As the Supreme Court wraps up the first of three days of oral arguments on the constitutionality of several provisions in the Affordable Care Act (ACA), the insurance industry is bracing for changes that could rock the market.

The justices will ultimately answer four distinct questions around the legality of the reforms, chief among them from ACA’s Section 1501, which holds that individual taxpayers are required to have insurance that meets a minimum standard or pay a penalty.

The notion of an “individual mandate” debate is not a new one. According to Paul Keckley, executive director at Deloitte’s Center for Health Solutions, it’s a concept first promoted and later disavowed by the Heritage Foundation (1989) and adopted by Republican House members (1993) as a means of stabilizing the risks and costs in health insurance coverage across large populations. Keckley says that at the federal level, this notion has been a focus of legislative efforts for almost 20 years. Today, however, its challengers include 26 of the 50 states, which claim Congress exceeded its constitutional power to regulate commerce with this so-called individual mandate. Meanwhile, Families USA, a supporter of the law, predicted that doctors and nurses in white coats and scrubs would join challengers positioned outside the Capitol.

“Its context—as the centerpiece of ACA—is unprecedented,” says Keckley. “The economics of the entire ACA rely on the success of the individual mandate to bring 16 million currently eligible but uninsured Americans into the insurance system. On that promise, the pharmaceutical, medical device, hospital and commercial health insurance industries conceded a half-trillion [dollars] in excise taxes and payment cuts to fund half of ACA’s ten-year costs.”

Keckley says the judges will address three other questions: Is the Anti-Injunction Act applicable to ACA? If the individual mandate is ruled unconstitutional, does it invalidate the rest of the law? And does the federal government have the right to force states to expand their Medicaid programs via specified eligibility thresholds and rules?

Regardless whether insurers agree with the ultimate answers to these questions, the judges’ ruling will have lasting impact on health insurers.

In a discussion on Bloomberg Television that focused on the implications of the Supreme Court’s review of President Obama’s healthcare overhaul on the insurance industry, Karen Ignagni, president and CEO of America's Health Insurance Plans (AHIP), said the stakes are important, especially as they apply to the market itself.

“The most important thing for us is the linkage between the mandate and market reforms,” she said. “The question for us is, how do you make market reforms work? The most important thing to keep in mind is that in every state that tried to do market reforms without having everyone participate, the market fell apart. If you pull the mandate out, market reforms don’t work, because what you’ll have is a spiraling up of premiums, older, sicker people remain in the pool and the younger people leave. They have all concluded that this would lead to a tremendous disruption. To have market reforms you need to have everyone participate, you need that linkage, that fundamental building block.”

To explain the many issues at stake with the legal activities, the Kaiser Family Foundation has published a 10-page primer tackling the information and arguments being presented before the court.

A ruling is expected in June, and its ramifications will land square in the middle of the summer presidential campaign season—and before major provisions of the law such as bundled payments, health exchanges, etc., are required to be implemented.

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