Can the health care reform law survive without the individual mandate?

Could President Obama's sweeping health care reform law survive if the court strikes down the requirement that all Americans buy insurance?

The short answer is yes -- but insurance companies certainly won't be happy about it.

Both Justice Department lawyers and their challengers agree that the individual mandate is not "separable" from the rest of the law, which means the rest of the law can't survive if the individual mandate is surgically removed by the court.

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The lower courts have been split on the question, but one of them, the 11th Circuit Court of Appeals, ruled in August that only the mandate should be struck down, leaving the rest of the law's provisions -- including an expansion of Medicaid to cover all low-income people and federal subsidies for lower-income and middle-class people to buy insurance -- in place.

That decision no doubt sent shivers down the spines of some insurance executives. Striking down the mandate could be a nightmare scenario for the health insurance industry, since the rest of the law compels them to accept sick customers and to not charge higher premiums based on a customer's health, age or gender. Sick customers would flood the insurance market and drive up costs, while young, healthy uninsured people would take their chances and not buy coverage, in what insurers worry would be a "death spiral" of rising costs.

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The Congressional Budget Office estimated that premiums in the individual market would increase 15 to 20 percent if just the mandate is struck down, since millions of healthier Americans would could forgo buying insurance and thus not offset the costs of new sick customers. But a study by the Rand Corporation estimated a more modest premium increase of less than 3 percent. MIT Professor Jonathan Gruber wrote in an analysis for The Center for American Progress that 50 to 75 percent fewer uninsured people would be covered by 2019 under the law if there was no mandate, but that the government would only save 25 to 30 percent on the lower numbers.

Starting in 2014, the mandate will levy a penalty of 1 percent of a person's income on those who don't buy health insurance, with exceptions for religious objections and financial hardship. The fee would eventually increase to 2.5 percent of annual income or $695, whichever is higher.

Maura Carley, president of the patient advocacy firm Healthcare Navigation, tells Yahoo News that New York state provides a case study for what could happen if the mandate is struck down, but insurers are still required to take every patient and charge them equally.

"We go back to 1993," she said, referring to when the state passed a law requiring insurance companies to cover everyone. "Every New Yorker can get individual coverage, they just can't afford it." (Unlike in New York, the health care law will offer subsidies to people to purchase health insurance.)

To avoid this outcome, Justice Department attorneys are asking the court to strike down the regulation requiring insurers to take all customers if they decide to kill the individual mandate. In this, they partially agree with the 26 states that are suing the government over the law. The states' attorney, Paul Clement, will argue that the entire law needs to be struck down, echoing Florida-based Federal Judge Roger Vinson's ruling that Congress would not have passed the law without the individual mandate, and thus the entire thing should fall.

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If the Court does only strike down the mandate, the death spiral could be averted, argues Aaron E. Carroll, an associate professor at the Indiana University School of Medicine. He writes that the government could give big tax breaks to people who buy insurance as one way to prevent "adverse selection." Princeton sociologist Paul Starr writes that Congress could replace the mandate's monetary penalty with an opt-out system, where people who choose not to purchase insurance must sign a form saying they won't buy insurance for a period of five years. This would prevent some people from waiting until they get sick to buy insurance, which drives up costs.

But any of those changes would actually require Congress to pass new laws, which seems highly unlikely given that Republicans control the House and are pushing for a full repeal of the law. Individual states could take up the cause, by passing their own mandates or other measures to encourage people to buy insurance.

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