When President Obama passed the Patient Protection and Affordability Care Act (PPACA), a cry arose from some groups that were against the mandate it contained requiring all individuals to have secured group or individual health insurance coverage by 2014 or face a penalty. As a result, the Supreme Court is now evaluating the constitutionality of this law.
TUTORIAL: Health Insurance
But what will happen to Americans who are currently uninsured if the Supreme Court finds this mandate unconstitutional?
Who Needs Health Insurance?
In late 2010, it was reported that over 50 million individuals in the U.S. were uninsured, a number that was partially influenced by a rough economy and slew of newly unemployed individuals. While some would argue that this number is at least partially made up of individuals who are able, but unwilling, to pay the average annual expense of $14,000 to insure a family of four, a larger portion of the uninsured population is comprised of those who don't have access to a health insurance plan that they can afford. In fact, it was found that low-income households (those that are at or 200% above the poverty level) were three times as likely to join the ranks of the uninsured as compared to households with an income of $75,000 or more. (For related reading, see Buying Private Health Insurance.)
The Financial Impact of the Act
Many counter that forcing low-income families to buy insurance, and fine them if they don't comply, will create an entirely new financial problem for America's poor. But the Act contains several measures meant to help control insurance costs, including:
- The limitation of the amount of premium dollars that can be used toward commissions, salaries and profits for insurers. This measure ensures that 80% or more of collected premium dollars must flow towards the actual cost of care, thereby creating a more cost-efficient system that lowers overall insurance premiums.
- The introduction of federal subsidies. These subsidies will be awarded on a sliding scale basis for families at or up to 400% above the federal poverty level. While subsidies may sound like a great burden to the federal government, they will be offset by the requirement for certain employers to supplement the federal subsidies their employees receive as a result of the employer's decision not to offer health insurance benefits to its 50 or more employees.
It's important to consider that some of these money-saving measures may be countered by the requirement that prohibits insurers from excluding pre-existing conditions. This may increase the healthcare expenses that insurers must cover. However, since insurance works because premiums and expenses are shared by a large group of people (the law of large numbers), the fact that many individuals who will be required to buy insurance will not cost the insurance companies much, and will help defray some of those expenses. (To learn more, see Health Insurance: Paying For Pre-Existing Conditions.)
The Bottom Line
In 2010, 15.1% of Americans were living in poverty, and even more were above the poverty level but were still considered low-income. If the Supreme Court rules the Act unconstitutional and no other program is put in place to help low-income families get health insurance, these individuals will likely continue to accrue medical debt, something that two out of five adults were struggling with in 2007. And, while it certainly makes sense to consider how the health insurance mandate will affect America's poor if it is passed, it might be more relevant to ask what happens to them and those who choose to be insured if it is not passed? Healthcare expenses continue to rise and with roughly one-third of the 50 million uninsured Americans unable to afford insurance, it's more than possible that the uninsured expenses that they incur and can't pay, will be disbursed to insured Americans through higher healthcare costs, and as a result, increased insurance premiums. (To find out more, read Fighting The High Costs Of Healthcare.)