PPACA: Reading the Tea Leaves
There is no doubt that within the halls of justice — at the highest court in the land — the midnight oil is burning. Meanwhile, our colleagues in the employee benefits business – as well as many other industries have taken to reading the tea leaves trying to predict the outcome of the Supreme Court’s PPACA hearings in March. Those observing the proceedings left little doubt in our minds that significant change lies ahead.
Eliminating PPACA is one possibility, yet most are placing bets that the individual mandate is the most vulnerable piece of the legislation. Like many in our industry, I support the individual mandate. It spreads risk – which is a very good thing that addresses the central issue facing our industry: affordability. And, personally, I believe that those who pay taxes and insurance end up supporting those who don’t.
How this plays out is of great interest to advisors serving the small- to mid-sized market, particularly the manner in which it affects exchanges. There is a lot of guesswork in this arena but the concept of all employers dumping their workers into exchanges just doesn’t hold water. Our company believes many employers will self-select out of participation. Bottom line: If the math doesn’t provide an advantage to a business, they won’t direct their employees into an exchange.
Depending on how the Supreme Court rules, the composition of exchange participants likely will differ. There are so many variables and mitigating factors that it’s difficult to predict exactly the impact of such an action. Among the possibilities:
- If justices toss out the individual mandate along with guaranteed issue and directives related to pre-existing conditions, exchanges will probably be populated by healthier, non-affluent participants who will benefit from a subsidy. States may bear additional financial burdens managing high-risk pools.
- If the individual mandate vanishes, but guaranteed issue and rules related to pre-existing conditions remain, then exchanges may be flooded with a less healthy risk pool.
