The individual mandate as contained in the health reform law will continue to be the subject of controversy until the U.S. Supreme Court makes a final ruling on its constitutionality. The lower courts are divided, with three supporting the mandate and two ruling against, which signals the very real possibility that the provision could be struck down.
Yet the individual mandate is a critical fixture of the Patient Protection and Affordable Care Act (PPACA) because it spreads risk throughout the market and prevents adverse selection in any one sector. That is because requiring all people to purchase insurance—not just those who need coverage—is the only way to ensure financial viability. Without this mandate, the Obama administration will be scurrying to find a way to structure a plan to save health reform.
State-by-state flexibility seems to be emerging as the solution. In an effort to accommodate states and attempt to make health reform more palatable to Republican governors and states facing budget crises, the Obama administration announced support for bi-partisan legislation in Congress that allows states to opt-out of the individual mandate or to move certain Medicaid eligibles into a state-run exchange beginning in 2014.
The proposed legislation could mean that health reform would no longer be a one-size-fits-all approach as intended under the original legislation. Whether or not this move by the White House is significant is unknown at this time. The current law already enables the HHS Secretary to grant states waivers under fairly prescribed conditions beginning in 2017. For example, the opt-out coverage must be at least as comprehensive and affordable as that offered in the exchange and will cover the same number of people.
In addition to accelerating the waiver provision to 2014, the proposed legislation could grant states even greater flexibility down the road. HHS can also choose to interpret this broadly or conservatively.
All this is likely to be determined only after the 2012 presidential election. But at the very least, plans and providers should expect that states will now have broader discretion in designing benefits and how they are delivered.
It’s hard to predict the future healthcare landscape—especially if more flexibility is given to states to implement their own approach to coverage. One thing is clear: as health reform legislation goes through the implementation process, we can expect adjustments to the law. Plans and providers must pay attention and anticipate these unknown challenges in order to best prepare for the future and remain competitive.