The Affordable Care Act (ACA) represents a major change in the way health insurance is administered in the United States — but is not, and was never considered to be, a panacea for all the challenges facing the health care industry, experts from Wharton and the University of Pennsylvania say.

With the Supreme Court’s decision to uphold most of President Obama’s health care reform legislation, patients and practitioners will see a new level of experimentation and innovation in the industry — but also new levels of complexity.

Today’s ruling addressed a few different aspects of the law, but perhaps the most closely watched question centered on the so-called individual mandate, or the requirement that most Americans buy health insurance. “The Court said [the mandate] is constitutional, but under a kind of secondary fallback position,” which treats, as a tax, the penalty facing those who opt not to become insured, said Tom Baker, a professor of law and health sciences at the University of Pennsylvania Law School.

Baker, University of Pennsylvania Health System CEO Ralph W. Muller, Wharton health care management professors Jonathan Kolstad and Scott Harrington and Penn School of Nursing professor Mary Naylor discussed the decision’s implications during a roundtable today organized by the LDI Health Economist, an online publication of Penn’s Leonard Davis Institute of Health Economics.

“Congress has really broad powers to tax,” he added. “Congress is able to tax things that it can’t regulate. The majority of the Court said the individual mandate is not lawful under the Commerce Clause [which gives Congress the power to regulate interstate commerce], but a different majority said it is constitutional under tax laws.”

Although Baker predicted that constitutional law experts will write “tomes” on why the Court ruled exactly the way it did, he said an explanation is immaterial to most in the health care industry. But speaking in a separate interview with Knowledge at Wharton, Wharton health care management professor Mark Pauly — who was one of a group of academics who came up with the individual mandate concept in 1989 at the behest of President George H.W. Bush — said it could have implications for the 2012 Presidential election.

“When we proposed an individual mandate …, we called the penalty for noncompliance a tax, so I think that, from an economic viewpoint, the court ‘did right,'” he noted. “The only political fallout is that as a candidate, Obama had promised not to tax the middle class, and now the Court has said that his signature legislation does tax the middle class.”

Avoiding ‘Chaos’

If the Court had decided that the individual mandate was unconstitutional, it would have created a dilemma as to whether the legislation could have survived without it, since expanding the overall pool of insured people was intended to help offset the cost of not allowing insurance companies to deny anyone insurance.

The Court struck down a piece of the law related to the expansion of Medicaid, a state and federal program that provides care to the poor and people with disabilities, saying that the federal government could not threaten to take away existing funding for the initiative if states refused to be part of the expansion. But according to Pauly, “the subsidies for expanding Medicaid are so generous that I think few states will refuse.”

“I think it would have been chaos if [the Court] had knocked out the whole act,” said Ralph W. Muller, CEO of the University of Pennsylvania Health System. “There’s an old adage that the most important rule of the Supreme Court is the rule of five: How do you get a five vote majority? I’m glad the act was maintained. It would have been chaos otherwise as people tried to figure out what one does [to move forward] with Congress deadlocked and 26 states suing.”

Health care is an extremely complex industry, Muller noted, and it is not possible to come up with one set of solutions to fit the entire country. Innovation at the federal, state and local levels is needed, and he said the Court’s decision “allows the experimentation to go forward.”

Calls from Republicans to attempt a repeal of the law began almost as soon as the Court’s decision was made public, but panelists at the LDI discussion said a complete undoing of the law would be difficult, considering many hospitals, insurance companies and others have already implemented some provisions of the legislation and have said they would continue with them even if the Affordable Care Act became null and void. “It’s interesting to see the transition of CEOs and heads of large firms shifting away from concern and uncertainty — champagne corks may well be popping at large insurance companies,” Kolstad suggested. “The rules of the game are set, and they have figured out how to start to work with that…. The lobbying apparatus may be against any sort of change, but [whether that will occur] remains to be seen.”

Harrington said he was surprised to see that stock prices for big insurance companies fell immediately following the announcement, given that the “big fear of the health insurance industry was that the mandate would be thrown out but the preexisting condition clause would remain.” When asked about longer-term investor reaction, Pauly asked: “How do investors feel about investing in heavily subsidized, regulated industries like defense and energy? I think they will have mixed feelings and probably hold back to see the rules in detail, and whether they are administered by an Obama or a Romney administration.”

More Regulation, Higher Costs?

Now that the waiting is over, patients, practitioners, state governments and others who have been holding their breath waiting for the Court to weigh in can move forward — but the impacts on each group, and even on individuals within those groups, will be very different, experts said.

For individuals, “if you have employer-sponsored health insurance coverage, probably very little will change,” noted Kolstad, who has extensively studied legislation similar to the ACA that was implemented in Massachusetts. “If you don’t have health insurance, there are a couple of different directions things could go. It all hinges on how well the insurance exchanges [to be established by the states] will function. In addition, if basic insurance is made universally available on the individual market, that could really facilitate reduced job lock, or people staying in jobs that might not be the best for them because they get health insurance. And if you don’t have insurance and want it, your employer will probably be more willing to give it.”

States have made varying degrees of progress in setting up the exchanges, which must be in place by 2014. “Basically, everyone has been holding their breath for the last three months,” Baker said. “The thing to keep in mind is that there is an enormous amount of money available for states that cooperate, and even the states mounting some of the lawsuits have been thinking about how to make sure they get their share of the money if the legislation went ahead. I think a lot of people are going to be cancelling their summer vacations.”

But Baker predicted that many state exchanges will ultimately end up being run by the federal government because states have waited to begin dealing with the level of complexity created by the legislation. “If I was a reporter, I would ask my state’s governor, ‘What are you doing to get ready to have the IT and data infrastructure in place so you know what works and what doesn’t work?’ This isn’t going to fly by itself.”

Harrington noted that the ACA introduces an “enormous regulatory burden” on the states and on individual companies requiring complex systems to monitor a number of different aspects of coverage and care. “The Court upholding the law has moved us more toward a system of centralized guidance of the health care delivery system,” he said. “I’m on the record as favoring a more decentralized approach to motivating delivery system reform, but there is a consensus that we need to get to delivery system reform.”

Another concern, Harrington added, is the potential for a “big cost surge from all of the people flowing into the market. The utilization levels could be higher than we expect, and a lot of people, even with subsidies, could face higher premiums.”

The decision also brings up questions about how much public sector spending is too much. “That issue may not be in front of the Supreme Court, but it is in front of the electorate,” Muller noted. “At some point, there has to be some budget around how much to put into health care, and we haven’t figured out how to do that yet.”

Health care is “the great dissatisfier in this country,” and the provisions of the ACA alone are not enough to fix all of its problems, Naylor said. “Consumers want a … person-centered, family caregiver-centered system where the patient is at the center. This is what the health care system is about, and that is what I hope for from the ACA and all that we’ve unleashed.”