The Individual Mandate Of Obamacare And Severability

From The New Ledger:

The Individual Mandate and Severabilityby Ben Domenech




Several state legislators have reached out to me recently with questions about the nature of severability and Obamacare. Since some folks seem to have questions as well, I thought I’d explain a bit about what this means.



Most laws of large size and scope have something called a “severability clause” attached to them. Essentially, this means that if one part of a piece of large legislation is ruled unconstitutional by a court, that unconstitutional portion is “severed” from the rest of the bill — the ruling doesn’t stop the rest of the law from being enforced.



The trouble for Obamacare is that it doesn’t have a severability clause. If you’re an opponent of Obamacare, this all sounds pretty good — it indicates that if Attorney General Ken Cuccinelli is successful in his Virginia case against the individual mandate, the entire legislation could collapse. But the answer isn’t that simple.



As I discuss with Maureen Martin in our latest podcast, what’s more likely is that the Supreme Court would just eliminate the portions of the bill which are tied directly to the individual mandate.



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Some people have claimed the severability clause is absent from Obamacare because the writing process of the bill was such a cluster, the clause was just forgotten. But the reality, I’m told, is that a severability clause would’ve been added in conference between the House and Senate. Except that as you know, no such conference happened — everything had to be done via reconciliation after the House passed the Senate bill. Hence, no severability clause.



But the lack of a severability clause wouldn’t necessarily result in the overrule the rest of the legislation, which mostly have to do with spending and rationing — the expansion of Medicaid, Medicare cuts, and sweeping regulatory authority — and isn’t wrapped up in the mandate. This has been the Court’s approach to other issues, such as the recent Sarbanes-Oxley ruling, another law which lacked a severability clause, where they invalidated a portion of the law and allowed the rest to stand.



Some things that the Court would likely leave unaffected would include the expansion of Medicaid, reporting obligations for businesses and hospitals, expansion of the Children’s Health Insurance Program, funds for “family planning,” expansion of state aging and disability resource centers, expanded funding for prevention programs and workplace education, reforms to inpatient rehabilitation and hospices, the addition of value-based payments for physicians and hospitals, and many provisions relating to Medicare services in rural areas… And that’s just for starters. The point is that the overwhelming portion of this legislation is not tied directly to the individual mandate.



Yet even if the Court behaved in the same way when deciding the constitutionality of the individual mandate, in practical terms, judging the mandate unconstitutional would set off a domino effect throughout the insurance industry. The mandate is the only thing which made other anti-market regulatory demands (such as guaranteed issue and community rating) workable for the industry. Despite Howard Dean’s argument that the individual mandate is unimportant (the reality is that Dean agrees with me — people will simply game the mandate) in the larger scheme of things, removing it and leaving other requirements intact would bring the entire insurance industry to the point of collapse.



So even if the lack of a severability clause doesn’t turn out to matter, elimination of the individual mandate as unconstitutional will create an untenable situation for insurers and eliminate many of the aspects of the legislation President Obama has touted. The push for further reform, at that point, would be inevitable