Today, Judge Roger Vinson heard oral arguments in the multi-state lawsuit claiming that the provision of the Affordable Care Act requiring most Americans to either carry insurance or pay slightly more income taxes is unconstitutional. After the hearing, Florida Attorney General Bill McCollum (R) co-hosted a press conference in which he expressed optimism that the landmark law would be strike down. As part of this conference, however, McCollum attributed an unfortunate view to Judge Vinson:
One of the things he kept saying…was there are other options, aren’t there, besides this approach, besides requiring you to buy health insurance. There are other ways to skin the cat, so to speak. And he said that several times today…like when you go into, I think he said an emergency room, for example, you know, maybe you could, at that point, be required to buy insurance.
Given his role in challenging the Affordable Care Act, McCollum obviously isn’t the most reliable witness. Nevertheless, it would be quite unfortunate if Vinson did actually suggest this alternative mechanism, since it is guaranteed to fail.
The reason why the Act requires people to carry insurance is because the Act also prevents insurance companies from denying coverage to people just because they are already sick. Patients with preexisting conditions cannot be protected unless the law also prevents them from entering the insurance market at the last minute — an act known as “adverse selection“:
This happened because of a phenomenon known as “adverse selection.” Adverse selection occurs when consumers delay purchasing health insurance until they become ill or injured — thus forcing the insurance plan to pay them substantially more in benefits than they previously paid in premiums. When one consumer engages in such a delay, everyone else’s premiums must rise to cover that consumer’s costs. When many consumers engage in this delay, the results can shut down an entire insurance market.
Seven states attempted to ban preexisting conditions discrimination without also requiring everyone to carry a minimum level of coverage, and all of them saw their premiums skyrocket. Several states that tried doing one without the other saw their entire individual insurance market collapse. (Massachusetts, by contrast, enacted a law that was very similar to the Affordable Care Act and its premiums declined by 40 percent in the individual insurance market.)
Yet, if McCollum is to be believed, Judge Vinson floated the idea that the solution to this adverse selection problem is, well, adverse selection.