Health Care Blog

Today’s Health Care Court Ruling

Today’s narrow ruling in Virginia on the constitutionality of a provision of the Affordable Care Act is just one of many recent rulings on similar cases that have come down in recent months.  Since the law passed, opponents of reform have filed more than 20 different legal challenges.   Judges have already granted the Administration’s motion to dismiss 12 of these cases.   And in two cases, federal judges looked at the merits of the opponents’ arguments, determined that the Affordable Care Act is constitutional and upheld the law.

We disagree with the ruling issued today in Virginia and the Department of Justice is considering its appeal options.

We are pleased that Judge Hudson agrees that implementation of the law will continue uninterrupted.   In the nine months since the health reform law was passed, we’ve made tremendous progress to strengthen our health care system, including lowering costs and implementing a new patient’s bill of rights to end some of the worst insurance company abuses. That work continues. And we’re confident that when it’s all said and done, the courts will find the Affordable Care Act constitutional. 

History and the facts are on our side.  Similar legal challenges to major new laws -- including the Social Security Act, the Civil Rights Act, and the Voting Rights Act -- were all filed and all failed.  Contrary to what opponents argue the new law falls well within Congress’s power to regulate economic activity under the Commerce Clause, the Necessary and Proper Clause, and the General Welfare Clause.

Opponents of reform claim that the individual responsibility requirement – the requirement that all Americans carry a minimum level insurance by 2014 –exceeds Congress’ power to regulate interstate commerce because it penalizes economic “inactivity.”   Make no mistake -- individuals who choose to go without health insurance are actively engaged in economic decision making – the decision to pay for health care out-of-pocket or to seek uncompensated care.  Every year millions of those who have chosen to go without health insurance actively seek medical care, which is evident in the billions of dollars spent on uncompensated care every year.

The Affordable Care Act came into being precisely because of the interconnectedness of our health care costs.   People who make an economic decision to forego health insurance do not opt out of the health care market, but instead shift their costs to others when they become ill or are involved in an accident and cannot pay.  Those costs – $43 billion in 2008 alone – are borne by doctors, hospitals, insured individuals, taxpayers and small businesses throughout the nation.  This cost-shift added on average $1,000 to family premiums in 2009 and roughly $410 to an individual premium.

This concept is clearly seen in other areas of commerce.  For example, in most states, drivers are required to carry a minimum level of auto insurance. Accidents happen and when they do, they need to be paid for quickly and responsibly. Requiring drivers to carry auto insurance accomplishes this goal. Similarly, the Affordable Care Act, through the individual responsibility requirement, will require everyone to carry some form of health insurance since everyone at some point in time participates in the health care system, and incur costs that must be paid for.

It’s no surprise then, that President Reagan’s Solicitor General Charles Fried recently wrote, “the health care law’s enemies have no ally in the Constitution.” Two federal judges that recently ruled on the challenge to the constitutionality of the reform law in Michigan and Virginia agreed. These lawsuits were dismissed, with the federal judge in Virginia concluding “how and when to pay for health care are activities…in the aggregate…substantially affect[s] the interstate health care market.”   

Two federal judges have agreed with this argument. In an earlier ruling in the Western District of Virginia, a federal judge wrote:

“I hold that there is a rational basis for Congress to conclude that individuals’ decisions about how and when to pay for health care are activities that in the aggregate substantially affect the interstate health care market…Nearly everyone will require health care services at some point in their lifetimes, and it is not always possible to predict when one will be afflicted by illness or injury and require care…Far from ‘inactivity,’ by choosing to forgo insurance, Plaintiffs are making an economic decision to try to pay for health care services later, out of pocket, rather than now, through the purchase of insurance. As Congress found, the total incidence of these economic decisions has a substantial impact on the national market for health care by collectively shifting billions of dollars on to other market participants and driving up the prices of insurance policies.”

The Affordable Care Act also bans insurance companies from discriminating against people with preexisting conditions.   However, unless every American is required to have insurance, it would be cost prohibitive to cover people with preexisting conditions.  Here’s why:  If insurance companies can no longer deny coverage to anyone who applies for insurance – especially those who have health problems and are potentially more expensive to cover – then there is nothing stopping someone from waiting until they’re sick or injured to apply for coverage since insurance companies can’t say no.  That would lead to double digit premiums increases – up to 20% – for everyone with insurance, and would significantly increase the cost health care spending nationwide.  We don’t let people wait until after they’ve been in a car accident to apply for auto insurance and get reimbursed, and we don’t want to do that with healthcare.  If we’re going to outlaw discrimination based on pre-existing conditions, the only way to keep people from gaming the system and raising costs on everyone else is to ensure that everyone takes responsibility for their own health insurance.   

There have been many rulings on court cases regarding health reform and we know there will be many more. In the end, the Affordable Care Act will prevail and the American people will enjoy the benefits of reform.

Stephanie Cutter is Assistant to the President for Special Projects

The Truth About Health Care Waivers

In recent days, there has been some confusion about the ability for businesses and insurance plans to receive blanket waivers from following the new consumer-focused rules of the road in the Affordable Care Act – the health reform law.  As we continue to move forward with implementation, and work with the business community, insurance industry, state leaders, consumers and everyone else with a stake in improving our health care system, it is important that we set the record straight.  

Here are the facts:

Today, over 165 million Americans get their health insurance through an employer—comprising nearly 70 percent of America’s insured population.  Employers offer health insurance as a way to attract the best and brightest candidates in the work force.   Employer-based insurance is the most common and efficient source of insurance coverage, which is why the Affordable Care Act takes steps to strengthen the employer-sponsored insurance market and make it easier and affordable for businesses to offer coverage to their workers.

However, not all coverage offered by employers is the same.  Employers who hire full time middle to high income workers tend to offer more comprehensive plans that cover essential health benefits (hospital care, physician visits, preventive services, among others) and provide sufficient security against financial risk of illness and accidents for their employees.  These employers offer more comprehensive coverage because workers are more likely to be able to pay their share of the premium. Workers at these firms are also more likely to work at the company for an extended period of time, making it good business sense for employers to invest in their workers’ long-term health since good health is linked to increased productivity. The law ensures this system continues, while helping to lower health care costs and providing financial support for employers who offer coverage to their retirees too young for Medicare through the Early Retiree Reinsurance Program.

Unfortunately, many workers don’t have this kind of quality coverage. Employers who hire lower wage, part time or seasonal workers are more likely to offer limited benefit plans.  Retail or chain restaurant employers frequently offer limited benefit plans that contain less comprehensive coverage and annual dollar limits on how much workers can receive in health coverage. The premiums for these limited benefit policies (known as mini-meds) are significantly lower than for policies with comprehensive coverage and are more affordable for lower wage workers and their families. In exchange for the low premiums, these policies generally come with high deductibles and annual dollar caps as low as $2,000.  In addition, in many cases, employees are paying the full cost of the insurance policy, with no help from their employer.