The new and even worse ObamaCare

And the nature of the action he has taken, as a matter of the Court’s disposition toward laws brought before it in disputes, is strikingly micro-managerial. Roberts has rewritten the law in several crucial respects rather than rule it unconstitutional. It’s not clear how his own theory of the Court’s role (even as articulated in this opinion) justifies doing this, but it seems his concern for the Court’s standing justified it in his eyes. This rewriting of the law — the fact that Obamacare was not simply upheld today — has several significant practical implications.

First, the Court ruled that the individual mandate would have been constitutional if, rather than being crafted as a legal requirement with a penalty for non-compliance, it had been crafted as a tax from which those who were insured were exempted and that, rather than be overturned, the mandate should be treated as though that was indeed how it was crafted. The Chief Justice’s opinion argues that the mandate should now be understood as essentially an optional tax — people have the choice of buying insurance approved by the federal government or paying that tax.

Decades of academic studies of the question of driving insurance coverage with penalties and incentives have found that a mandate crafted this way would have a significantly smaller effect than a mandate that was structured as a legal requirement with a penalty. (The Congressional Budget Office discussed some of that literature in this paper from 2010.) The basic reason appears to be that a lot of compliance with legal requirements is driven by people’s inclination to do what they are required to do by law, quite apart from the cost of breaking the law. When the imperative to buy insurance is instead presented as a choice between two options, more people will be likely to choose the cheaper option (which, for almost everyone, will be paying the tax rather than buying the coverage). If Obamacare is not repealed by 2014, the behavioral economics of insurance decisions suggests, today’s Court opinion sets up the Obamacare system for an insurance death spiral — less expressly than an outright striking of the mandate while leaving the rest of the law intact, of course, but pretty expressly.