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5 Scenarios for the U.S. Supreme Court Ruling on Health Care

5 Scenarios for the U.S. Supreme Court Ruling on Health Care

Even a betting man would stay away from calling this one.

The U.S. Supreme Court could in the next several days strike down a provision in the Affordable Care Act that requires individuals to purchase health insurance or pay a penalty. Or, it might not.

Exhibit A for those betting against the health-care law: The seemingly harsh line of questioning -- which includes the now famous broccoli query from Justice Antonin Scalia -- lobbed at attorneys for the federal government during the Supreme Court's three-day hearing on the case back in March. As such, on Intrade, a site that allows people to bet on the outcome of events, the odds are 76 percent that the Court will eliminate the mandate.

By contrast, the law's advocates are convinced that the 26 states and organizations pursuing the legal case against the health-care law have only a flimsy constitutional leg to stand on. They say that Congress has -- since the New Deal -- had the power to regulate anything that is in the stream of interstate commerce or that has implications on it.

Still, the only thing critics and advocates know for sure is that no one knows exactly how the High Court will rule. While that's probably not what small-business owners who treasure stability and certainty want to hear, girding for hard knocks is hardly a foreign concept, either. To help you get a handle on what's to come at the end of the month, we examine these five possible outcomes:

  1. The Supreme Court leaves the law intact. If nothing happens, the first, most immediate effect would be that certain states like New Jersey, which hasn't yet built out its state-run insurance exchange, would be behind schedule. If the law stands, come Jan. 1, 2013, the federal government is set to determine whether states are ready to offer insurance exchanges to the public. States could also engage in civil disobedience and refuse to set up exchanges or even not uphold the mandate if they chose. This strategy could result in a rise of state-wide premiums, along with the number of uninsured, notes Larry Levitt, senior vice president at health-policy researcher the Kaiser Family Foundation, in a March briefing about the implications of the case. Without such state-born protests, Americans at large will likely begin to accept the law, he says.

    Related: Small Business Health Care Stuck on Hold  
     
  2. The individual mandate is struck down, but the law stands. This scenario -- as economists like Joseph Stiglitz suggest -- would trigger a cycle of rising premiums and reduced insurance-coverage uptake, described by Stiglitz and others as the "death spiral" of the health-insurance industry. One estimate from the Congressional Budget Office suggests that 16 million fewer Americans would be insured than if the mandate stayed in force. Insurance premiums in the individual market, by this estimate, could also rise by as much as 20 percent. Others have estimated that premiums could rise by as much as 27 percent or as little as 12.6 percent without the mandate.
     
  3. The individual mandate is struck and replaced. Dean Baker, co-director of the Center for Economic and Policy Research in Washington, D.C., suggests that President Barack Obama could try to mitigate the effects of the "death spiral" by instituting some kind of "mandate lite" program. Essentially, if the Supreme Court quashes the mandate, the President could try something else to get more Americans to sign up for coverage, he says. One idea is to install some kind of health-insurance tax on people who don't get coverage, or the law could ease some of its consumer protections. For instance, lawmakers could overrule the requirement among insurers to offer coverage to everyone, regardless of preexisting conditions. And states could move to individually impose their own mandates.

    Related: The Entrepreneur's Guide to Health-Care Reform  
     
  4. The mandate is struck and the High Court finds the law no longer viable. With this outcome, things would go back to the way they were. Business owners can expect their premiums to continue to rise as they've done in recent years. In 2012, U.S. employers were anticipated to face an 8.5 percent jump in health-care costs, up slightly from an 8 percent increase in 2011, according to PricewaterhouseCooper's annual report on medical-cost trends. 

    Related: Four Ways to Cut Small Employer Health-Care Costs 
     
  5. The Supreme Court delays its decision. The Court may say that it can't preemptively rule against a tax that isn't already in effect. So the Court may wait until the law is fully in force in 2014 before deciding whether to rule against it, essentially pushing off its decision until 2015. This means that all eyes would be on the presidential election to decide the health-care debate. For business owners, this predicament would likely cause prolonged uncertainty. 

How do you think the High Court will rule? Leave a comment and let us know.

Diana Ransom is deputy editor of Entrepreneur.com.
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