Federal Judge Rules Individual Mandate Unconstitutional.

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A copy of the decision is here. Two other federal district courts have previously upheld the individual mandate against constitutional challenge, and at least one suit remains pending.

It’s often claimed that the individual mandate is a necessary compliment to the provisions of ObamaCare banning denial of coverage based on pre-existing conditions and so forth. The idea is that if an insurance company can’t deny you coverage once you are already sick there is a strong incentive not to get coverage until you are already sick, which leads to a death spiral (that’s a technical term) of increased insurance prices and lower levels of coverage.

However, as Paul Starr noted back when the bill was being debated, there are ways of dealing with this problem that don’t involve a mandate:

The law could give people a right to opt out of the mandate if they signed a form agreeing that they could not opt in for the following five years. In other words, instead of paying a fine, they would forgo a potential benefit. For five years they would become ineligible for federal subsidies for health insurance and, if they did buy coverage, no insurer would have to cover a pre-existing condition of theirs.

The idea for this opt-out comes from an analogous provision in Germany, which has a small sector of private insurance in addition to a much larger state insurance system. Only some Germans are eligible to opt for private insurance, but if they make that choice, the law prevents them from getting back at will into the public system. That deters opportunistic switches in and out of the public funds, and it helps to prevent the private insurers from cherry-picking healthy people and driving up insurance costs in the public sector.

For whatever reason, the Democrats choose not to head this advice, and didn’t include any alternative to the mandate in the bill, even as a fall back measure. This means that, if the mandate is ultimately found unconstitutional, there will be nothing in the law to prevent the “death spiral” scenario. Granted, this can always be passed in the future, but this may not be as easy to do depending on the political environment at that time. Why the Democrats didn’t do this is a mystery to me.

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  1. Why the Democrats didn’t do this is a mystery to me.

    With that statement you seem to assume that the objective of the Democrats was to draft sound legislation to produce a beneficial and sustainable system. I didn’t get that sense about it at any point in the process. Perhaps your remark was rhetorical and excessively charitable. 🙂

  2. Perhaps the provision was left out of the bill because our Congresspersons did not [could not – were not permitted to] read it.

  3. The obvious problem is: what happens when someone signs the 5-year opt-out, and then gets cancer a year later? Then we’re back to the same old problem: someone needs health care and is being denied can’t afford it. Europeans may be okay with that, because they’ve learned that there are trade-offs in universal care, like having to sit on waiting lists. If Americans were hard-hearted enough to leave that guy’s care up to his family and private charity, we would never have gotten anywhere near passing ObamaCare in the first place.

    Most Americans today believe every person should be able to get whatever health care he needs, on demand, regardless of his ability to pay — and we’ve convinced ourselves this is actually possible, and not at all a square circle. Any sort of opt-out that has actual consequences would be like admitting otherwise.

  4. Who would have thought . . .

    That’s what happens when you elect nitwits who can neither read nor understand the bills they enact.

    Worse yet, we have given them unlimited power to botch the whole enchillada.

    NO WAIT! they are sufficiently SMART to exempt themselves from socialist hell care.

  5. Most people think they’ll be healthier than others so I don’t see any time-out period working. There is still a backstop in the form of Medicare when people hit 65. Also, the longer the penalty period, the earlier you’d have to sign up to avoid the penalty. The earlier you make people sign up, the less educated and less financially able they’d be and therefore less likely to sign up. The longer penalty would be at least partially, if not wholly, counteracted by these effects. Finally, there’s the politically unpalatable effects that Aaron mentioned.

  6. The obvious problem is: what happens when someone signs the 5-year opt-out, and then gets cancer a year later?

    Same thing that happens now.

  7. “Same thing that happens now.”

    Yes, including sob stories about people being “denied” health care, and grandiose schemes to “fix” the problem.

  8. That’s what happens when you elect nitwits who can neither read nor understand the bills they enact.

    1. Glass-Steagall Act of 1933 (definitively concluding post-crash banking crises and erecting a legal architecture which stood for 47 years):
    53 pages long.

    2. Social Security Act of 1965 (erecting Medicare and Medicaid):
    137 pages long.

    3. Dodd Frank financial ‘reform’:
    848 pages long.

    4. Affordable blah blah act of 2009 (Obamacare):
    1,990 pages long.

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