Health Case Ripples Outward

After three days of historic Supreme Court debate, the
political world and health-care companies confronted the prospect of President
Barack Obama's health law being wiped away, a decision that would upend years
of planning by businesses and roil the November elections.

Among those set to implement the law, insurers would have to
ditch changes to their businesses designed to bring in millions of new
customers. Provisions that have already gone into effect, including letting
children stay on their parents' insurance plans until they turn 26, would no
longer be required.


Justices in the Supreme Court's conservative majority said
Wednesday that it would be difficult to figure out which parts of the Obama
health-care law should survive if one part of it is judged unconstitutional.
Jess Bravin has details on The News Hub. Photo: Reuters.
.Companies facing the law's requirements would be reprieved,
including health firms set to pay new taxes and businesses that would have been
required to insure their employees or pay a fee.


As the affordable health care law arguments wrap at the
Supreme Court, WSJ's Peter Landers checks in on Mean Street to outline the next
steps in the legal process. Photo: Getty Images.
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It is impossible to predict how the court will rule, but
skepticism from key justices heightened the possibility the 2010 health
overhaul could be overturned in June, when the court is set to announce its
opinion.

During the marathon arguments, the government's attorney was
grilled by the conservative majority over the constitutionality of the law's
central plank, the mandate to buy insurance. On Wednesday, the final day, the
court's conservatives appeared inclined to wipe away the entire law if it found
the mandate in error.

The same justices even questioned the basis for the law's
expansion of the Medicaid insurance program for the poor, giving credence to an
argument that even some of the challengers had declared a long shot.

Few disputed that untangling the law would be tricky if it
is overturned. It would leave "a mess," said Jon Kingsdale, a
managing director with Wakely Consulting Group and a former official of
Massachusetts' near-universal insurance system. "It just ripples
throughout Medicare and Medicaid and the private markets."

Neil Trautwein, a vice president at the National Retail
Federation, a Washington trade group that represents stores, said: "If the
clock went back and health-care reform was gone, we could live with that."
He said it would be "a little trickier" if the court decided to only
strike down parts of the law.

Under any outcome, the decision will wedge itself into the
2012 presidential election.

White House officials said they remained confident the law
would be upheld, and that it was impossible to predict the outcome. Ultimately,
one official argued, the election is likely to turn on the economy, not health
care, no matter what the ruling. Mr. Obama, who returned late Tuesday from
South Korea, was briefed by staff on the court deliberations.


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Still, if all or part of the law is struck down, it would be
a blow to Mr. Obama and Democrats, and create a liability months before the
election. Republicans would hold up the victory as evidence the Obama
administration overreached in trying to expand the scope of federal power.
"To strike it down would send a chilling message to the administration's
agenda," said Rep. Tim Scott (R., S.C.).

Congressional leadership aides from both parties say a
health law left with holes would have no chance of getting patched until at
least after the election. What happens next would be largely driven by the
election result. Republicans want to repeal the law, and Democrats have little
incentive to restart work on a legislative fix, given how the law has thus far
been a political loser.

Lawyers for the Obama administration pressed the court on
Wednesday for its preferred outcome, which would be to scrap certain popular
insurance rules tied to the mandate, if the court was inclined to rule out the
mandate.

Justice Antonin Scalia called it "totally
unrealistic" to expect a court to "go through this enormous bill item
by item and decide each one." Justice Anthony Kennedy, a key swing vote,
suggested the justices may "lack the competence" to pick and choose
what parts should stay.

Chief Justice John Roberts, whose vote is also somewhat
unclear, asked several questions that appeared to further the case of the
challenger's attorney, Paul Clement, who argued the whole law be struck down.

The court could decide to strike down parts of the law. If
it nixed only the insurance mandate, insurers say premiums would skyrocket
because there would be nothing to stop people from waiting to buy coverage
until they got sick.

Health-industry officials on Wednesday began grappling with
a range of problematic outcomes and said there was little they could do to
prepare for them.

Molina Healthcare, which manages care for 1.7 million
low-income Medicaid members in 10 states, saw in the health law a growth
opportunity. Steven T. O'Dell, the senior vice president overseeing Molina's
growth strategy, said it was preparing for an influx that could as much as
double its membership as states boost Medicaid rolls to comply with the law.

If the law fails in the court, Mr. O'Dell said, the company
would turn instead to a state-by-state strategy, seeking to expand in states
that overhaul their own health systems or expand Medicaid. That is a decision
each state will make based on "politics and budget," he said.

If the entire law fell, many parts of the law already in
place would cease to exist, including checks for seniors to fill a gap in their
Medicare prescription-drug program and insurance pools covering nearly 50,000
Americans who otherwise can't get health insurance.

Planning for the main pieces of the law that are set to
begin in 2014—including new marketplaces where consumers can shop for policies
and subsidies designed to expand coverage to millions of lower earners—would
halt. Experts said it could be years before the U.S. again tackled the issue of
covering the tens of millions of Americans who lack insurance.

If only the mandate falls, insurers have scratched out
backup plans that could potentially be done with support from state officials.
These include offering narrow annual windows in which people could buy
policies, or allowing plans with narrower benefits and lower premiums, which
might entice younger and healthier people to sign up. They plan to press
Congress to get rid of the requirements most closely linked to the mandate,
should the court not strike those down, too. But with little political will
among Republicans to fix a law they dislike, there is little chance a federal
replacement to the mandate could get passed.

In states such as New Jersey, which in the 1990s guaranteed
policies to all applicants but didn't require all residents to carry coverage,
premiums rose about 30% over the first few years of the policy, said Robert
Laszewski, president of Health Policy and Strategy Associates, a consulting
firm, and a former insurance-industry executive.

Mr. Laszewski said insurers could decide to voluntarily keep
in place the requirement that children can stay on parents' plans, which the
Obama administration says has covered 2.5 million young adults. That change is
already priced into coming policies and isn't expensive, he said.