ACA Individual Mandate: Lawsuits, Legislation & Ethics

Introduction

Health insurance coverage is one of the major issues at the core of initiatives to reform the United States health sector. This issue has attracted considerable attention in health reform initiatives because of the relatively high number of uninsured and underinsured people in the country. The United States has a high number of uninsured and underinsured populations despite increased federal expenditures on health. Recent healthcare reform legislation has sought to address this issue in various ways, including the introduction of the mandate to buy health insurance. The mandate is essentially an individual or employer requirement to obtain private health insurance coverage. However, the individual mandate is one of the most controversial provisions of the Affordable Care Act and has been the subject of numerous lawsuits. In addition, legislation has been enacted against the mandate to buy health insurance. This paper discusses the lawsuits and legislation involved against the mandate to purchase health insurance.

History and Background of the Individual Mandate

The individual mandate is one of the provisions of the Patient Protection and Affordable Care Act (also known as the Affordable Care Act, ACA, or Obamacare), which was enacted into law in March 2010. Based on the provisions of the ACA, the individual mandate is enforceable as a tax and requires Americans to buy health insurance or face a penalty. However, low-income individuals who cannot afford to purchase health insurance are exempted from the mandate. Despite the enactment of the individual mandate into law in March 2010, the issue has a long and tortuous history that can be traced back to 1986, when legislation passed by a Democrat House and a Republican Senate was enacted into law (Roy, 2012). The legislation — the Emergency Medical Treatment and Active Labor Act (EMTALA) — was signed by President Ronald Reagan and allowed individuals who had lost their jobs to continue purchasing health insurance using their former employer's group plan. This regulation was the first attempt to incorporate the individual mandate concept into health care law. In 1974, President Nixon proposed replacing the single-payer model with an employer mandate. As part of the Comprehensive Health Insurance Plan, all employers would be required to provide comprehensive health insurance plans to all full-time employees. Following concerns that the employer mandate did not address health insurance for the unemployed, Bill Clinton proposed universal health care for all in 1993, based on the concept of managed competition (Roy, 2012).

The employer mandate served as the predecessor for the individual mandate because of its significant and well-documented problems. First, the employer mandate increased the cost of hiring new employees, which in turn discouraged new hiring and contributed to rising unemployment rates. Second, this mandate forced employers to pay for their employees' health costs, which increased operational expenses that were in turn passed on to consumers in the form of higher prices for products and services. Third, it failed to address the health needs and coverage of the unemployed. Fourth, it increased the cost of health insurance by insulating consumers from the true value of health care, which meant that consumers had no incentive to economize. Finally, the employer mandate resulted in job lock, since employees were reluctant to leave their jobs because of the likelihood of higher premiums or denial of coverage when switching plans.

The historical health reform initiatives relating to the individual mandate culminated in its inclusion and enactment as part of the Affordable Care Act of 2010. This represented the translation of the individual mandate theory into practice (Hackmann et al., 2015). While the individual mandate was considered necessary to help cover the costs of health care in the United States, it is one of the most politically and legally controversial provisions of Obamacare. According to Hackmann et al. (2015), the individual mandate was at the center of legal challenges to the Patient Protection and Affordable Care Act. These legal challenges have been fueled by near-unanimity among opponents that the provision constitutes an egregious infringement of individual liberty (Roy, 2012). Lawsuits and legislation against the individual mandate have taken a distinctly partisan form, as Democrats and Republicans continue to debate this provision, its effects, and its legality.

On one hand, proponents of the provision — mostly Democrats — contend that it is necessary to cover health care costs in the country while expanding health insurance coverage to large uninsured and underinsured populations (Campbell & Shore-Sheppard, 2020). Additionally, these proponents argue that the provision would increase enrollment in the individual market and reduce health care costs for the federal government. Moreover, the individual mandate would help keep a higher percentage of younger and healthier people enrolled in the individual market, and would expand access to health coverage for sick people who would otherwise have been priced out of the market or denied coverage (Roy, 2012). On the other hand, many conservatives and Republicans have opposed the individual mandate on the grounds that it violates individual liberty. They further contend that the provision is likely to increase premiums, and these opponents have coalesced around the idea of a free-market approach to health reform.

Social Issues and Legal Dimensions

The political and legal controversies regarding the individual mandate have been at the center of legal battles and legislation against the provision. These divergent opinions have made the individual mandate the least popular yet most widely known provision of the Affordable Care Act. At the heart of these controversies are important social issues and legal questions. The primary social issue surrounding the individual mandate today is the avoidable social burden created by people who are unable to obtain health insurance coverage. Generally, the individual mandate focuses on enhancing individual responsibility with regard to health insurance coverage. According to Blake (2012), the requirements of individual responsibility underlying this provision were considered necessary to avoid problems associated with the free-rider.

By promoting individual responsibility, the individual mandate seeks to reduce the social burden of uncompensated care in several ways. First, it seeks to avoid the free-rider problem, in which the health care costs of uninsured populations are effectively paid by others. Second, this legislation seeks to address adverse selection, which occurs when low-risk individuals choose to forgo health insurance coverage (Geruso & Layton, 2017). The free-rider problem and adverse selection would create an avoidable social burden by raising the costs of health insurance for all Americans. Since the individual mandate addresses both the free-rider problem and adverse selection, it helps prevent this social burden by expanding the pool of participants who pay into health insurance. Additionally, the individual mandate significantly reduces the number of free-riders who obtain health care services without contributing to or recognizing the value of health care. Therefore, the individual mandate promotes individual responsibility in obtaining health coverage and addresses the broader need to ensure the uninsured receive care.

The social issue relating to the individual mandate has been central to the legal dimensions reviewed in courts and health agencies. First, the extent to which the individual mandate violates individual liberty has been a key legal question surrounding this provision. Opponents have challenged its legality by arguing that it infringes on individual liberty. In a recent court case, opponents argued the provision's constitutionality given this concern. Judge Carolyn Dineen King noted that since Congress had lowered the individual mandate penalty to zero, legal questions regarding the provision were essentially academic, as people could freely decide whether to buy insurance (Goldstein, 2019). The determination of the individual mandate's constitutionality would in turn affect its ability to address the social burden of health insurance coverage, particularly among the uninsured population. These recent legal questions arose after Congress removed the penalty for failing to purchase health insurance.

According to Blake (2012), states have challenged this provision on the grounds that it constitutes an overreach of Congress's Commerce Clause powers. Lawsuits challenging the individual mandate penalty represent some of the most prominent actions taken by states to alter, oppose, or limit Obamacare. These lawsuits have sought to declare both the individual mandate penalty and the entire ACA unconstitutional. In 2018, 20 states filed a lawsuit against the federal government arguing that the 2019 repeal of the individual mandate penalty rendered the ACA unconstitutional (Keith, 2018). Some states have continued to argue that the individual mandate is unenforceable, inefficient, and ineffective.

Legal questions relating to the individual mandate's constitutionality continue to affect enrollment for health insurance coverage. The United States health sector encompasses two major social groups: those who cannot afford health coverage and those who can afford it but opt to invest their resources elsewhere. Since the mandate was designed to promote universal coverage regardless of socioeconomic status, legal challenges to its constitutionality affect enrollment in health insurance markets. As a result of these legal challenges, the uninsured experience greater difficulties in accessing health insurance while people who can afford it opt out, forcing society to absorb the costs of uncompensated care.

Conclusion

The legal challenges facing the mandate to buy health insurance have proven formidable obstacles to efforts to reform the U.S. health sector. Some states have enacted laws that protect or oppose the mandate to buy health insurance. The absence of a federal mandate to buy health insurance affects efforts to increase coverage across the country, as fewer healthy people pay into the health system to offset the costs of caring for sick individuals. Despite these legal challenges, efforts to mandate the purchase of health insurance remain critical and necessary to expand health insurance coverage in the United States. As evident in this discussion, recent court rulings — such as the decision by the U.S. Court of Appeals for the 5th Circuit — continue to shape the fate of the individual mandate. Nevertheless, states have adopted various measures to enact some form of individual mandate policies and requirements, signaling that the effort to achieve broader health insurance coverage is far from abandoned.

References

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Campbell, A. L., & Shore-Sheppard, L. (2020, July). The social, political, and economic effects of the Affordable Care Act: Introduction to the issue. The Russell Sage Foundation Journal of the Social Sciences, 6(2), 1–40.

Geruso, M., & Layton, T. J. (2017). Selection in health insurance markets and its policy remedies. Journal of Economic Perspectives, 31(4), 23–50.

Goldstein, A. (2019, December 19). Individual mandate ruled unconstitutional, ACA in limbo. The Washington Post. Retrieved February 12, 2021, from https://www.washingtonpost.com/health/appeals-court-rules-acas-individual-mandate-unconstitutional-lower-court-to-decide-whether-rest-of-law-can-stand-without-it/2019/12/18/3443fd3e-c03c-11e9-b873-63ace636af08_story.html

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