will grow, until it covers 75 percent of the costs in 2020.

Because Medicare beneficiaries typically pay 25 percent of their drug costs before they hit the coverage gap, these phased-in changes will effectively close the doughnut hole.

According to CMS, more than 416,000 Medicare beneficiaries saved an average of $724 on prescription drugs in the doughnut hole during the first four months of this year, for a total of $301.5 million. CMS also reported that the 3.6 million Americans who received discounts in 2011 saved more than $2.1 billion on the cost of their prescriptions.

If the high court decides that the overhaul is unconstitutional, health experts say, drugmakers may find it in their best interest to continue the discounts, at least for a while.

"I think the drug industry will probably honor it for a run-off period," said Robert Laszewski, president of the consulting firm Health Policy and Strategy Associates. "Administratively, they can't change the system in 24 hours. And from a public relations standpoint, the drug industry might say something like, 'We'll honor the discounts to the end of the year' or, you know, something like that."

Likewise, AARP's Certner said the benefit might continue for a time. "It would be complicated to untangle contracts that are currently in effect, and the discount provisions are already written into the Part D contracts," he said. "So I think that the provisions that you're dealing with this year, like the drug discount and the age 26 provision, are more likely to be honored for this calendar year, but they are part of the uncharted territory when you're talking about a ruling that the law is unconstitutional."

GOP Skepticism

Several House Republicans have said the drug discounts should remain in effect even if the law is struck down because they are part of a deal between Democrats and the pharmaceutical industry.

"PhRMA agreed to that deal, didn't they? Well, God bless them," said Georgia Republican Phil Gingrey, co-chairman of the House GOP Doctors Caucus, referring to the Pharmaceutical Research and Manufacturers of America. "That was the risk they took, and that's fine. That problem is solved. Why do we need to do anything to solve the problem with the doughnut hole? It's already been done."

Still, others say that seniors who are receiving drug discounts might lose them quickly. Ron Pollack, executive director of the consumer advocacy group Families USA, said drug companies and other providers may question why they should make sacrifices if they aren't receiving a benefit that balances everything out.

"Remember, the drug companies, like other providers, were willing to make some concessions because they felt that those concessions would be more than made up through increased volume in drug sales, which occurs when you've got fewer people uninsured," Pollack said. "Of course, that balance is lost if, you know, the tens of millions of people who currently are expected to gain health coverage due to the Affordable Care Act don't actually receive that new coverage."

Laszewski also said drug companies are offering the discounts "because they got an overarching drug deal in the new law" and that they have an incentive to eventually take the benefit off the table: They'd want to be able to use it in any future negotiations on health care legislation. "That's a big chip that the industry gave up to get other things," he said. "They're going to want that chip back to negotiate with whomever."

There are also questions about whether Medicare would have the authority to help close the doughnut hole without the statute in place, and whether antitrust laws or restrictions on offering inducements to Medicare beneficiaries would permit drug companies to continue the discounts voluntarily.

"The Affordable Care Act created the legal structure for biopharmaceutical companies to provide discounts to seniors through the coverage-gap discount program," said PhRMA spokesman Matt Bennett. "This structure addressed fraud and abuse laws and antitrust concerns, among others."

In the Aftermath

If the law is struck down, most observers agree, the divided Congress is unlikely to have enough time to negotiate and push through any significant health care legislation before the election.

"It just seems that the stars are certainly nowhere aligned to have any serious legislative effort, even if it's just picking up the most popular provisions of the bill," said Sarah A. Binder, a George Washington University political science professor and a senior fellow at the Brookings Institution.

AARP's Certner predicted that there would be an immediate outcry for Congress to address the coverage gap if the drug discounts disappeared. And Pollack pointed to what he called "enormous" public support for the provision to close the gap and the provision to allow young adults to stay on their parents' policies. An April survey by the Kaiser Family Foundation showed that 78 percent of respondents had a very favorable or somewhat favorable view of the health care law's provision to close the coverage gap. The same survey found that 71 percent of respondents viewed the young adult provision favorably.

Regardless of public pressure, Speaker John A. Boehner of Ohio has said House Republicans are committed to repealing the entire health care law, and conservatives have said they have no interest in restoring any parts if the law were to be struck down.

And Democrats won't have much incentive to patch up the system, Binder said, because they will want to campaign on the issue.

"It's another opportunity for Democrats to criticize Republicans for not having an alternative, and so I just can't see them marching to the middle and trying to come up with some patchwork solution here," she said.

By John Gramlich, CQ Staff

June 18, 2012 -- With the health care overhaul in the hands of the Supreme Court, dozens of cases have been stayed in federal courts across the country pending its review. Many of them are likely to be set aside if the law is upheld because they turn on the same four constitutional questions the court is now weighing.

Others, however, raise far narrower constitutional objections about specific provisions in the 2010 health care overhaul. Lawyers and health care experts look to these cases to become the next front in a legal battle over the law that the Supreme Court could once again have to arbitrate.

One plaintiff sets its sights on the constitutionality of the Independent Payment Advisory Board, known as IPAB, which was created to curb the growth of Medicare spending. In other cases, distinct groups of people—physicians with financial stakes in hospitals and religiously affiliated groups chafing under an Obama administration rule that requires free contraceptive services as part of preventive-care coverage—are taking aim at specific requirements in the law or regulations it has spawned.

The cases turn on issues that lack the consequential sweep of a potential Supreme Court ruling striking down a law that touches nearly one-fifth of the nation's economy as well as the lives of most Americans.

But a successful outcome in any one of the lawsuits could set aside hard-fought policy prescriptions to rein in Medicare costs; curb the growth of physician-owned hospitals; and mandate that employees, even those at religiously affiliated organizations, get access to free contraceptive services.

"It's a very big law. It's got a lot of moving parts," says Hadley Heath, a senior policy analyst at the Independent Women's Forum, a conservative group that opposes the law. "It's rife with constitutional issues."

Multiple Constitutional Fights

The lawsuits most likely to remain viable should the Supreme Court uphold the law raise an array of constitutional questions. The conservative Goldwater Institute is pressing one that the U.S. District Court of Arizona stayed in January, pending the high court's ruling. It contends that the 15-member, presidentially appointed IPAB violates the separation of powers because the health care law gives the board broad powers to make crucial spending and policy decisions constitutionally delegated to Congress.

Another case, brought by Physicians Hospitals of America, an advocacy group for doctor-owned hospitals, is pending before 5th U.S. Circuit Court of Appeals in New Orleans. The case asserts that the law arbitrarily favors hospitals owned by those who are not physicians, stripping physician hospital owners of their constitutionally guaranteed due process and equal protection rights.

At the center of nearly two dozen constitutional challenges working through the federal district courts nationwide is the contention that the Obama administration's evolving policy requiring insurers of religiously affiliated organizations to provide their employees with contraception services violates the First Amendment rights of those forced to provide services that run counter to their religious values.

Targeting IPAB

The Arizona case, Coons v. Geithner, has the attention of the Obama administration because it is the only lawsuit that targets the constitutionality of the IPAB. The administration is counting on the board to "bend the cost curve" of Medicare.

The health care law empowers IPAB to make recommendations to Congress beginning in January 2014 about how to reduce Medicare spending if costs rise more than 1 percent faster than the economy at large grows. The panel's recommendations do not carry the force of law but will go into effect unless Congress acts to stop or amend the proposals.

Proponents of the independent board defend it as necessary because Congress has shown an inability to reduce Medicare spending, particularly when confronted with pressure from providers such as doctors, hospitals and drug companies.

"The whole idea of IPAB was to depoliticize decisions to reduce health care costs," said Ron Pollack, the Founding Executive Director of Families USA, a national consumer advocacy organization. "It's a useful mechanism. Is that the only mechanism? No, but it is helpful to try to depoliticize the decisions and make what cost savings are possible without getting into pitched battles with key interest groups."

Lawyers for the Goldwater Institute—representing Arizona Republican Reps. Jeff Flake and Trent Franks, among others—contend that the law makes it too difficult for Congress to change or stop the panel's recommendations. The law, for example, requires the House and Senate to adopt a joint resolution with a three-fifths supermajority vote to stop IPAB's proposals from being automatically implemented. Board proposals could be controversial, such as reducing benefits or provider reimbursement rates.

Diane Cohen, the lead attorney for the Goldwater Institute, describes the board as "an unaccountable, unelected board of bureaucrats." Among her specific concerns is that, while the law calls for 15 members on the panel, it does not actually require the president to appoint that many. "The president could appoint one person, and that one person could dictate Medicare policy for the entire country," she says. "Or he appoints no one, and the secretary of HHS would step in."

The Obama administration rebuts such claims and contends that the challenge to IPAB is premature because the panel will not be named for a year and a half, let alone make recommendations on Medicare spending. But the biggest legal hurdle Cohen and her clients have to overcome is that Congress itself created IPAB. The federal courts traditionally have been reluctant to find unconstitutional a delegation of power that Congress has authorized, Cohen concedes. "It's an uphill battle under the separation of powers," she says. "It's been a tough road, historically."

Doctor Hospitals

Another case to watch is one involving physician-owned hospitals, on appeal to the 5th U.S. Circuit Court of Appeals by the Texas Spine & Joint Hospital Ltd., a small specialty hospital in eastern Texas, and the Physician Hospitals of America, an advocacy group. The U.S. District Court for the Eastern District of Texas ruled in favor of the Obama administration.

The doctors groups argue that the law effectively stopped the expansion of physician-owned hospitals as well as the development of additional physician-owned facilities by cutting off Medicare reimbursements, a major source of their income.

The administration has countered that the provision was needed because physicians were essentially circumventing rules meant to stop them from referring patients to hospitals in which they have a financial stake, referrals that studies show result in higher health care costs.

Most of the nation's some 300 physician-owned hospitals provide care in specialized fields such as back and heart surgery, and while they often are highly ranked for the quality of the health care they provide, studies show that their patients undergo more tests and procedures than patients at other hospitals.

Lawyers arguing on behalf of doctors in Physician Hospitals of America v. Sebelius say their clients are being unfairly and unconstitutionally singled out as hospital owners for no rational public purpose and that restricting Medicare payments to them has prevented them from expanding or building new hospitals. The district court rejected the physicians' arguments that their due process rights were being violated, prompting the doctors to appeal the case.

Contraception Dispute

Lawsuits targeting the Obama administration's policy that employees should have access to free contraception services could have broad implications for many religiously affiliated institutions in the country. At least 23 cases representing 56 plaintiffs are currently in federal district courts nationwide, according to the Independent Women's Forum. Seven Republican-led states—Florida, Michigan, Ohio, Oklahoma, Nebraska, South Carolina and Texas—also are suing to overturn the policy.

Many of the cases raise First Amendment objections to a Health and Human Services Department rule that was finalized in March and later modified to address an outcry from Catholics and other groups that object to providing birth control. The rule requires employers to offer insurance that covers preventive services, including contraceptive services, free of charge. The administration's compromise shifted the burden of providing the coverage to insurance companies, directing them to offer the same access to services directly to employees of religiously affiliated institutions.

Lori Windham, senior counsel with the Becket Fund for Religious Liberty and a counsel on one of the cases, says many of the cases contesting the rule contend that it "forces employers to cover contraception, sterilization and abortion-causing drugs, even if that's something that violates their religious teachings."

The Obama administration's revision did not formally change the rule, leaving it vulnerable to legal challenges, she added. "A non-binding statement from [the government] can't trump an existing law," Windham says.

Waiting in the Wings

It is not knowable whether any of these cases will ultimately succeed. Many lawyers and health experts judged the three cases the Supreme Court is now considering long shots when the first one was filed seven minutes after Obama signed the overhaul into law March 23, 2010, and many are now more circumspect about handicapping the legal strengths of any leftover lawsuits.

"As a former law school dean and someone who has argued before the Supreme Court, I thought these were frivolous lawsuits," Pollack of Families USA said of the three cases the Supreme Court is now reviewing. "I am not sure I'm prepared to make other predictions about other lawsuits that this court may take seriously."

But the lawyers pressing the more targeted challenges share a common hope that the Supreme Court makes their arguments moot by invalidating the entire law.

"Once the decision comes down, I'm hoping that it will be over," says Cohen, the lawyer handling the IPAB case. "But if not, we will be moving within the next few weeks."

Ilya Shapiro, senior fellow in constitutional studies at the libertarian Cato Institute, said a high court ruling upholding the health care overhaul would shift the legal wrangling to specific aspects of the law.

The narrower challenges lack the size and scale to undermine the construct of the law, but they can shape how it is put into action. "These are really more of the garden-variety lawsuits that tend to shape implementation of a far-reaching law that lends coverage to 30 million uninsured people," says Dan Mendelson, a former Clinton administration health budget official and chief executive and founder of Avalere Health, a Washington, D.C., consulting firm.

Bradley W. Joondeph, a law professor at Santa Clara University in California, says while the cases "don't have the potential to bring down the act in its entirety," they still pose headaches for the Obama administration's signature legislative achievement.

"What is a viable constitutional argument?" Joondeph said. "It can change, and it can change very rapidly, depending on the political incentives of people who have the power to shape public opinion on these questions."

By Rebecca Adams, CQ Staff

June 18, 2012 -- The health care case before the Supreme Court is as big as it can get in terms of the law: It's about the reach of government, congressional power and individual liberty.

Yet during oral arguments in the case, the justices showed that they were well aware that their ruling, however important in constitutional terms, would have serious real-world effects—on consumers, on the insurance industry and on the nation's health care system.

This is especially true if the justices decide to throw out only part of the law—the requirement that most Americans buy insurance, for example—and keep the rest. That requirement, known as the individual mandate, is central to the law because it guarantees the insurance companies a new pool of customers and therefore offsets lost revenue associated with consumer protections that would require them to cover higher-risk patients.

Justice Samuel A. Alito Jr. referred to economists' predictions of the effects of striking the requirement, asking, "What would happen to the insurance industry?" Justice Elena Kagan suggested that insurance markets would shrivel if the justices removed the mandate but upheld consumer protections in the law, saying "the whole system crashes and burns." Justice Sonia Sotomayor, similarly, asked about the "death spiral" such a scenario could cause through an escalating series of premium increases.

These are scenarios that might be better addressed by actuaries than judges, but the decision on whether to keep all or part of the law is nonetheless in the justices' hands, and the practical ramifications are enormous.

A limited decision would set in motion campaigns for Congress to change those parts of the law that remain. For consumers, some would face higher costs in new insurance markets, known as exchanges, than under current law. The new state-based exchanges would probably exist but in some scaled-back way. The long-term consequences of a partial ruling on the overall insurance markets are even harder to predict, insurance experts say.

If the court ruled against the individual mandate as well as the two associated consumer protections—one preventing insurers from charging sick people more and one prohibiting them from denying coverage to people with pre-existing conditions—consumers would face the same problems they have today in trying to find insurance. Some patients would not be able to buy insurance at any cost, and the law would have failed to protect people who need care the most.

The potentially more disruptive scenario occurs if the court strikes down the mandate but keeps the consumer protections. While it's unclear exactly what the industry would do in that case, experiences in states that have passed such protections without the mandate suggest that rates for everyone could climb, although none of the state laws is exactly like the federal statute.

Those who would be affected by such a narrow ruling—especially insurers—say a decision striking the mandate but upholding the rest of the law would be difficult to respond to in the year and a half that remains before the new markets are supposed to open.

"A partial decision would add considerably to the uncertainty and confusion," said Mike Tuffin, who worked for nine years, until this month, for the trade group America's Health Insurance Plans (AHIP).

Insurers Play Offense

Insurers—particularly those active in the small-group and individual markets, such as WellPoint Inc., Blue Cross and Blue Shield Association, and smaller plans—are already anticipating the possibility of a narrow ruling, making their view clear that the mandate is essential to the rest of the law.

They are representing their case through online inside-the-Beltway ads, Twitter feeds, a website devoted to showing "the link between the mandate and market reforms" that includes contact information for lawmakers, and a Facebook page complete with graphics on the effect of the mandate on premiums. AHIP, the industry trade group, organized the pre-emptive public relations moves.

The industry also appears to be trying to buy good will with the public in anticipation that the law will be struck down. On June 11, three major insurers—Aetna Inc., Humana Inc. and UnitedHealth Group Inc.—announced they would keep some, but not all, of the more popular provisions in the law, including those allowing young adults to stay on their parents' policies until age 26, banning insurers from rescinding coverage after customers get medical care, covering some preventive care without co-payments and providing easy-to-navigate appeals processes for policyholders protesting a claims decision. Some of those benefits could help insurers' balance sheets and were common practice even before the law passed. All poll well with the public.

But the insurers did not promise to accept the much more sensitive provisions at stake in the Supreme Court case. UnitedHealth officials said they would like to keep offering insurance at reasonable rates to people who have had medical problems but that they cannot afford to do so unless all their competitors also do so. The law requires insurers to cover pre-existing conditions for children up to age 19 starting in 2010. In 2014, the ban on denying coverage for pre-existing conditions is supposed to extend to adults.

"One company acting alone cannot take that step," UnitedHealth said in a statement.

World Without a Mandate

Policy analysts tend to agree that without a provision like the mandate in place to force healthier people into the insurance market, premiums would tick up at least a bit. The estimates of increases range from 2.4 percent per person to about 15 percent to 20 percent for an average rate. A 2010 study by MIT economist Jonathan Gruber projected that average premiums could rise by as much as 27 percent in 2019.

The Congressional Budget Office (CBO) estimated in a 2010 analysis that eliminating the mandate could drive up premiums for new non-group policies by about 15 percent to 20 percent.

CBO and the Urban Institute both projected that about 16 million more people could be uninsured if the mandate were struck. Under the law, about 23 million people would remain uninsured in 2019, by CBO's count. Taking away the individual requirement to buy coverage could leave about 39 million uninsured in 2019.

The potentially higher numbers of uninsured would pinch the profits of hospitals and other medical providers, who are already expecting significant cuts under the law.

But not everyone agrees that the problems would be that severe.

"I just don't believe the numbers," said Gail Wilensky, who ran the Medicare and Medicaid programs in the early 1990s under President George Bush. "Those models are based on what you assume will happen in a world which doesn't exist. To me, the very large reductions in the number of uninsured make no sense, given observations from employment-based insurance."

Wilensky said that the key to people's decisions about buying insurance is whether they can afford it, not whether they are required to buy it. Most healthy lower-income or middle-class people, she believes, would buy insurance because under the law they would be subsidized by the government.

And experts at the think tank Rand Corp. say that studies showing "average" rates can be misleading because they are higher than the actual increase that any one individual would personally face.

The main reason average premiums would increase is that different types of people would buy insurance under different situations. Rand found that average premiums would rise about 9.3 percent if the mandate were removed—but that this is because the age and health of the people who enrolled would be different without the mandate, not because insurers would charge each individual a lot more. Under the law, insurers can still charge older people more than they do younger people. The difference that any one person would face in premium costs would be much lower. If the mandate were removed, Rand analysts found, any given individual would see only a 2.4 percent rise in his or her premiums.

AHIP officials present the experiences in Washington state and Kentucky, among other states, as evidence of the startling premium increases that can occur in areas in which insurers are banned from charging sick people more or denying them coverage and there is nothing that compels people to buy insurance. In those states, the number of insurers dropped dramatically when the legislatures passed laws that effectively allowed people to wait until they got sick to buy coverage.

Several justices asked questions that suggested they might buy into the view that removing the mandate alone, as the 11th U.S. Circuit Court of Appeals chose to do in its ruling last year, could raise rates higher than they normally would be and jeopardize consumers' ability to buy insurance. Others were concerned about what kind of judicial test they could apply that would give them the authority to strike the mandate without eliminating other provisions.

Kagan recalled failed experiments in states that had enacted laws that prevented insurers from charging sick people more or refusing to offer them insurance.

But some policy analysts say that past experiences in states are not all that applicable to the federal law, in part because Congress added a half dozen or so provisions to try to entice healthy people to buy insurance.

In the 2010 law, people would get significant subsidies to buy coverage. For instance, lower-income people earning twice the federal poverty level (or $22,340 this year) would get an average subsidy that would cover 80 percent of their costs. Premium subsidies would be available for people earning up to four times the poverty level, or $44,680 for an individual this year. People who earn 2.5 times the poverty level or less would get extra help from the government in picking up their out-of-pocket costs, too.

"Most people who have access to group insurance—which people with subsidies will have in the exchange—do buy insurance, regardless of whether they are mandated to do it," said Wilensky.

The state experiences may also not be predictive of the federal one because in some of the states, the rate schedule was set so that younger and healthier people had to pay a lot more than they would under the federal law. In some states, younger people were even required to pay exactly the same rates as older, sicker people. Under the federal law, healthier people would still be subsidizing those with higher medical costs, but insurers would be able to offer younger people rates that are about one-third of those of older people.

Other minor details could also make a difference. For instance, the law authorizes limited-time enrollment periods that could prevent people from calling to get insurance on the way to the hospital. Another provision would, for the first three years, give insurers that have the highest-cost cases more money than companies that cover healthier people.

Comparisons between the state experiences and the potential federal framework are "just irrelevant and misleading," said Gary Claxton, vice president and director of the Health Care Marketplace Project at the nonprofit Kaiser Family Foundation.

No Mandate, No Protections

The Obama administration maintains that if the court strikes down the mandate, it must also take the protections with it. In that case, the market would face less change than if the protections were left in place, but there would still be a need to revisit the system. Without the protections, people with poor medical histories would face a hard time finding affordable insurance—or any insurance at all.

"That means that irrespective of what people can pay or are willing to pay, it won't make a difference, because insurers won't sell to you no matter the circumstances," said Ron Pollack, the founding executive director of the consumer advocacy group Families USA. "You would have a lot of people who need health care the most out in the cold."

That point has been somewhat overlooked in the discussions about the potential implications of different rulings, said Cori Uccello, senior health fellow of the American Academy of Actuaries and a commissioner on the Medicare Payment Advisory Commission. "I think people aren't thinking a lot about this," she said, saying the protections have been the most favorably received parts of the law.

And even if the exchanges are still there for the uninsured, their rates might not be affordable even if the government subsidies in the law are upheld by the court.

The law envisions the exchanges offering standardized plans with different levels of benefits: Gold plans would offer better benefits than silver plans, which would be a little more generous than basic bronze plans. The subsidies are supposed to be based on the costs of the second-least-expensive silver plan. The consumer protections in the law are designed to protect people from having to face wildly varying rates, and, without those protections, insurers probably would quote individualized rates.

In other words, one of the main goals of the law—covering the uninsured at affordable rates—would go unfulfilled if insurers could still decline to cover people or quote them rates based on their health status.

Then lawmakers would have to answer the more difficult political and philosophical question of whether taxpayer funds should be used to support a private insurance system that could deny coverage to some of the people whose taxes help pay for that system.

Because the pieces of the law are so intertwined—the exchanges and their rates are dependent on the subsidies and the consumer protections, and the protections are dependent on the mandate—keeping one part of the law in place while overturning another would have the effect of essentially creating a system different from the one envisioned.

It's a point that was not lost on the court's potential swing voter, Anthony M. Kennedy, who said that trying to assess the economic effects of slicing various provisions from the law could give the court more of an activist role than if it simply tossed the entire thing.

"If we lack the competence to even assess whether there is a risk" to insurers by striking some provisions, Kennedy said during the arguments, "then isn't this an awesome exercise of judicial power?"

By Jane Norman, CQ HealthBeat Associate Editor

June 20, 2012 -- More than 26,000 adult Americans under 65 who didn't have health insurance died prematurely in 2010, according to estimates recently released by advocates of the health care overhaul.

Leaders of the advocacy group Families USA said that the 2010 health care law (PL 111-148, PL 111-152) offers the promise of access to medical care for people who might otherwise die. The U.S. Supreme Court is expected to issue a decision on the constitutionality of the law as soon as Thursday, and advocates are working to stress the law's importance.

Ron Pollack, executive director of Families USA, said in a conference call with reporters that there are 50 million people in the nation lacking health insurance and the court decision on the law is very important for them. "When people are uninsured, what they often do is defer care," and an illness like cancer can spread and prove fatal, he said.

The state-by-state death estimates—which apply to people age 25 to 64—were derived using a methodology developed by the Institute of Medicine for a similar 2002 report, said a Families USA report titled "Dying for Coverage." Scientific research has found that, after controlling for various factors, the absence of insurance increases mortality rates by about 25 percent for adults, said the report.

"We have great confidence in these numbers," said Pollack. He also said the estimates are likely low because the estimates don't include children or young adults.

The reasons for a lack of health insurance include denials for individual policies due to pre-existing health conditions, the rising cost of insurance and decisions by employers to no longer offer health insurance benefits, the report said.

• Families USA Report (pdf) 

By Dena Bunis, CQ HealthBeat Managing Editor

June 21, 2012 -- Insurance companies that spent more on administrative costs, salaries, and advertising in 2011 than the health care law allows will pay $1.1 billion in rebates to 12.8 million customers this summer, Health and Human Services (HHS) officials announced this past week.

The rebate checks are supposed to be in the mail by Aug. 1. HHS Secretary Kathleen Sebelius told reporters on a conference call that the payments will average $151 per family. Under the health care law (PL 111-148, PL 111-152), insurers in the individual and small group markets must spend 80 cents of every premium dollar on medical benefits or quality improvements and 20 cents on administrative costs. The medical loss ratio (MLR) standard for large group plans is 85/15.

Insurers not only have to send the money, but they also have to send policyholders an explanation of why they didn't meet the MLR standard. Such statements must go out with the checks. Even insurers who did meet the standard have to say so in future communications with their customers.

"Before the law was passed,'' Sebelius said, "some insurers reported spending as little as 60 percent of the premium dollar on care." That meant that insurers "saw record profits, while families saw record premiums," she added.

The announcement was one of a series of conference calls that Sebelius and other HHS officials have been conducting in the past weeks while the nation waits for the U.S. Supreme Court to rule on the constitutionality of the overhaul. A ruling is expected next week, the last week of the high court's term. White House and HHS officials have consistently refused to say what would happen to some of these benefits if the health care law is struck down. They wouldn't say whether the rebates would still go out if the justices find that the law is unconstitutional.

Not everyone will actually get a check. HHS officials outlined several ways people could see their MLR benefit:

• a rebate check in the mail;
• a lump-sum reimbursement to the same account they used to pay the premium, if by credit card or debit card;
• a reduction in their future premiums;

If someone is part of a large employer-sponsored group, he or she would receive a pro-rated benefit, meaning if they paid 20 percent of the cost of the premium they would get 20 percent of the rebate value.

Also, last year, Internal Revenue Service officials said the rebate benefit would not be taxable.

HHS officials said they don't yet have a list to release of which insurers met the MLR standard and which did not.

Michael Hash, acting director of the Center for Consumer Information and Insurance Oversight (CCIIO) said two-thirds of policyholders, about 67 million people, were insured by a company that did meet the 80 percent threshold in 2011.

The MLR standard only applies to fully insured products; self-insured plans are not affected.

By John Reichard, CQ HealthBeat Editor

June 19, 2012 -- Lawmakers joined a top outside adviser to the Medicare program last week in suggesting that a demonstration program to move "dual eligibles" into managed care plans is moving too fast. The growing criticism of the pace of the test, set to be launched in January, could force Centers for Medicare and Medicaid Services (CMS) officials to scale it back.

Another potentially major Medicare change—redesigning the benefits for all beneficiaries—also drew a cautious if not cool response at a House Ways and Means Health Subcommittee hearing. Lawmakers expressed concern about redesigning benefits for all Medicare enrollees to cap their out-of-pocket costs while at the same time establishing a surcharge on Medigap coverage. Medicare Payment Advisory Commission (MedPAC) is behind that idea. But lawmakers worried about the cost impact on seniors of taxing Medigap plans. They wondered whether it would cause beneficiaries to skip needed medical care because they either would drop their gap policies or if they kept them would have to pay higher premiums and then have less money for other medical expenses.

MedPAC Chairman Glenn Hackbarth told the lawmakers that the demonstration program to test enrolling those eligible for both Medicare and Medicaid in managed care plans is growing too large to be useful and should be developed more slowly and on a smaller scale.

Health Subcommittee Chairman Wally Herger, R-Calif., agreed with that assessment. He said after the hearing that the demonstration program to be launched by the states under the direction of CMS needs to be more limited. Herger was non-committal about whether he would pursue legislation to make that happen.

The so-called duals demo is one of the most closely watched recent developments in health policy. The duals market is huge, accounting for a big share of Medicare and Medicaid spending. Duals themselves are extremely vulnerable, accounting for the sickest and frailest population in Medicare.

The demo holds the allure of both improving care of the duals by better coordinating their complex treatment services and of lowering the costs of caring for them.

But controversy is growing over tactics under consideration by states for moving the duals into managed care. Under one such strategy, "passive enrollment," individuals are enrolled in a specific plan without their approval, but with the right to opt out if they decide they don't want to be in the plan. Another concern is about a lack of measurement tools to accurately assess the quality and cost of care in the demonstration program.

Hackbarth noted that state interest in the demonstration program has mushroomed to the point that more than three million of the 9.9 million duals could be enrolled in the demo. "That is not by our reckoning a demonstration project but a program change," he said.
Moving at a slower pace with a stronger measurement system than now exists would be better, he said. It would allow changes to be better understood before they are adopted widely, he suggested.

"We think real care needs to be taken before anyone is passively enrolled," Hackbarth added. The concern is that a dual moved into a new plan will lose access to doctors, drugs, and other treatments not included in the new plan.

Hackbarth said that if a state chooses the passive enrollment route it must take pains to clearly communicate not only to the dual but also to his or her doctor and family the switch to the new plan so care is not disrupted with potentially dangerous consequences. Hackbarth also suggested that for a period of time existing doctors may have to be included in the new plan's network in order to assure a safe transition.

Beneficiaries Need Choice

Republicans Diane Black of Tennessee and Vern Buchanan of Florida joined Herger in expressing concern about the pace of the demo and the need to preserve the rights of beneficiaries to choose their care.

Herger said better coordination of the care of the duals is clearly needed, "but I am concerned that the administration's unilateral actions to address this population's needs may undermine the protections guaranteed to all Medicare beneficiaries."

Democrats weren't anxious to criticize the administration but they too have concerns. The panel's top Democrat, Pete Stark of California, told Hackbarth in his opening statement that he looked forward to hearing his ideas for improving the demonstration. He also took a swipe at Republicans and how the duals would fare under their proposals for overhauling Medicare. "This is a large and vulnerable population that is associated with high program costs," Stark said. "I am extremely wary of the Republicans' solution to give them all a voucher."

State Medicaid directors have been enthusiastic about the demo as have many policy analysts anxious to test better coordinated care. But providers such as the Federation of American Hospitals have said the demo threatens the rights of duals to choose their providers.

MedPAC recommended the other potential change, the benefit redesign, in its June report to Congress. The added charge for Medigap plans would lead a number of people who now have the supplemental coverage to drop it, thus leaving them more exposed to the costs of care and more judicious about seeking treatment, the commission says. It says that Medigap encourages overuse of services. At the same time, beneficiaries would be protected financially in that out-of-pocket expenses would be capped.

But Stark expressed worry that Congress would choose to establish a charge for Medigap plans as a cost saving measure but not cap out of pocket expenses. Buchanan asked whether seniors would drop the coverage and skip needed care, as did Rep. Sam Johnson, a Republican from Texas. Johnson said he didn't like the idea of making Medigap coverage more costly.

But the MedPAC proposal would generate Medicare savings at a time when it needs to find ways to economize. And Hackbarth suggested that seniors would save money in the long run from the cap on out-of-pocket costs.