Bloomberg News

Bankruptcies Hit People Challenging Health Insurance Rule

March 23, 2012

Facing “a very tight monthly budget” after the recession hurt his Michigan solo law practice, John Ceci has cut back on movies and restaurant meals, drives a 1996 Honda and has higher priorities than health insurance.

“I would prefer to purchase a new car rather than pay a monthly health-care premium,” Ceci said in a court affidavit after suing to block President Barack Obama’s health-care law, which requires most people to have insurance by 2014. “I cannot afford both.”

The recession hit Ceci hard enough that, 13 months before his March 2010 lawsuit to overturn the insurance requirement, he filed for bankruptcy relief from almost $120,000 of unpaid balances on 20 credit cards, according to court records.

As the U.S. Supreme Court prepares to review the health- care law next week, Ceci’s case is one of three lawsuits, filed by 11 individual plaintiffs, in which federal appeals courts have ruled on the insurance mandate. Four of the people who objected to getting health coverage, including Ceci, have gone to bankruptcy court to discharge debts they couldn’t pay, court filings show.

Questions about who foots the bill for treating the uninsured are key to the Obama administration’s defense of the individual mandate. While people challenging the law say they want to choose how to manage their own medical and financial affairs, some may be gambling that they won’t need expensive care, said Michelle Mello, a professor at the Harvard School of Public Health in Boston.

Future Needs

“Is it a choice about making an arrangement about how to pay for your future needs, or is it deciding that you have higher priorities and you’re just going to take your chances?” Mello said in a telephone interview. “And is part of taking your chances that somebody else may wind up paying your bills?”

Few people can afford to pay thousands of dollars out-of- pocket if stricken by “bolt-from-the-blue” injuries or ailments, the government said in court briefs. The cost of treating people without insurance, it said, is passed to others in the form of higher prices and costlier insurance premiums.

“Every individual is always at risk of requiring health care, and the need for particularly expensive services is unpredictable,” the administration said in its Supreme Court appeal.

Underscoring the importance of insuring against catastrophic costs, the government argued, health-care expenses contribute to more than six out of 10 personal bankruptcies.

‘Obama Apologists’

“That’s the argument advanced by the Obama apologists,” Robert Muise, a lawyer representing Ceci, said in a telephone interview. “It’s utter nonsense to say we can trash the Constitution because there are some people who have had bankruptcies.”

The health-care debate involves “very difficult policy questions that have to be resolved,” said Muise, a co-founder of the American Freedom Law Center, which describes itself as a Judeo-Christian public interest law firm. “But they have to be resolved in a way that’s acceptable under the Constitution.”

A bankruptcy filing briefly threatened the Supreme Court’s review of the insurance mandate.

Mary Brown, one of the original participants in the lawsuit at the court, shut down her Florida auto repair shop and filed for bankruptcy in September, listing about $4,700 of unpaid medical bills among $60,000 of unsecured debts.

Coverage Requirement

A trial judge had said Brown could challenge the coverage requirement, even though it hasn’t taken effect, because she had to make financial preparations now that could endanger her business. After her shop closed, lawyers fighting the insurance mandate had to get the Supreme Court’s permission to add new plaintiffs to the case.

Brown’s refusal to have health insurance had little or nothing to do with her financial crisis, as unpaid medical costs represented only a sliver of the debt that pushed Brown and her husband into bankruptcy, said Karen Harned, a lawyer with the National Federation of Independent Business who represents Brown and other plaintiffs in the case.

“She didn’t have the customers, she couldn’t support her business anymore and she had to file,” Harned said in a telephone interview. Brown still doesn’t have health insurance “and she doesn’t want the government to tell her she has to have it,” Harned said. “This is not constitutional.”

An Atlanta federal appeals court in Brown’s case struck down the insurance requirement, saying it exceeded Congress’s authority to regulate interstate commerce. An appeals court in Cincinnati upheld the law against Ceci’s challenge.

‘God Will Provide’

In a third case pending at the Supreme Court, Charles Edward Lee and Susan Seven-Sky filed suit in Washington saying they refuse to buy insurance because it violates their beliefs that God will provide for their “physical, spiritual and financial well-being.”

Lee, former owner of Eddie Lee Lawn & Tree Service in San Antonio, filed for bankruptcy in September 2009 with $69,000 of credit-card and credit-line debt, $50 in cash and $61 in checking and savings accounts, according to court records.

Seven-Sky, a suburban New York chiropractor and massage therapist, sought bankruptcy protection in September 2006, according to court records, listing almost $58,000 of credit- card debt and $550 of cash and non-retirement savings.

“What it comes down to is not that people have to declare bankruptcy for various reasons, but can Congress do something that is unconstitutional?” said Ed White, a lawyer with the Washington-based American Center for Law and Justice, which represents Lee and Seven-Sky.

Forcing Purchases

“The ends don’t justify the means,” White said in a telephone interview. “Acting illegally by forcing Americans to buy something when there are a whole array of constitutional, legal options out there isn’t the solution.”

Lee and Seven-Sky both said in their lawsuit that, while they could afford insurance if they wanted it, they have had to start setting money aside now to pay future penalties for lack of coverage.

The fact that participants in some lawsuits against the coverage mandate cite difficulty affording relatively modest health-care costs or penalties demonstrates that, without insurance, they couldn’t handle the cost of treatment in cases of serious illness or injury, the government argues.

“Plaintiffs’ own declarations suggest that a medical expense of any significance could exceed their ability to pay,” the Justice Department said in a brief in the Lee and Seven-Sky case. “The purchase of insurance is the classic mechanism for addressing that risk.”

Shifting Costs

U.S. District Court Judge Gladys Kessler in Washington upheld the health-care law against the challenge by Lee and Seven-Sky, bluntly saying the intentionally uninsured are deliberately shifting inevitable medical costs onto their neighbors.

“Those who choose -- and plaintiffs have made such a deliberate choice -- not to purchase health insurance will benefit greatly when they become ill, as they surely will, from the free health care which must be provided by emergency rooms and hospitals to the sick and dying who show up on their doorstep,” Kessler wrote in her opinion. “Those who choose not to purchase health insurance will ultimately get a ‘free ride’ on the backs of those Americans who have made responsible choices.”

The U.S. Court of Appeals for the District of Columbia Circuit upheld Kessler’s decision. White’s group, founded by television evangelist Pat Robertson, is seeking Supreme Court review.

‘Relying on God’

In that case, Lee said he rejects more than just insurance: “Lee so firmly believes in the importance of relying on God to maintain his health that he has instructed his family and friends that, should he be stricken with a serious health issue, for example, a heart attack or traumatic injury, they should only pray for him and not provide him with emergency medical care,” his lawsuit said.

The government’s argument that society at large carries the cost of the uninsured is flawed, Harned said, because some people may never need or use expensive, catastrophic care.

“At the end of the day, we’re assuming that all of these people are going to get hit by a proverbial bus,” she said. “The odds are that’s not going to happen.

The administration’s briefs say most medical costs for people less than 65 years old come from unforeseeable events such as strokes, accidents, cancer or pregnancy complications.

An appendectomy costs an average of $13,000, bypass surgery runs about $60,000 and a year’s supply of some cancer drugs can cost more than $150,000, the government says.

‘Far More Draconian’

An alternative -- denying medical treatment to those who can’t pay -- would be ‘‘far more draconian” than requiring individuals to have insurance coverage, or pay a penalty to help defray the cost of treating the uninsured, the administration argued.

Ceci, whose law practice’s website promotes his expertise in bankruptcy and debt-collections, acknowledged in a telephone interview that he would have trouble today paying large medical bills.

“I don’t know what’ll happen if I ever find myself in that situation: I don’t know if I’ll get cancer; I don’t know if I’ll be in a car accident later today,” said Ceci. “If I get hit by a bus, there’s somebody to sue.

‘‘I might get cancer one day and, if I do, I’ll have to deal with it,” he said. “I don’t know if that’s a valid reason to force somebody to buy something, regardless of whether they want it or not.”

The cases are: Thomas More Law Center v. Obama, 11-117; Department of Health and Human Services v. Florida, 11-398; and Seven-Sky v. Holder, 11-679.

To contact the reporter on this story: Bob Drummond in Washington at bdrummond@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net


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