My Turn to Weigh In
First, let me say that I don't think that this case is within the Supreme Court's jurisdiction. It is a legislative matter, not a Constitutional one. My guess is that President Obama has thought through this, and discounted the probability of this case even being considered by the Supreme Court. We can debate the President's politics and policies, but one thing is certain: he is no minor-leaguer when considering matters of Constitutional Law. It is his academic specialty, and I doubt that anyone would suggest that Harvard or the University of Chicago are places for minor-leaguers on Constitutional Law matters. You can absolutely bet that there will be some blurb in an opinion that refers to this, i.e. this is none of SCOTUS' business, period. In reality, the rest of what the justices think should be irrelevant afterwards. Unfortunately, this is probably not the way this will turn out.
Let's Assume I Am Wrong, and the Court Weighs In
The individual mandate will be upheld. There are many that believe that the government has no right to force a person to buy health insurance. Wrong. The government mandates that persons buy auto insurance correct? The counterargument to this is that some persons just simply decide to not buy cars as a result. Please. The point is that the government has mandated auto insurance for those that own autos because the market mechanism is dysfunctional if there are those that have auto insurance and those that do not. That is, the price of auto insurance would be, in theory, a lot higher if there were no laws in place. Enforcing the law is another matter entirely. In short, the government has, rightfully or wrongfully, put into place the individual mandate in other cases, and the SCOTUS hasn't stricken down the auto insurance market in the same way. It isn't likely to break that precedent, or the next ones up in this morass are auto insurers. SO, the hint: short the crap outta P&C if the individual mandate is stricken down. Those who object to the requirement that persons are required to purchase auto insurance have already prepared their lawsuits which will be filed the nanosecond that the individual mandate is stricken down. There is nothing in this blog more true than that.
A la Carte? Nope.
If you sever the parts from one another, the whole thing falls apart. That is true. There is no averaging of costs from each other. You might say this is unfair. You would be right. You might say this doesn't exist in other arenas of our society. You would be wrong, and you were born yesterday. The 27-year old that has never been sick will need to pay for insurance in order to make up for the 60-year with cancer. Too bad. Those that pay their loans on time are subsidizing those with negative equity on their homes that tried to day-trade real estate at 95% LTV. Guess what? Too bad, it happened, and it still happens. The SCOTUS cannot strike down moral hazard in every nook and cranny of our society, lest that becomes its one and only job. That is why it doesn't make sense that the individual mandate doesn't get stricken down. Those without insurance do still receive medical care, and that forces costs to be moved to others. In the end, that gets paid by...everyone.
Punt on Constitutionality, Weigh In On The Aspects
What isn't written (from what I can tell), is the possibility that SCOTUS says, "This isn't any of our business, so we pass on the terms. HOWEVER, if it were the SCOTUS business, then this would've been our opinion...." Why is this a plausible scenario? It is clear that the justices have their own views, whether they are Constitutional perspective, or from a law & economics perspective. This way, the SCOTUS can have its cake and eat it too. In other words, if you are looking for the ACA to be stricken down, I think that this scenario hasn't received enough attention, which means that upholding the ACA as a whole is being given a lower probability than what is being discounted in markets, and according to the "pundits."
The Markets
Candidly, I don't care much about the impact of SCOTUS' ruling on hospitals, pharmaceuticals or surgical equipment companies. The bottom line is that if you are 18 years old, and dream of becoming a medical doctor, it will cost you $500,000. And you will be in your mid-30s til you start to be able to pay back your loans. If you are 18 years old and want to discover the cure to cancer, the economics are much much worse. By the way, it isn't as if those persons couldn't have done something else during that time. So in addition to the financial cost, there is opportunity cost. So when you tell a doctor or drug company that they are over-charging, guess what the answer is going to be? N.F.W. Until that equation is solved, the profitability of hospitals, pharmaceuticals and surgical equipment companies will be impacted by SCOTUS, but the fundamental economics will remain unchanged.
Insurance companies is a different matter entirely. Life/health insurance companies are in for a problem, and there will be a HUGE disparity on the impact to the different companies, and the market is very likely to get it wrong. Medicare-dominant companies will be screwed, and that includes health clubs and weight management companies (huge HINT). Why? Less money to Medicaid means that Medicare will bear more of the costs. That means that Medicare Advantage companies will have to pay for more of the unpaid claims. Right now, those monies are being used to hand out freebies, like incentives to join...health clubs and weight management companies. Unwind this and voila, those freebies are going to disappear. They have to.
Who else? Companies dominating large group policies will be better off almost no matter what. Strike ACA down, and those who have waited will need to take up their employers' weakened offers of whatever health insurance is available. Maintain ACA, and small employers will need to enroll and fast unless they want to face the tax penalties in 2014. The exchanges? Pfft. I will believe that it works when I see it. The insurance companies already know each others' pricing mechanisms, and each has their intended markets already. It isn't as if we have a purely competitive health insurance market. It is an oligopoly, at best. A marketplace only helps if there is a larger number of insurance companies that provide health insurance.
It's Gonna Be Fascinating
Lawyers, insurance executives, doctors, scholars, economists: there is something for almost everyone in this case. Oh yeah, the sick and those that would benefit from health insurance are also affected. The next few days, maybe Thursday, or next Monday, are going to be fascinating. One thing is for sure: it is much more interesting than debating whether or not Spain will be able to avoid looking for a bailout.
