The Tale That May Sink the Affordable Care Act

Setting the record straight on young Americans, health insurance and the individual mandate.

Setting the record straight on young Americans, health insurance and the individual mandate.

[optional image description]

At first glance, the case against the constitutionality of the Affordable Care Act's Minimum Coverage Provision -- a.k.a. the individual mandate, requiring most Americans to obtain health insurance -- is a matter of abstract theory. Does Congress's power to regulate commerce afford it the power to create commerce? Should Congress be permitted to regulate "inactivity" -- i.e., a decision not to buy something?

The emotional center of the plaintiffs' written and oral argument, however, is a simple morality tale. The main characters are hordes of healthy young adults, forced to buy more coverage than they need in order to subsidize the coverage of older adults. The key verbs in the private respondents' brief against the individual mandate are force, conscript, compel, and commandeer. Free, strong, savvy young Americans are being robbed of their ability to assess risk, drive bargains, and buy just the right amount of insurance for their robust condition. The ACA, according to the brief, was "forcing healthy individuals to immediately start paying inflated premiums that exceed their actuarial risk."

That narrative seems to have resonated with the Supreme Court's conservative justices. In oral argument, Justice Alito asserted, "the mandate is forcing these people to provide a huge subsidy to the insurance companies for other purposes that the Act wishes to serve." Justice Scalia added, "These people not stupid. They're going to buy insurance later. They're young and need the money now."

The notion that the ACA forces young, healthy Americans to buy Cadillac insurance to subsidize older, sicker Americans is a resonant one, but it's false on three counts. The ACA provides bare-bones insurance options to anyone subject to the mandate. It allows insurance companies to charge older policyholders up to three times as much as younger ones. Finally, it's a myth that young Americans don't need or don't want health insurance.

None of these facts were pointed out during oral argument. Ironically, attorney Michael Carvin, arguing against the mandate, was the only participant to acknowledge, backhandedly, that the ACA enables adults under age 30 to buy bare-bones catastrophic insurance. In so doing, however, he materially misrepresented the mandate, stating "Congress prohibits anyone over 30 from buying any kind of catastrophic health insurance." In fact, the catastrophic coverage available to those under 30 is also available to anyone exempt from the mandate, which includes those who can show that buying coverage inside the exchanges would cause them financial hardship.

Moreover, for those subject to the mandate, the cheapest plans available in the state insurance exchanges offer a level of coverage that, according to the Kaiser Family Foundation, "most would consider catastrophic, providing protection in the event of an expensive illness while subjecting routine expenses ... to a relatively high deductible." The ACA of course subsidizes premiums on a sliding scale. Further, the ACA aims to enable as many Americans to fulfill the mandate through expanded Medicaid eligibility (provided to those with incomes as high as 133 percent of the poverty line) as by selling individual plans through the insurance exchanges.

In short, the ACA's drafters did their utmost to minimize the financial commitment required of citizens deemed able to afford coverage.

Nor does the ACA exploit young people to pay for the insurance of older Americans. University of Michigan economists Jill Horwitz and Helen Levy, writing on the Health Affairs blog, point out that the ACA allows "variation in premiums for age, geographic location, family size, and smoking status...Insurers may set premiums for older individuals as much as three times as high as those for younger individuals."

Finally, the perception expressed so trenchantly by Justice Scalia, that typical healthy young adults would regard the purchase of health insurance as unwelcome burden, is also a fallacy. An amicus brief in support of the mandate, filed by a coalition of 20 youth organizations calling itself the Young Invincibles, provided a wealth of data demonstrating that young adults overwhelmingly want health insurance; that they are disproportionately uninsured and underinsured; and that their lack of health insurance causes them bodily and economic harm.

In oral argument, one justice appeared to see both sides of the debate. Justice Kennedy cast the mandate as a troubling impingement on individual freedom while also acknowledging that "the young person who is uninsured is uniquely proximately very close to affecting the rates of insurance and the costs of providing medical care in a way that is not true in other industries." Recognizing the unique "proximity" of all to all in a national health-care market, Justice Kennedy might conceivably see the necessity for a mandate as narrowly construed as possible. He might even, as Justice Department Office of Legal Counsel alumnus Marty Lederman has suggested, lead a decision further narrowing the mandate, requiring that the purely catastrophic coverage offered to adults under 30 be made available to all.

The justices should recognize, however, the extent to which Congress imposed a "limiting principle" on itself by minimizing the mandatory financial burden imposed by the Minimum Coverage Provision.