Randy Barnett wrote his thoughts about severability in Texas v. U.S. over at Reason.com and here is my comment.

The individual mandate is an example of why I believe the Affordable Care Act was a bunch of dumb ideas that were poorly implemented. The individual insurance market as envisioned by the ACA depended on a carrot and stick approach. The carrot was affordable health insurance for the unsubsidized healthy people to lure them into the market willingly. This is how insurance companies make the money to pay for their unprofitable customers. The stick was the individual mandate. The individual mandate was designed to be scary, not effective. It would never have an influence on healthy customers like affordable health insurance. In 2010 individual insurance rates were already too expensive so healthy people made their adjustments. Some stuck with their grandfathered plans. Some went to alternative insurance products. Others dropped their insurance because they were exempt from the mandate because health insurance premiums would exceed 8.15% of their adjusted gross income. Insurance companies lost their best customers but were largely protected by the Risk Adjustment, Reinsurance, and Risk Corridor provisions. There is no free lunch.  Like all dumb ideas that are poorly implemented, the American government got stuck with the bill.


The only portion of the ACA that must continue to exist for the subsidized individual health insurance market to continue to exist is the Risk Adjustment, Reinsurance, and Risk Corridor provisions. If we want to continue to subsidize health insurance premiums for those people earning less than four times the federal poverty level then it will be born the general population rather than the unsubsidized healthy customers.  For the unsubsidized healthy customers, this is sweet revenge.  The individual mandate has always been a moot point.

Back in 2016, I wrote a post, The Health Exchange Transformation Is Almost Complete, in which I made the argument that the individual health exchange had a better chance of reverting back to a high-risk pool exchange than a market-based exchange. It all depended on the affordability of health insurance for unsubsidized healthy customers. If you do not keep your best customers, the government will be left holding the bag. When it comes to the individual mandate, the people who wrote the ACA were not that smart. The most important thing that matters to a customer who might get penalized is not the penalty but affordable unsubsidized health insurance. Affordable health care has always been the primary objective of the Affordable Care Act and the American people. Our politicians seem to have forgotten that aspect of the ACA. If the individual mandate has always been a moot point then severability has always been a moot point, too.

A Federal judge ruled that the Affordable Care Act is unconstitutional and I am not sorry. The Affordable Care Act has always been a bunch of dumb ideas that were poorly implemented. The only way the Affordable Care Act would be a “good first step” at reforming health care is if it provided affordable health care costs for everyone.  The Affordable Care Act has always been a great deal for doctors, hospitals, drug companies, and health insurance companies. It was a great deal for those who will never pay enough into the system to cover their health care. For the rest of us who pay for our health care costs, it didn’t provide a path to affordable health care costs. For healthy people buying health insurance in the individual health insurance market, the Affordable Care Act has always been a failure. There has never been a greater condemnation of the Affordable Care Act than healthy people opting out of the health insurance.

The health care industry has always been a hotbed for cronyism. So while those of us who pay for our health care struggle to find a way to pay for the same old insurance at a much higher price, the Affordable Care Act supporters have been doing their touchdown dance with their industry friends. The trouble with the Affordable Care Act is that you eventually run out of other people’s money and the only path forward is to focus on health care costs. The party is over!

It was not that long ago that there was general agreement amongst the health care policy wonks that the “mandate was considered necessary for the market to work“. In reality what they meant to say was that the market needed both the individual mandate and affordable, unsubsidized health insurance to work. The Affordable Care Act(ACA) supporters realized that they could not deliver expanded benefits and affordable, unsubsidized health insurance. Expanding benefits was more appealing to their political base so they chose to kill the one thing that was essential for the market to succeed, affordable health insurance. So while the individual insurance market rotted away our courts debated whether the individual mandate was a “penalty” instead of a “tax” while maintaining that it was a valid exercise of Congress’s power to “lay and collect taxes”. The idea that the individual mandate was not as important as everyone claimed must be a grating reminder to Supreme Court justices like Justice Roberts who went out of his way to rationalize its legality. I wonder if the Supreme Court Justices learned anything from this exercise in futility.

The Irony of Repealing The Individual Mandate As Part Of A Tax Cut Package

Now after the ACA has blown up the individual insurance market, our legislators find themselves in a strange predicament. They cannot pass a health reform bill but they can pass a middle-class tax cut if they repeal the individual mandate. You got to love the idea of the nonpartisan Congressional Budget Office providing the intellectual foundation for repealing the individual mandate. What’s next? Repeal the Medicaid expansion because it would save the federal government even more money? According to their analysis, the primary source of savings comes from reduced subsidies due to healthy people leaving individual health insurance market. Avik Roy has more details in his Forbes article, How The CBO Drove Obamacare’s Individual Mandate Repeal Into Tax Reform. Although this sounds like a win-win situation, there are health insurance problems when you repeal the individual mandate. Robert Laszewski goes as far to call it a nightmare for the middle class. Then he backs off from this statement when he agrees that the repeal is good for the poor and healthy people. For the poor struggling with out of pocket costs, this is probably a better alternative than insurance. The group Mr. Laszewski says has the greatest risk are those healthy people whose income is greater than 400% of the Federal Poverty Level, who get sick, and do not have the money to pay for their illness. This sounds scary but for most major medical expenses, the combination of unaffordable health insurance and high deductibles puts this group in a more precarious financial position than going without health insurance. Earlier this year I wrote how we reduced the risk of this lesser evil.

In 2015 my wife and I came to the conclusion that the healthcare industrial complex would not willingly change their ways so we started building up our HSA. At the end of 2016, I asked our insurance company if they would offer me a lower rate. They declined and we chose to drop our health insurance. The markets are working, the customer has spoken, and our health policies are dysfunctional. Although we are nervous about our choice, we think we can do a better job managing our health care than the healthcare industrial complex. It is amazing how fast the money builds up when you divert your old health insurance premium amount into a savings account. I am mildly optimistic we can get better health care advice for non-emergency room treatments if we tell our health care providers that we are a cash customer.  Every month we get by without a cancer diagnosis makes us a little more confident we made the right decision. If the insurance companies want us back all they have to do is show us an affordable health insurance plan!

In retrospect, we are a lot more comfortable with our decision now than when we started. We stuck to the plan and our emergency funds are in better shape. We are confident enough about our health that I am not sure an “affordable” health insurance plan could lure us back in. The only healthcare benefit we wish we had was the ability to add more money to our Health Savings Account.

In a recent opinion piece for the New York Times, Governor Kasich argued that the way forward for health care reform is more government spending. He says:

One vital improvement would be to provide adequate tax credits, which would help keep health plans in the individual market and encourage — not undermine — robust competition. Companies should also be required to continue following reasonable guardrails like ensuring minimum coverage that is genuinely useful and covers pre-existing conditions. Once we see these repairs taking hold, Congress should then take up needed improvements to Medicaid as part of comprehensive entitlement reform.

Health Care Reform Starts With Controlling Health Care Costs

The problem I have Governor Kasich’s argument is that he ignores the elephant in the room, health care costs. I can understand how the federal subsidies have benefitted hospitals, doctors, pharmaceutical companies, and insurance companies but not the consumer. Each of these groups publicly stated they were going to make health care bigger, better, faster, and cheaper. I don’t see it happening. Kasich is arguing that the health insurance markets will get better if we throw more government money at them. This is the exact same argument ACA supporters have made for the last eight years. The failure of the ACA to control costs tells us we need a different strategy if we want a different outcome. After eight years of using a carrot to encourage health care reform, maybe it is time to use the stick.

Thinking Outside Of The Box Idea Number 1 – Repeal The Individual And Employer Mandate

One of the things I learned over the last couple of years is that the individual mandate is not necessary or important. Although the ACA supporters argued in the Supreme Court that it was necessary to avoid a death spiral in the health exchanges, the consumer is largely unaffected by premium increases. It is the federal government who bears the brunt of the cost increases since the consumer’s portion is limited to 8.13% of their income. Why will the consumer leave the exchange if their payment stays the same? The primary purpose of the individual mandate was to keep unsubsidized, healthy people in the exchanges. The lack of affordable health insurance forced healthy people to evaluate their health care options. They voted with their feet.

If our politicians really wanted to help the American people by putting more money in their pocket, the simplest solution is to repeal the individual mandate. In a letter to members of Congress, IRS Commissioner John Koskinen said about 6.5 million Americans paid an average penalty of $470 for not having health insurance in 2015. Ironically these Americans are the group who can least afford the penalty. As health insurance continues to get unaffordable for more people, we should expect that fewer people will be required to pay the penalty. If the government continues to get less and less money from this penalty, maybe we should admit that the individual and employer mandate are not working and never will. This would be a great time for both parties to join together and get rid of both mandates.