Thursday, March 15, 2012


Admit it, you thought I was talking about March Madness, right? The U.S. Supreme Court is set to hear arguments later this month regarding the constitutionality of the Individual Mandate.  If you recall, the individual mandate is that provision in PPACA (Health Reform) that states all people must have individual medical coverage or face a fine.  How the outcome could affect the way employers offer medical coverage could go several different ways.

If the Mandate is ruled constitutional, health reform will continue on its path, states will continue to set-up their exchanges and employers will need to make decisions whether to continue to offer coverage or send employees to the exchanges or a combination of both.  Employer groups of under 50 employees will see little or no monetary adverse consequence to sending employees to the exchange or not because there are no penalties to do so.  If the employer has over 50 employees, not offering some form of minimal essential coverage could cause fines and penalties levied on them.  There are decisions, especially for employers under 50 employees, if its financially prudent to shut down their medical plans and send all employees to the exchanges.  There are schools of thought that for some employers, in order to stay competitive, they will need to continue to offer employer sponsored coverage.

If the Mandate is ruled unconstitutional there is no requirement for employees or anyone else to elect medical coverage.  Since the individual mandate is a guard against "adverse selection" and allows risk to be spread among everyone, it could potentially be the death of the health reform law as it is written.  Since there are no pre-existing condition exclusions and individuals would be able to come onto plan when they wanted, mostly the people electing coverage would be those that needed it.  In other words there is no incentive, or dis-incentive not to carry coverage.  So the risk pool would be made of mostly sick people and eventually would make the cost of coverage unaffordable leaving us in a much worse place then we are now. 

If the individual mandate was removed, other provisions like no pre-existing condition limitations may need to be adjusted to keep people from hopping on-plan simply when they need coverage.  Some thoughts could be limited open enrollment periods, higher premiums for those outside of this period, etc. 

In all, health reforms are needed.  Forcing people to carry coverage may or may not be a good thing.  As far as employers are concerned there is much to keep our eye on in the upcoming months as we draw closer to full implementation of health reform.