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Sept. 20, 2012 Volume 34, No. 5

Law professor warns of potential problem in the Affordable Care Act

Constitutional Quandary

Individual mandate may be undoing of legislation

The Affordable Care Act is doomed. 

That was the takeaway point offered Monday by University of Missouri law professor Thom Lambert at a panel discussion about the recent Supreme Court ruling on the controversial health care legislation. 

Lambert was one of four panelists to speak at the hour-long discussion in the Hulston Hall Courtroom. Also taking part were Josh Hawley, associate law professor; Phil Peters, law professor; and Stan Hudson, associate director of the MU Center for Health Policy. 

The event took place on the 225th anniversary of Constitution Day, which honors the signing of the U.S. Constitution by the Founding Fathers.

In upholding the requirement for everyone to buy health insurance — the central feature of the 2010 law overhauling the nation’s health insurance system — the Supreme Court this summer said that Congress could not force everyone to buy insurance based on its power to regulate commerce, but it could tax people who chose not to buy insurance.

That’s a distinction with a big difference, Lambert argued to a standing-room-only crowd of more than 100 people.

Taxes are constitutionally different than penalties, Lambert said. Penalties, such as a speeding ticket, are relatively large sums; they are designed to alter behavior. Because the Affordable Care Act’s penalties for not buying insurance are relatively small sums, the court ruled that they’re not penalties but taxes.

The impact of basing the mandate’s constitutionality on that argument, Lambert contended, is that to be constitutional, the enforcement of the individual mandate must forever be too weak to be effective. Without an effective mandate, the law’s provisions for requiring health insurance companies to cover people with pre-existing health conditions at the same cost as their healthy peers fall apart.

Crunching the numbers, Lambert concluded that families with incomes of $45,000 or more would save money by not buying insurance until they really needed it. Economists call that adverse selection. Lambert called it the “What would young, healthy people do?” approach. 

If healthy people remove themselves from the insurance rolls (because they know they can return if they need medical care), the cost of providing insurance to everyone else goes up fast, making it likely healthy people will drop their coverage. “It’s a really pernicious cycle,” Lambert said. 

— Erik Potter