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Where Would Consumers, Insurers Land if ACA Is Struck Down?

California officials have been quick and confident in their assertions that the state should move forward with health care reform no matter what the Supreme Court decides about the Affordable Care Act.

But what about insurers?

The reform law promised up to 30 million new customers for health insurance — more than six million in California. If the Supreme Court rules that requiring citizens to have insurance is unconstitutional, where will that leave insurers?

“There are too many potential variables to speculate on the future, but it is well accepted by analysts from left to right and in between that insurance demands a balanced pool of risks,” said Patrick Johnston, president and CEO of the California Association of Health Plans.

“The policy goal of guaranteeing the issuance of health insurance to anyone who applies without regard to health status is undermined if people can chose to buy insurance only when they need the benefits,” Johnston said.

Dave Jones (D), insurance commissioner of California, agreed.

“The only way you can make guaranteed issue work is to get everybody into the pool,” said Jones, who prefaced his remarks with a vote of confidence that the reform law will emerge unscathed from the Supreme Court.

“It’s premature to write the obituary of the Affordable Care Act,” Jones said. “I believe the court will uphold it.”

Consumer Protections in California

Betsy Imholz, director of special projects for Consumers Union, said Californians are in a relatively good position to weather the fallout if part or all of the ACA is struck down.

“A lot of the things we’ve done in California have been crafted cleverly to be separate and not tied to federal health reform,” Imholz said. “Some are in the middle and some are closely tied to the ACA.”

During the past two legislative sessions, several health care-related bills have been drafted, passed and signed into law.

New laws range from requiring insurers to cover specific services to establishing California’s own medical loss ratio for insurance companies.

“In legislation and in policy language, both the DMHC (Department of Managed Health Care) and DOI (Department of Insurance) have specific areas of leverage,” Imholz said.

“I don’t want to be Polly Anna about it, but I think that all is not lost if the ACA comes down. We’re going to keep going. We’ll find a path. I think public thinking to some extent has evolved and there is now a public will and political expectation that things will change for the better,” Imholz said.

Worst-Case Scenarios for Insurers

The worst-case scenario for insurers could be the elimination of the individual mandate but retention of the provisions that require insurers to accept all customers, regardless of medical condition and age.

“Guaranteed issue and individual mandate are linked,” Johnston said. “If they are decoupled, it is more likely that California will experience what New Jersey and New York (which passed state versions of guaranteed issue laws) have seen, namely that premiums rise because people with serious medical conditions buy insurance and utilize the benefits, while too many healthy people decline to buy coverage knowing that they can purchase it at any time without pre-existing conditions affecting their eligibility,” Johnston said.

Johnston said if the Supreme Court strikes down all or part of the ACA and California considers legislating its own version of health reform, it would make more sense to include an individual mandate along with guaranteed issue like Massachusetts did.

Jones agreed, but added that California should learn from Massachusetts that mandates and guaranteed issues won’t keep prices down unless the state has some regulatory clout.

Jones predicted a couple of things will happen no matter what the Supreme Court rules: California will move forward with reform and insurance rates will increase.

“Regardless of how the court rules, insurance rates will go up,” Jones said. “In fact, the individual mandate might make it worse. Once you require someone to buy a product, you give companies that have a monopoly on that product carte blanche to raise prices.”

“That’s why I believe a big missing piece in the ACA and in California is the authority to deny unreasonable rate increases,” Jones added.

“We’re going to have increasing insurance rates that will ultimately undermine progress unless we can get the authority to deny unreasonable rate increases,” Jones said. “That’s exactly what happened in Massachusetts. They passed their reform law in 2005 and prices went up and up and up. Finally in 2009, the state decided it needed the authority to regulate price increases.

“That’s the best evidence out there. It took them years to get to that conclusion. California should do it now, no matter what happens to the ACA.”

Before he was elected commissioner, Jones, then a member of the California Assembly, wrote a bill to give the state rate approval authority. It was defeated in the Senate in 2010. Last year, a similar bill, AB 52, by Assembly members Mike Feuer (D-Los Angeles) and Jared Huffman (D-San Rafael), was passed by the Assembly and by the Senate Health Committee before it died in the Senate.

Now, a not-for-profit consumer advocacy organization, Consumer Watchdog, is collecting signatures to get an initiative on the November ballot that would grant authority to the state insurance commissioner to regulate health insurance rates.

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