Backup plans if individual mandate is struck down

“If the U.S. Supreme Court strikes down health reform’s individual mandate and leaves the rest of the law in place — what happens next?

The backup plan could be automatic enrollment in your employer’s health insurance, a lot like the way you get signed up for the 401(k) plan.

If Congress decides to act to repair that hole in the Affordable Care Act — and that’s a big if — an auto-enrollment requirement is the option that’s getting the most attention from health policy experts. It’s a more low-key way to reach at least some of the uninsured people who would be covered by the individual mandate.

It’s an idea that could even appeal to Rep. Paul Ryan (R-Wis.) — because it’s straight out of the health reform alternative he sponsored in 2009.

“Compared to the relatively weak tax penalties with the mandate, aggressive auto-enrollment like what was talked about in 2009 could work pretty well,” said Don Taylor, a health policy professor at Duke University who has written extensively about Ryan’s 2009 bill, the Patients’ Choice Act, at The Incidental Economist blog. “In policy terms, there are things that can be done. Of course, politically, it’s a very different story.”

The Patients’ Choice Act proposed setting up auto-enrollment procedures at emergency rooms and state departments of motor vehicles and through state tax returns and workplaces. People would have been enrolled in private plans being sold on state exchanges.

Although the bill allowed individuals to opt out, research has shown that auto-enrollment, particularly in the case of individual retirement accounts, has successfully boosted participation from people who wouldn’t take the initiative on their own. And Congress will need high participation from healthy people if they want to keep one of the most popular parts of the health reform law: the guaranteed coverage for people with pre-existing conditions.

The individual mandate would require nearly all Americans to purchase health insurance or pay a tax penalty, starting in 2014. It’s one way to get more healthy young people and others on insurance rolls to help pay for expanded coverage of the sicker population.

It’s also the most politically unpopular element of the law.

A Supreme Court decision to strike the mandate could bring back other ideas like auto-enrollment, which enjoyed some conservative support — as did the individual mandate — before the Affordable Care Act passed, some health policy experts say. And Congress would come under considerable pressure to act.

Health care economists disagree on how effective the mandate would be, but they are united on at least one point: If the mandate goes and insurance companies still have to cover everyone with pre-existing conditions, a tidal wave of uncertainty — that great fear of actuaries — will crash down on the insurance industry and people’s premiums could shoot up to frightening levels.

That’s only a hypothetical, since the court could rule that the pre-existing condition coverage — along with a provision that bans insurers from basing premiums on people’s health status — has to go away if the mandate is unconstitutional. But if it gets rid of only the mandate, calls for action will echo through the halls of Congress.

“If it’s as bad as I think it’s going to be — and I think the uncertainty it adds would be very, very bad — then we’ll need to try something else,” said Jon Gruber, an architect of the Massachusetts health reform law that is a model for the Affordable Care Act. “It would become a self-fulfilling prophecy. The actuaries would imagine the worst case and start projecting high premiums across the board.”

Gruber believes the individual mandate is the tried-and-true way to move people onto insurance rolls, but he would choose auto-enrollment as the second best option. He warns, however, that a loss of the mandate would be a major shock to a load-bearing piece of the health reform law.

Gail Wilensky, who ran Medicare and Medicaid under President George H.W. Bush, said she thinks a combination of carrot-and-stick policies could do a better job of moving free riders into the insurance market than the mandate — “a terrible piece of policy,” she said.

Auto-enrollment could do a better job, Wilensky said, as could another option: strict late-enrollment penalties, in which people pay higher premiums if they don’t enroll in coverage as soon as they’re eligible. That’s an approach similar to those that have shown results in Medicare Part B and Part D.

Another alternative comes from Princeton sociologist Paul Starr, who was a senior health care adviser to President Bill Clinton. Under his proposal, people would have three options, not including the poor, who would be covered under health reform’s Medicaid expansion.

They could buy insurance, with subsidies if they qualify. They could pay an annual tax penalty for going uninsured. Or they could opt out with no penalty — but they couldn’t opt back in for five years. And those who opt out wouldn’t have the protections under the health reform law, meaning any insurance — if they could get it at all — could be prohibitively expensive.”