Health Care / Medicine, Justice

Is Ryancare's 'Lapsed Coverage' Surcharge Unconstitutional Under Roberts's Obamacare Precedent?

Is there a legal problem with the GOP's proposed Affordable Care Act replacement?

By  
on
(Photo courtesy of Getty Images)

(Photo courtesy of Getty Images)

A key feature of the GOP’s proposed Affordable Care Act replacement, the American Health Care Act, is to dispose with Obamacare’s individual mandate that people buy health insurance. Instead, Paul Ryan wants to impose a 30 percent surcharge on the premiums of anybody who seeks health insurance after their coverage lapses, as an incentive to keep people continuously enrolled.

There are numerous ethical and social problems with that scheme. Instead of incentivizing people to keep their health care, the GOP plan creates a perverse incentive for people to not get coverage if their plans have lapsed. It also provides a potential boondoggle to insurance companies (though the surcharge boondoggle isn’t as obvious as the executive-pay boondoggle that removes the ACA’s limit on corporate tax deductions for executive pay).

But is there also a legal problem with the lapsed-coverage scheme? Here’s the language from the proposal:

“If the applicant had a lapse in coverage for greater than 63 days, issuers will assess a flat 30 percent late-enrollment surcharge on top of their base premium based on their decision to forgo coverage.” [emphasis mine].

So Ryancare won’t hold you down and force you to buy coverage (note: neither does Obamacare), but it will assess a penalty based on your decision to forgo coverage (kind of like Obamacare). The Obamacare penalty was a tax applied to people out of coverage, the Ryancare penalty is a surcharge imposed on people when they seek to re-enter the market.

Sponsored

The Republicans will argue that their plan doesn’t force anybody to buy health insurance, but is that just playing semantics? Is there a logical distinction between penalizing people who don’t buy health insurance (Obamacare) versus penalizing people who don’t “continuously purchase” health insurance (Ryancare)?

The GOP will surely argue that the “government” isn’t penalizing those who don’t continuously purchase insurance, it’s simply mandating that private insurers do so.

I’m not sure that helps them. You might remember the fact that the Obamacare penalty could be interpreted as a “tax” was kind of… CRUCIALLY IMPORTANT when the ACA was reviewed by the Supreme Court. Here’s Chief Justice John Roberts in National Federation of Independent Business v. Sebelius:

The Affordable Care Act’s requirement that certain individuals pay a financial penalty for not obtaining health insurance may reasonably be characterized as a tax. Because the Constitution permits such a tax, it is not our role to forbid it, or to pass upon its wisdom or fairness.

Does Congress have the authority to place a surcharge on people who don’t continuously purchase health care, under its Commerce Clause authority? Remember, in Sebelius Roberts specifically rejected the government’s preferred argument that Obamacare was constitutional under the Commerce Clause authority:

Sponsored

Whether the mandate can be upheld under the Commerce Clause is a question about the scope of federal authority. Its answer depends on whether Congress can exercise what all acknowledge to be the novel course of directing individuals to purchase insurance. Congress’s use of the Taxing Clause to encourage buying something is, by contrast, not new. Tax incentives already promote, for example, purchasing homes and professional educations. See 26 U. S. C. §§163(h), 25A. Sustaining the mandate as a tax depends only on whether Congress has properly exercised its taxing power to encourage purchasing health insurance, not whether it can. Upholding the individual mandate under the Taxing Clause thus does not recognize any new federal power. It determines that Congress has used an existing one.

The key takeaway from the ACA case is that Congress has no right to force people to get health coverage, but it does have the right to tax pretty much whatever it wants. Since the Ryancare scheme is clearly not a tax (remember, it’s a boondoggle to the insurance industry), it seems like the key question will be how coercive the continuous coverage surcharge is meant to be. The more coercive, the more it would seem to go beyond the scope of federal authority, under the Supreme Court’s own precedent.

Certainly, the GOP formulation “feels” less coercive than Obamacare. But that’s a political point. Legally, it would be very interesting to watch conservative justices twist themselves into this kind of use of the interstate commerce power.

The AHCA is just a proposal, and one could imagine some fixes that would avoid this particular legal issue all together. Maybe you give insurers the “option” of imposing the surcharge, and create a market opportunity for “late enrollment insurance” that ignores your previous coverage history?

As a dumb man once said, “Nobody knew health care could be so complicated.” If Trump and Ryan think that repealing Obamacare and replacing it with “Obamacare Lite” is difficult to get through Congress, wait until they try to get it through the courts.

Republicans unveil bill to repeal and replace Obamacare [CNN]

Elie Mystal is an editor of Above the Law and the Legal Editor for More Perfect. He can be reached @ElieNYC on Twitter, or at [email protected]. He will resist.

Topics

, , , , , , , , , , , , ,