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Individual Mandate and Consumer Protections Must Stay Together, DOJ Tells Justices

By Jane Norman, CQ HealthBeat Associate Editor

January 27, 2012 -- The Obama administration on Friday, in a brief filed with the U.S. Supreme Court, resisted arguments that the entire health care law should be struck down if its individual mandate is found unconstitutional.

Friday was the deadline for the Justice Department to file a brief with the high court on the issue in the legal fight known as severability—how much of the law should die if part is found unconstitutional. It is one of four questions the justices will take up in four separate oral arguments scheduled for March 26-28.

In its brief, the DOJ said that arguments by plaintiffs in the suit—that the entire law (PL 111-148, PL 111-152) should fall if the requirement that all Americans have health insurance is found unconstitutional—is "not properly presented in this case and is meritless in any event."

If the requirement that all Americans should have insurance is found unconstitutional, the only other sections of the law that also should be struck are those dealing with guaranteed issue and community rating, the brief says.

Otherwise, "bizarre results" would occur, it says, such as the end of an extension of a pre-existing Medicare payment provision involving air ambulance services, more rigorous enforcement of drug pricing regulations, reauthorization of immunization programs and more.

The guaranteed issue section of the law requires insurers to provide coverage to all comers and prohibits exclusions for pre-existing conditions. Community rating bars plans from charging higher premiums except on the basis of how old the applicant is, where the applicant resides, whether the applicant uses tobacco, and whether the policy covers individuals or families.

The mandate, guaranteed issue and community rating must stay together, DOJ says. "Congress specifically found that in a market with guaranteed issue and community rating, but without a minimum coverage provision, 'many individuals would wait to purchase health insurance until they needed care,' " DOJ says. Congressional intent is a key issue for courts in considering this question of whether or not to break up the various pieces of the law.

"The guaranteed issue and community rating provisions ensure that all individuals have access to health insurance priced according to communitywide rates rather than individual risk factors," says the brief.

If the mandate and the consumer protections were to fall but the rest of the law remained intact, items such as the sweeping Medicaid expansion, the employer mandate and the premium tax credits would remain. The plaintiffs in the case have not shown how those provisions have to be tied to the individual mandate, the brief says.

Even before the Justice Department submitted its brief, the National Federation of Independent Business, one of the parties challenging the law, said in a written statement that it continues to argue that if the mandate is struck, the entire law should be as well, not just the consumer protections.

"What NFIB will argue is simple: The mandate to purchase health insurance is unconstitutional, and the health care law cannot exist if the court strikes down the unconstitutional mandate that holds it together," said Karen Harned, executive director of the NFIB Small Business Legal Center.

"To argue otherwise would be like arguing a house can stand after its foundation has crumbled," she said.

Twenty-six state governors and attorneys general and four individuals are also plaintiffs.

Actuaries' Amicus Brief

Also Friday, the American Academy of Actuaries in an amicus brief filed with the court did not take sides on the constitutionality of the law's individual mandate, or any other provision. But the nonpartisan professional group said it is sure of one thing: The law will fail if the mandate is severed from related consumer protections.

If the court eliminates the requirement that all Americans must have health insurance, it needs to also get rid of community rating and guaranteed issue, the brief says. If the requirement stays, those provisions also should stay.

"The academy files this brief for the sole purpose of informing the court of its judgment that, from an actuarial perspective, a decision invalidating only the individual mandate provision would impose an unsound regulatory regime on the American health-insurance market—a regime that Congress would not have intended," the actuaries say.

Health care premiums reflect the costs of a plan's enrollees, and rules that allow people to join who have higher costs will put upward pressure on those premiums, they say. Those increased premiums in turn discourage younger and healthier people from buying insurance.

"If the individual mandate provision were struck down but the guaranteed issue and community rating provisions were left intact, the ultimate result would be less stable health-insurance pools, higher premiums and a greater-than-projected number of uninsured Americans," thus undermining the law, the actuaries say.

That means the individual mandate is "a vital mechanism for keeping insurance pools fully stocked with lower-risk individuals," the brief says.

"However the court rules on the constitutionality of the individual mandate provision, therefore, the guaranteed issue and community rating provisions should stand or fall together with it," the brief concludes.

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