Although the Supreme Court upheld the constitutionality of the individual mandate of the Affordable Care Act (“ACA”), the ruling does not bridge the gap of potential uninsured patients for hospitals and health systems. Under the ACA, the individual mandate requires nearly all Americans to purchase and maintain health insurance. However, if an individual does not maintain health insurance, the only consequence is that he or she must make an additional payment to the IRS when paying his or her taxes. The failure to maintain insurance is not an unlawful act.
The practical question is this: Will people follow the individual mandate and maintain health insurance or will they elect to simply pay the amount owed to the IRS when filing their taxes? The Court notes that:
In 2016, individuals making $35,000 a year are expected to owe the IRS about $60 for any month in which they do not have health insurance. Someone with an annual income of $100,000 a year would likely owe about $200. The price of a qualifying insurance policy is projected to be around $400 per month.
Based on the Court’s example, the expected amount owed to the IRS is 50% to 85% less than the projected expense to purchase a qualifying insurance policy. Therefore, it is possible that healthy, young, low-risk individuals will choose to pay the IRS rather than an insurance carrier. It is also possible that the departure of these individuals from the market may increase insurance premiums for the remaining population that needs health insurance. Ultimately, this process could result in unanticipated levels of uninsured individuals.
The second part of the Court’s ruling was that the federal government cannot penalize the States for declining to participate in the expansion of the Medicaid program. Under the ACA, the Medicaid program will include coverage for all individuals under the age of 65 with incomes below 133% of the federal poverty level. However, because each State can decide whether or not to participate in the expanded coverage, it is unknown whether this category of individuals will be insured or uninsured. If the States elect not to participate in the expansion, it is likely that these individuals will be uninsured as they cannot typically afford the cost of insurance.
Ultimately, the rulings on both the individual mandate and the Medicaid program raise questions as to the level of uncompensated care that hospitals and health systems will continue to face in the wake of the Affordable Care Act. Hospitals and health systems should closely follow the legislative activity in the states where they operate to determine whether the Medicaid expansion is approved. In addition, hospitals and health systems should evaluate alternative methods to reduce expenditures. While there may be an influx in the number of insured individuals under the ACA, the cost of providing care to the uninsured will likely remain a prevalent part of providing care.
© 2012 Michael P. James, J.D., M.B.A., CSSGB
Michael James provides representation and counseling related to all facets of business enterprise and healthcare matters. For more information, you can contact Michael at email@example.com, (810) 936-4040 or www.michaeljameslaw.com.