JONATHAN COHN APRIL 19, 2012
It’s bad enough that five justices of the Supreme Court, in their deliberations over health care reform, seem to be contemplating legal arguments that jurists haven’t taken seriously for nearly a hundred years. Will they also base their decision on fundamental misconceptions about the Affordable Care Act?
The answer may be yes, thanks to some apparent confusion over the availability of “catastrophic” health plans. Several other writers* have pointed out this error. But it’s so fundamental, and so indicative of the Court’s potentially faulty logic, that I think it’s worth another look.
As the name implies, catastrophic coverage refers to insurance designed to protect consumers only from the most severe medical bills, the kind you get from a serious accident or injury. Typically catastrophic policies leave you with significant out-of-pocket costs for doctor visits, prescription drugs, and even hospital stays—with comprehensive coverage kicking in only after you’ve spent well into four or, for a family, low five figures. Because these policies cover less, they also cost less.
Liberals like me tend to be wary of government encouraging use of catastrophic plans. We worry that people will economize poorly, skimping on beneficial preventative care, and that the migration of healthy people into catastrophic plans will will drive up the cost of coverage for everybody else. Conservatives take the opposite view: They think catastrophic plans will encourage people to become smarter, thriftier health care consumers—thereby making health care, and insurance, less expensive overall.
For a while now, conservatives have focused on the supposed lack of catastrophic options in the Affordable Care Act as one of the law’s major flaws. And during oral arguments, conservative lawyers turned this policy criticism into a constitutional one: By forcing everybody to buy more comprehensive coverage, they argued, the government was effectively forcing people to engage in a certain kind of commerce. Several conservatives justices signaled, through their questioning, they agreed.
But the premise happens to be wrong. Yes, the law establishes a level of benefits that all insurance plans must meet or exceed. But it’s not a particularly high standard. It’s an actuarial value of 60 percent, which means, roughly speaking, insurance that would cover 60 percent of the average person’s medical expenses. For a family of four buying coverage through the new insurance exchanges, the out-of-pocket expenses could be as high as $12,500. People under 30, meanwhile, will have access to even skimpier plans that are roughly equivalent to the catastrophic options now available to people who use federally qualified health savings accounts. Again, this is not something that makes liberals like me happy (although most people will likely still end up with better coverage, in the case of low-income people with the help of subsidies). But it ought to satisfy the conservative critics who think the law should guarantee only catastrophic coverage.
Of course, I don’t actually think this issue should matter to the Court one way or the other. Even if the Affordable Care Act didn’t have a catastrophic coverage option and established a higher standard for benefits, you could make the same constitutional arguments for it—that the law is a perfectly reasonable exercise of federal power to tax, regulate interstate commerce, and do what is “necessary and proper” for carrying out its duties. But if the justices don’t find those arguments convincing and think the presence of a catastrophic plan matters, then they should give the law a closer look before ruling against it.
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