White House Concedes Individual Mandate is Not Severable

Observers are anticipating a decision on the motion for summary judgment by Judge Henry Hudson in the Virginia AG’s challenge to the Affordable Care Act soon, perhaps next week — and perhaps in advance of Thursday morning’s oral arguments on the summary judgment motion in the 20 AG lawsuit in Florida. I will be attending that hearing in Pensacola, but understand that laptops are not allowed in the courtroom, so I won’t be able to live blog.

In a briefing of White House reporters yesterday, anticipating the forthcoming decision, the White House issued a fact sheet conceding that, should the individual mandate be held unconstitutional, the regulations being imposed on insurance companies “would” also fall:

The Affordable Care Act also bans insurance companies from discriminating against people with preexisting conditions beginning in 2014 (In 2010, insurance companies were banned from discriminating against children). 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 of health care. 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. If we don’t, then we will go back to the days of allowing insurance companies to deny coverage to people with pre-existing conditions.

If the constitutional challenge to the Affordable Care Act’s individual responsibility requirement ultimately prevails, it would mean that provisions preventing health insurance companies from discriminating against people with pre-existing conditions would also be invalidated by the court because the two are inseparably linked. If insurance companies are required to cover those with pre-existing conditions, who are potentially more expensive to cover, without requiring everyone—both sick and healthy people—to have insurance, premiums will increase rapidly. Similarly, other provisions – including banning insurers from discriminating based on health status, age and gender – would also fall.

For some time, I have been making the same argument concerning the implication of Congress not including a severability clause in the Act. See here. So, while I am little surprised that the White House would concede this in advance of a ruling, I concur in its assessment of this issue.

At the same time, the White House said this too:

However, many parts of the new law would remain intact. While the law does not include a severability clause, courts have a constitutional obligation to preserve as a much of a statute as possible. Portions of the law such as the new provisions that expand access to Medicaid and create Exchanges –– new competitive marketplaces where consumers and small businesses can shop for private coverage giving them market power similar to large employers and permits easy comparison of available options based on price, benefits, services, and quality –– will be unaffected by the rulings in these cases. Other provisions that would remain effective include tax credits for small businesses and rules that will strengthen Medicare by closing the prescription drug coverage gap known as the donut hole and extend free preventive care to Medicare beneficiaries.

I have not given the severability of these other provisions much thought, but the White House could well be right here too. I just do not know.

So, if the mandate is held unconstitutional, and the White House is right that it is not severable from the insurance company regulations, then the remaining question is whether Judge Hudson will issue an injunction staying the operation of the relevant portions of the act. (And if so whether the injunction will be upheld by the Court of Appeals or the Supreme Court.) All these questions about the Virginia challenge will soon be answered.

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