What Now, After Health Care Ruling?

WASHINGTON-- Opponents of the new health care law got what they wished for Monday when a federal judge in Pensacola, Florida, Roger Vinson, ruled that the 2010 Affordable Care Act was unconstitutional-all of it.

In another blow to the new law, on Wednesday the Senate voted 81 to 17 to repeal the provision that requires businesses that purchase more than $600 worth of goods from a single seller to file an Internal Revenue Service Form 1099 reporting that purchase. The House vote may follow soon, and President Obama is also in favor of repeal.

Judge Vinson concluded, in an opinion written so clearly that any layman can understand it, that the individual mandate to have health insurance cannot be justified by the Constitution's Commerce Clause, which regulates commercial activity, because failing to purchase health insurance is not activity. Rather, it is inactivity.

In addition, the Judge found that "the individual mandate and the remaining provisions are all inextricably bound together in purpose and must stand or fall as a single unit."

That tied at 2-2 the score on challenges to President Obama's signature health-care initiative. Two district courts have upheld it, and two have found Congress exceeded its constitutional authority when it required individuals to buy health insurance, starting in 2014.

After appeals to the circuit courts, these cases will go to the Supreme Court for consolidated resolution.

Other courts have found that the mandate was "severable," that it could be struck down without invalidating the entire act. Presumably, the Supreme Court will have to address that, too.

Will it toss out the entire law? Or will it find that the individual mandate clause alone cannot stand? Either way, the Act's opponents face the challenge of offering their own version of health care reform, a challenge made more urgent by Judge Vinson's decision.

In order to have a chance at lowering health care costs and developing a system responsive to different needs, Americans should be able to shop around from a choice of plans. This would be facilitated if employers were not required to offer health insurance and if refundable tax credits were available to help with insurance premiums.

One attractive model is the Federal Employees Health Benefits Program, which offers a variety of plans to federal government employees, including members of Congress. Every year, federal employees, depending on location, can choose from about 20 to 30 plans offered by a wide range of health insurance companies.

Possibilities include bare-bones, relatively inexpensive catastrophic health coverage, where people can pay for routine care out of pocket or out of a health savings account; health maintenance organizations, where all care is covered but limited to certain providers; or a more expensive fee-for-service plan, where more services are covered and the annual deductible is lower.

American Enterprise Institute resident scholar Joe Antos told me, "What's needed is consumer choice among competing health plans. That's what an FEHBP system can deliver if it is designed well."

Antos continued, "We need a system that balances legitimate concerns about consumer protection with the freedom of plans to innovate and purchasers to decide what's best for them. If we can do that and live within our fiscal means, we will have truly reformed the health system."

Some people confuse the federal health benefits plan with the new health care law. For example, on January 4, New York Senator Charles Schumer, a Democrat, told Politico, ""It seems unfair that House Republicans want to deprive middle-class Americans of the same health care as members of Congress but to keep it for themselves." Mr. Schumer should know better-and probably does.

But the two are very different. Many of the plans available to federal employees would be disallowed under the 2010 Act, because they would fail to satisfy the law's criteria for coverage.

Plans have to insure anyone who applies, regardless of medical history, with no dollar cap on lifetime coverage. They must include dental and vision care for children, mental health and substance abuse services, no copayments for routine care, and coverage of adult children up to age 26 on parents' plans.

There's nothing wrong with the state exchanges proposed under the new law, but what is destructive is that only plans that meet the prescribed qualifications are allowed to be purchased with federally-subsidized premium credits. In other words, the government not only tells people they must have health insurance, but it also specifies unusually broad coverage by today's standards.

If all plans were listed, rather than only plans that offer the federally required minimum benefits, consumers would have more choices, just as under the federal health plan, and plans could compete on the basis of price.

In fact, the Department of Health and Human Services has granted over 700 waivers of the requirements for 2011 to companies that offer less expensive plans with lower benefits. The Department has been accused of favoring Democratic campaign contributors by granting to waivers to the Service Employees International Union, the American Federation of Teachers, and the United Food and Commercial Workers Union.

Even if there is no favoritism involved, the volume of waivers granted shows that it is difficult for companies and consumers to comply with the provisions of the new law. More generous benefits mean higher premiums, which causes hardship for enrollees.

Judge Vinson's ruling has made it all the more pressing for Congress to come up with alternatives to the 2010 health care law. Abandoning the individual mandate and offering Americans a range of choices modeled after the Federal Employees Health Benefit Plan would be a substantial improvement.