Go tell the justices: the ACA has a catastrophic coverage option

Attention, Justices Roberts, Alito, Scalia: your objection to the extent of the individual mandate in the ACA may be based on at a partial misunderstanding. Or at least, on a failure by Solicitor General Donald Verrilli and the four justices supportive of the ACA to highlight an important provision of the law.

In questioning the right of the Federal government to require individuals to buy insurance, the justices glided past the argument that the requirement was justified because the cost of care for the uninsured drives up the cost of health care for everyone -- that we are all in the health care market -- by asserting that not everyone in the market needs the range of services that policies offered in the insurance exchanges are required to cover. This objection was hammered repeatedly, in a variety of ways, by Roberts, Alito and Scalia, and by Michael Carvin arguing for the plaintiffs.  Here's the first such assertion in the transcript:

JUSTICE ALITO: But isn't that really a small part of what the mandate is doing? You can correct me if these figures are wrong, but it appears to me that the CBO has estimated that the average premium for a single insurance policy in the non-group market would be roughly $5,800 in -- in 2016.

Respondents -- the economists who have supported the Respondents estimate that a young, healthy individual targeted by the mandate on average consumes about $854 in health services each year. So the mandate is forcing these people to provide a huge subsidy to the insurance companies for other purposes that the Act wishes to serve, but isn't -- if those figures are right, isn't it the case that what this mandate is really doing is not requiring the people who are subject to it to pay for the services that they are going to consume? It is requiring them to subsidize services that will be received by somebody else.

And Roberts, broadening the objection:

CHIEF JUSTICE ROBERTS: Well, but it's critical how you define the market. If I understand the law, the policies that you're requiring people to purchase involve -- must contain provision for maternity and newborn care, pediatric services, and substance use treatment. It seems to me that you cannot say that everybody is going to need substance use treatment -substance use treatment or pediatric services, and yet that is part of what you require them to purchase (pp 31-32).

And Scalia, following up a couple of minutes later:

JUSTICE SCALIA: These people not stupid. They're going to buy insurance later. They're young and need the money now.

GENERAL VERRILLI: But that's -

JUSTICE SCALIA: When they think they have a substantial risk of incurring high medical bills, they'll buy insurance, like the rest of us (p. 36).

What remained unacknowledged in this conversation is that the Affordable Care Act includes a catastrophic coverage option for people under thirty and others who meet certain financial requirements. Here's Section 1302 (e) of the Act:

(e) CATASTROPHIC PLAN.—
(1) IN GENERAL.—A health plan not providing a bronze,
silver, gold, or platinum level of coverage shall be treated
as meeting the requirements of subsection (d) with respect
to any plan year if—
(A) the only individuals who are eligible to enroll in
the plan are individuals described in paragraph (2); and
(B) the plan provides—
(i) except as provided in clause (ii), the essential
health benefits determined under subsection (b), except
that the plan provides no benefits for any plan year
until the individual has incurred cost-sharing expenses
in an amount equal to the annual limitation in effect
under subsection (c)(1) for the plan year (except as
provided for in section 2713); and
(ii) coverage for at least three primary care visits.
(2) INDIVIDUALS ELIGIBLE FOR ENROLLMENT.—An individual
is described in this paragraph for any plan year if the individual—
(A) has not attained the age of 30 before the beginning
of the plan year; or
(B) has a certification in effect for any plan year under
this title that the individual is exempt from the requirement
under section 5000A of the Internal Revenue Code
of 1986 by reason of—
(i) section 5000A(e)(1) of such Code (relating to
individuals without affordable coverage); or
(ii) section 5000A(e)(5) of such Code (relating to
individuals with hardships).*
(3) RESTRICTION TO INDIVIDUAL MARKET.—If a health insurance
issuer offers a health plan described in this subsection,
the issuer may only offer the plan in the individual market.

This does not fully answer the objection that some people are being required to buy coverage they don't need, or that the ACA requires cost-shifting from the healthy and prudent (e.g., those who will never need substance abuse coverage) to the sick and vulnerable.  To that point, Verrilli's arguments -- that none of us know what we'll need when, that the young will one day be old, that all insurance entails cost-shifting, and that the market can't function if adverse selection is enabled -- are all essential and germane.

But this option should have been highlighted. Michael Carvin, arguing for the plaintiffs an hour later, did acknowledge it in a backhanded way, asserting that "Congress prohibits anyone over 30 from buying any kind of catastrophic coverage" (p. 105**). But no one pointed out by way of retort that the youngest, healthiest and presumably relatively poorest part of the population does have that option -- and so do those over 30, ineligible for Medicaid, for whom even the subsidized purchase of insurance is a hardship (and so Carvin's assertion is not strictly true).  I wonder whether the justices even noticed the 'over 30' caveat or are aware of the catastrophic option for young adults.

I wonder too whether the catastrophic care option for those under 30  does not suggest a way out: it could be extended. Could the judges rule that the mandate can extend to catastrophic care only -- in effect, legislating from the bench?

Also, it could be argued that the ACA already offers sufficient flexibility. States can take waivers if they want to design an alternative plan that offers equivalent coverage. That could perhaps include extending eligibility for the catastrophic care option -- though that would require a kind of waiver within a waiver, since the law as written specifies who's eligible for catastrophic care.  Further, the department of Health and Human Services opted to leave it to the states to determine coverage parameters, in accordance with broad outlines. Might that decision also not provide space for states to seek permission to widen catastrophic care eligibility?


* Those over 30 eligible for a catastrophic plan include:

(e) Exemptions- No penalty shall be imposed under subsection (a) with respect to-- `(1) INDIVIDUALS WHO CANNOT AFFORD COVERAGE-

`(A) IN GENERAL- Any applicable individual for any month if the applicable individual's required contribution (determined on an annual basis) for coverage for the month exceeds 8 percent of such individual's household income for the taxable year described in section 1412(b)(1)(B) of the Patient Protection and Affordable Care Act. For purposes of applying this subparagraph, the taxpayer's household income shall be increased by any exclusion from gross income for any portion of the required contribution made through a salary reduction arrangement....

and

(5) HARDSHIPS- Any applicable individual who for any month is determined by the Secretary of Health and Human Services under section 1311(d)(4)(H) to have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan.

** At first publishing, I had not noticed Carvin's "over 30" caveat.  I have edited the post accordingly.

UPDATE: as noted in a 4/5 post, it seems that Marty Lederman agrees that the justices could limit the mandate without killing it:

Moreover, even if [plaintiffs' attorneys] Randy and Mike Carvin were correct, and the preventive care coverage could not be justified under my proposed, or any other, limited holding, that would only mean that the Court should declare invalid those subsections of section 18022(b) that go beyond coverage for catastrophic care and other services that are government-guaranteed. Such an excision would likely have, at most, only a marginal impact on the cost of insurance premiums, since it is of course catastrophic and longterm care--the services the state and federal governments guarantee--that account for the lion's share of uncompensated health care costs, and of the cost of health insurance (my emphasis).