WASHINGTON - It would be the health insurance industry’s worst nightmare: if the Supreme Court strikes down the mandate that individuals obtain coverage but leaves the rest of President Obama’s signature law intact.
Most concerning, industry representatives say, would be the requirement to cover people with preexisting medical conditions without the ability to charge higher premiums for the sickliest.
Without the premiums of healthier people brought into the system by the mandate, individual insurance premiums could rise up to 40 percent, making it prohibitively expensive, according to several analyses. Tens of millions more would remain uninsured - the very problem health reform tried to address.
“Health plans are nervous,’’ said Jon Kingsdale, a health care consultant who used to head Massachusetts’ insurance exchange and is now working with other states to set up a similar model. “People would inevitably blame the health plans for increasing premiums. And the market will shrink because fewer people would be able to afford it.’’
Several justices expressed concern for insurance companies during Wednesday’s arguments over how much of the law could stand if the court deemed that the mandate to have insurance is unconstitutional. A ruling is expected in late June.
Justice Samuel Alito Jr. grilled the deputy solicitor general on how insurance companies were supposed to make up an estimated $350 billion in losses if they were still expected to provide coverage for those with preexisting medical conditions.
Justice Anthony Kennedy indicated that it would be an “extreme exercise of judicial power’’ were the court to strike down the mandate but allow the rest of the law to remain “to impose a risk on insurance companies that Congress had never intended.’’
Justice Antonin Scalia worried about bankrupting insurance companies. Chief Justice John Roberts Jr. asked whether insurers, in bearing a greater cost without revenues from the mandate, would have to end up in court at a later point to ask that the rest of the law be stricken.
Insurance representatives, while appreciative of the justices’ concerns about the financial consequences to their industry if only the mandate was struck down, said the justices should be at least as worried about their actions’ impact on individuals.
Missing from Alito’s analysis, said James Roosevelt Jr., president and chief executive of Tufts Health Plan, is “the consequences to the people who buy insurance, particularly small businesses and individuals.’’
“After the transitional period, they’re the ones who fully suffer the consequences,’’ Roosevelt said. “If only the mandate goes down and you still have the provision saying you can’t charge people more for preexisting conditions and you still have to cover them, insurance companies will have to pass through the costs to anyone who buys insurance, because they won’t have the healthy people to offset it.’’
What is at stake, said Karen Ignagni, president and chief executive of America’s Health Insurance Plans, is the “viability of the market reforms,’’ and everybody - not just insurers - stands to lose.
Her organization is now focused on making sure policy leaders understand what occurred in the eight states that tried requiring insurers to cover people, regardless of their medical histories, without the benefit of a mandate.
In New York and New Jersey, premiums skyrocketed as young people fled the market. In Vermont, Maine, and New Hampshire, insurance companies had little choice but to stop selling individual insurance.
The Congressional Budget Office has estimated that 16 million fewer people would be insured without the mandate.
Those nightmare scenarios painted by insurance companies and many others wedded to the mandate are extreme, said Gail Wilensky, a health economist who oversaw Medicare and Medicaid under President George H.W. Bush.
“People are talking as though the only reason people buy insurance is because they have a mandate, which is ridiculous,’’ Wilensky said.
Most individuals will still obtain insurance through their employers, and many will receive government-subsidized insurance under the Obama law. She fears the relatively light penalties on individuals who choose not to get coverage weaken the mandate as a way to bring healthy people into the system.
If the mandate were to be ruled unconstitutional, a better way to incentivize people to buy insurance sooner rather than later would be to establish a limited annual enrollment period, and then impose a penalty on those who wait too long before deciding to enroll, Wilensky said.
Wendy Parmet, a law professor at Northeastern University who filed an amicus brief supporting the individual mandate, said she was disturbed by some of the justices’ hand-wringing over insurance company finances.
“There was no concern expressed, which I find remarkable, that not severing the mandate and striking down the whole act would create harm to millions of individuals,’’ Parmet said. “There was a little bit of judicial myopia there.’’