Supreme Court Decision & Health Insurance Consequences

This week it is expected that the United States Supreme Court will decide whether to eliminate the ‘individual mandate’ which would require all Americans to buy health insurance or be fined for noncompliance. It is most likely that the Supreme Court will overturn the mandate. But what does this mean for the Healthcare Reforms? To many in support of healthcare reforms, it is a total stripping of all President Obama’s plan had to offer, and weakens the plan, perhaps the entire healthcare economic system.

As the plan stands currently, without being overturned, all Americans must purchase health insurance. Since that is the directive, it was written into the plan that insurance companies must charge the same amount to all people whether they are healthy or sick, since it may have seemed unfair to demand people to have to get insurance and them have to pay a lot more money because of preexisting conditions compared to a person who has to get insurance but is a lot healthier. In the past, insurance companies would reduce costs to a person who is in better health to those of lesser health. But as the Health Care Reform Act requires insurance companies are required to charge all people the same amount for coverage regardless of their current or past health history. So how do these two items relate 1. ‘Individual Mandate’ being overturned and 2. Health Insurance Costs being the same to all people of differing health status? Well, overturning the ‘individual mandate’ only overturns the portion of the Healthcare Reform Act that requires all Americans to have purchase health insurance; it doesn’t change the fact that insurance companies have to give flat rate costs for coverage to all Americans. Now, this sounds good right off the bat, but there are some huge consequences lingering in the background. Since it doesn’t matter what your health status is when you get insurance why would you get insurance until you actually needed it? Sounds good right? Maybe, not. The analogy that has been recently used is this, if the only time people bought car insurance is when their car was totaled and laying in the middle of the road, people would have no incentive to purchase car insurance. Healthy people would have no incentive to keep giving money to insurance companies and health insurance companies would be bleeding out costs due to only receiving money when people are in need of health care assistance, resulting in adverse selection. Healthcare companies would have to raise premiums to those who actually needed care and most health economists believe the entire system could crumble quite rapidly. So what is the answer? Healthcare Reforms? Keep the system the way it currently is? These type of nationwide problems and debates as well as healthcare economic discussions are what students at Baylor University in the MBA of Healthcare talk about in class. I want to know what the Nation outside of Texas thinks about these issues, because we need to have a lot more national discussions to be able to paint a more forthcoming, complete and honest picture.

Sources:

1.      http://www.nytimes.com/2012/06/20/business/economy/a-health-care-mandate-that-might-not-matter-economic-scene.html?_r=1

2.      http://www.washingtonpost.com/business/health-care-overhauls-plan-to-expand-coverage-leaves-millions-behind/2012/06/19/gJQA5yaanV_story_2.html