affordable, it's very important to keep in mind different groups of people, because it is not something that applies accurately to everybody. for people who were not able to get insurance before, obviously, their insurance beforehand was, the price was essentially infinite. they were not able to get it at any price. they will not be able to get at a price that they can afford. for people who are unhealthy, and were able to get insurance, but perhaps not for the things that they were most concerned about, or only at very high rates, their rates will be lower under the system, even without the minimum coverage provision. also, you have a large number of people who under the act -- >> excuse me. why do you say -- i didn't follow that. why? >> because the -- >> why would their rates be lower? >> their rates are going to be lower than they were under the prior system, because they're going into a pool of people, rather than having -- some of

whom are healthy, rather than having their rates set according to their individual health characteristics. >> the problem, mr. farr, isn't that they're going into a pool of people that will gradually get older and unhealthier. that's the way the thing works. once you say that the insurance companies have to cover all of the sick people and all of the old people, the rates climb more and more young people and healthy people say, why should we participate? we can just get it later when we get sick, so they leave the market. rates go up further. more people leave the market. and the whole system crashes and burns. becomes unsustainable. >> well, that's -- >> this is not -- >> sorry. >> -- what i think. what do i know? it's just what's reflected in congress' findings, that it looks at some states and says, this system crashed and burned. it looked at another state, with the minimum coverage provision and said, this one seems to work. so we'll package the minimum coverage provision with the

non-discrimination provisions. >> well, in a moment i'd like to talk about the finding, but if i could just postpone that a second and talk about adverse selection itself. i think one of the misconceptions here, justice kagan, is that congress having seen the experience of the states in the '90s, with community rating and guaranteed issue, simply imposed the minimum coverage provision as a possible way of dealing with that, and if you don't have the minimum coverage provision, then essentially adverse selection runs rampant. but that's not what happened. congress included at least half a dozen other provisions to deal with adverse selection caused by bringing in people who were less healthy into the act. there are -- to begin with, the act authorizes annual enrollment periods association people can't just show up at the hospital. it they don't show up and sign

up at the right time they at least have to wait until the time next year. that's authorized by the act. rp to the subsidies, there are three different things that make this important. first of all, the subsidies are very generous for people below 200% of the federal poverty line and the subsidy will cover 80% on average of the premium, which makes it attractive to them to join. the structure of the subsidies, because their income -- they create a floor for the, based on the income of the person getting the insurance, and then the government covers everything over that, and this is important in adverse selection, because if you do have a change in the mix of people, and average premium starts to rise, the government picks up the increase in the premium. the amount that the person who is getting insured contributes

remains constant at a percentage of his or her income, and the third thing -- >> there's nothing about federal support that is unsustainable. right ask that is infinite? >> well -- i mean, that's a fair point, justice scalia, although one of the things that happens, if you take the mandate out, while it is true that the subsidies that the government provides to any individual will increase and they will be less efficient. i'm not disputing that point. actually, the overall amount of the subsidies that the government will provide will decline as the government notes itself in its brief, because there will are fewer people getting it. some people will opt out of the system even though they're getting -- i'd just like to go back for one more second to the point about how the subsidies are part of what congress was using, because the other thing is that for people below 250% of the federal poverty line, congress also picks up and

subsidizes the out of pocket costs raising the actuarial value. so you have all of that, and then you have congress, also, unlike the states, establishing precisely, almost all the states, establishing an age differential of up to 3-1. so an insurance company, for example is selling a 25-year-old a policy for $4,000 can charge a 60-year-old $12,000 for exactly the same coverage. the states typically in the '90s, when they were instituting these programs, they either had pure community rating, where everybody is charged the same preem -- everybody regardless of their age is charged the same premium. some states had varies of 1.5-1. massachusetts, effects, their age was 2-1.

so when congress is enacting this act, it's not just simply looking at the states and thinking, well, that didn't go very well. why don't we put in a minimum coverage provision and that will solve the problem? congress did a lot of different things to try to combat the adverse selection. now if i could turn to the finding, because i think this is the crux of the government's position, and then the plaintiffs pick up on that and then move from that to the rest of the act. it seems to me quite honestly it's an important part, because that is -- in this whole quest for what we're try to figure out, the finding seems to stand out as something that the court can rely on and say, here's something congress has actually told us. but i think the real problem with the finding is that the context in which congress made it, it's quite clear that, if the court wants to look, the findings on page 42 -- 43a,

excuse me. the solicitor general favorability brief in the adendics, but the finding is made specifically in the context of interstate commerce. that is why the findings are in the act at all. congress wanted to indicate to the court knowing that the minimum coverage provision was going to be challenged, wanted to indicate to the court the basis on which it believed it had the power under the commerce clause to enact this law. why does that make a difference with respect to finding i which is the one the government is relying on in particular the last sentence which says this environment essential to creating effective health insurance markets in which guaranteed issue and pre-existing illnesses can be covered. the reason is because the word essential in the commerce clause context doesn't have the cloak kweel meaning. in the commerce clause context,

essential effectively means useful. so that when one says, in lopez, when the court says, section 922q is not an essential part of the larger regulatory scheme of economic activity, it goes on to say, in which the regulatory scheme would be undercut if we didn't have this provision. well if that's all congress means, i agree with that. the system will be undercut somewhat, if you don't have the minimum coverage provision. it's like the word necessary and the necessary and proper clause. it doesn't mean as the court has said on numerous other cases absolutely necessary. it means conducive, useful if advancing the aims and it's easy to see, i think, that -- >> any dictionary that gives that -d. i'm sorry, justice --

>> that definition of essential. it's very imaginative. just give me one dictionary. >> well, but i think my point, justice scalia is that they're not using it in the true dictionary sense. >> how do we know that? when people speak i assume they're speaking english. >> well i think that there are several reasons that i would suggest that we would know that from. the first is, as i say, the findings themselves, congress says, at the very beginning, the head of it is, congress makes the following findings, and they're talking about the interstate -- you know, b is headed, effects on the national economy and interstate commerce. so know the context congress is talking about it is more or less quoting from the court's commerce clause statement, but if one looks at the very preceding finding which is finding h, which is on 42, over on to 43, congress at that point also uses the word essential in

the second sentence. it says, this requirement, and again we're talking about the minimum coverage provision, is an essential part of thethe-of s larger regulation of the economic activity, by the way, an exact quote from lopez. in which the absolute requirement would undercut federal legislation, also an exact quote from lopez, but what it's referring to is essential, an essential part of orissa, the national health service act, and the affordable care. it can't possibly be even the plaintiffs haven't argued that those acts would all fall in their entirety if you took out the minimum coverage provision. and as a second example of the same usage by congress, the statute that was before the court in raisch, section 801 of title 21, the court said that, the regulation of intrastate

drug activity, drug traffic, was essential to the regulation of interstate drug activity. again, it is simply not conceivable that congress was saying one is so indispensable to the other, the way the united states uses the term here. so indispensable, that if we can't regulate the intrastate traffic, we don't want to regulate the interstate traffic either. the whole law, criminalizing drug traffic would fall. so i think once you look at the finding for what i believe it says, which is, we believe this is useful part of our regulatory scheme, which congress would think in its own approach would be sufficient -- >> counsel, the problem i have is that you're ignoring the congressional findings and all of the evidence congress had

before it, that community ratings and guaranteed issuance would be a death spiral. i believe that was the word used, without minimum coverage. those are all of the materials that are part of the legislative record here. so even if it might not be, because of the structure of the act, that's posttalk evidence. why should we be looking at that as opposed to what congress had before it? and use essential in its plain meaning? we can't have minimum coverage without what the sg is arguing, community ratings and guaranteed issuance. you can't have those two without minimum coverage. >> well, i think that's a fair question, but the idea that all the information before congress only led to the idea that if -- that you would have death

spirals seems to me to be contradicted a little bit, at least, by the cbo report in november of 2009 which is about four months before the act passed. where the cbo talks about adverse selection. now, i want to be clear. this is at a time when the minimum coverage provision, it was in the statute. and i'm not suggesting that this is a discussion without that in it. but nonetheless, the cbo goes through and talks about adverse selection, and points out the different provisions in the act. the once i've mentioned. plus one other, actually, where in the first three years of the operation at the exchanges of those insurance companies that get sort of a worse selection of consumers will be given essentially credit from insurance companies that get better select -- >> you want us to write an opinion saying we have concluded that there is an insignificant

risk of a substantial adverse affect on the insurance company? that's our economic conclusion, and, therefore, that's what you want, are you saying? >> doesn't sound right. >> findings. >> that's correct. now, i agree there's a risk, and the significance of it people can debate. but what i think is lost in that question and i can be whimsical about it, what's lost in it is what's on the other side. which is the fact that if you follow the government's suggestion if the court follows the government's suggestion, what is going to be lost is something we know is a central part of the act. i mean, indeed if one sort of looks at the legislative history more broadly, i think much of it is directed towards the idea

that guaranteed issue and community rating were the crown jewel of the act. the minimum coverage provision wasn't something that everybody was bragging about. it was something that was meant to be part of this package. i agree with that, but the point of it was to have guaranteed issuance and -- excuse me. guaranteed issue and community rating, and that's under the government's proposal, goes, would disappear. we would go back to the old system, and understand wlaer wh is the -- the real question the court is asking, should be asking is, would congress rather go back to the old system than to take, perhaps, the risk that you're talking about? >> you -- you're referring to the government's second position. their first, of course, is that we shouldn't address this issue at all. >> that's correct. >> i asked mr. kneedler about what procedure, or process, would be anticipated for people who be affected by the change in

the law, and the change in the economic consequences. do you have a view on how that could be played out? it does seem to me that if we accept your position, something, there has to be a broad range of consequences, whether it's additional legislation, additional litigation. any thoughts on how that's going to play out? >> well, if the court adopts the position that i'm advocating, mr. chief justice, i think what would lap would happen is that the court would say, the minimum court, by hypothesis is unconstitutional and the fact of that being unconstitutional does not mean the invalidation of any other provisions. so under the position i'm advocating, there would no longer be challenges to the remaining part of the act. >> but if the challenge is what we're questioned today, whether if you're an insurance company and you don't believe that you can -- can give the coverage in

the way congress mandated it, without the individual mandate, what type of action do you bring? >> if the court follows the course that i'm advocating, you do not bring an action in the court. you go to congress, and you seek a change from congress to say the minimum coverage provision has been struck down by the court. here is -- here's the information that we have to show you what the risks are going to be. here are the adjustments you need to make. one of the questions earlier pointed out that states have adjusted their systems as they've gone along. as they've seen things work or not work. you know, i was talking earlier about the -- the different ratio for ages in insurance and states intended to change that, because they found having too narrow a band worked against the effectiveness of their program, but they -- except for massachusetts. they didn't enact mandates.

so to answer -- i think to answer your question directly, mr. chief justice, the position i'm advocating would simply have those -- those pleas go to congress, not in court. now, if one, just to discuss the issue more generally, if that's helpful, i think that if there were situations where the court deferred, let's say for discretionary reasons, say the court said we're not going to take up the question of severability and therefore not resolve it in other situations, it certainly seems to me that enforcement actions, for example, if the time comes in 2014 and somebody applies to an insurance company for a policy, and the insurance company says, well, we're not going to issue a policy. we don't think your risks are ones that we're willing to cover, it seems to me that they could sue the insurance company, and the insurance company could

raise as a defense that this provision, the guaranteed issue provision of the statute, is not enforceable, because it was inseverable from the decision, from the provision that the court held unconstitutional in 2012. >> let's consider now, how your approach severing as little as possible thereby increases the deference that we're showing to congress. it seems to me, it puts congress in this position. this act is still in full effect. there is going to be this deficit that used to be made up by the mandatory coverage provision. all of that money has to come from somewhere. you can't repeal the rest of the act, because you're not going to get 60 votes in the senate to repeal the rest. it's not a matter of enacteding a new -- you've got to get 60 votes to repeal it. so the rest of the act is going

to be law. so you just put to the choice f of, i guess, bankrupting insurance companies and the whole system comes tumbling down, or else, enacting a federal subsidy program to the insurance companies which is what the insurance companies would like, i'm sure. do you really they that is somehow showing deference to congress and respecting the democratic process? it seems to me it's a gross distortion of it. >> well, your honor, the difficulty is that it seems to me the other possibility is for the court to make choices particularly based on what it expects the difficulties of congress altering the legislation after a court ruling would be. i'm not aware of any severability decision that -- >> no. that wouldn't be my approach. mip approach would say if you

take the heart out of the statute, the statute's gone. that -- enables congress to do what it wants in the usual fashion, and it doesn't inject us into the process of saying, this is good. this is bad. this is good. this is bad. it seems to me it reduces our options the most and increases congress' the most. >> i guess to ask extent i have to quarrel with the premise, justice scalia, because the position that i'm advocating today under which the court would only take out the minimum coverage provision, i don't think would fit the description that you have given, of taking out the heart of the statute. now, i do think once you take out guaranteed issue and community rating, you're getting closer to the heart of the statute, and one of the difficulties i think with the government's position is that i think it's harder to cabin that, to draw that right line around it.

it's harder than the government thinks it is. i mean to begin with, even the government seems to acknowledge, i think, that the exchanges are going to be relatively pale, relatives of the exchanges as they're intended to be. we are going to have standardized products. everybody can come and make comparisons based on products that look more or less the same, but the other thing that's going to happen is with the subsidy program. the way that the subsidy program is set up, the subsidy is calculated according to essential slay benly a benchmar. if the court wants to look at provision, 64a of the private plaintiff's brief again in the appendix. the particular provision, 68a, but there is a question. you're looking essentially to calculate the premium by looking at a standardized silver plan. first question, obviously, is

there going to be any such plan if you don't have guaranteed issue and community rating, if the plans can basically be individualized? but the second problem is, that in the provision of 68a, the -- the provision that's used for calculating the subsidy, what is anticipated in the provision under the act as it is now is that you have the floor of the income. you would take this benchmark plan, and the government would pay the difference, and as we talked about earlier, the benchmark plan can change for age, and the provision says, it can be adjusted only for age. so if, in fact, you even have such a thing as a benchmark plan anymore, if the rates of people in poor health go up, because of individual insurance underwriting, the government subsidy is not going to pay for that. >> mr. farr, i understood that

the answer that you gave to justice scalia was essentially that the minimum coverage provision was not the heart of the act. instead, the minimum coverage provision was a tool to make the non-discrimination provisions community rating guaranteed issue work. so if you assume that, that all the minimum coverages is a tool to make those provisions work, then i guess i would refocus justice scalia's question and say, if we know that something is just a tool to make other provisions work, shouldn't that be the case in which those other provisions are severed along with the tool? >> well, i don't think so, because there are many other tools to make the same things work. that's, i think, the point. in the case that comes to mind is new york versus the united states, where the courts struck down the title provision, but left other, two other incentives essentially in place.

even without the minimum coverage provision, there will be a lot of other incentives still to bring younger people into the market. and to keep them in the market. and if -- if my reading of the finding is correct, and that's all the time we're saying that this would be useful, it doesn't mean that it's impossible to have -- >> i would just like to hear before you leave your argument, if you want to, against what justice scalia just said. let's assume contrary to what you want, that the government's position is accepted by the majority of this court. and so we now are rid of quote, of the two hearts of the bill. still, there are a lot of other provisions like the indian, the black lung, the restaurants have to have a calorie count of major menus, et cetera. now, some of them cost money. and some of them don't.

what is your argument, just because the heart of the bill is gone, that has nothing to do with the validity of these other provisions, both those that cost money or at least those that cost no money, do you want to make an argument in that respect, that destroying the heart of the bill does not blow up the entire bill. it blows up the heart of the bill, and i'd just like to hear what you have to say about that. >> justice breyer, what i would say if one goes back to what i think is the proper severability standard and say would congress rather have no bill as opposed to the bill with whatever is severed from it? it seems to me when you're talking about provisions that don't have anything to do with the min mup coverage provision there's no reason to answer that question as any other way than, yes. congress wants -- >> the real congress or a hypothetical congress? >> an objective congress.

specific -- not with a vote count. >> why put congress to that false choice? because you only have two choices, congress. the whole bill or you can have -- you know, can you have parts of the bill or no bill at all. why that false choice? >> i think the reason is because severability is by necessity a blunt tool. the court doesn't have even if it had the inclination, doesn't essentially have the authority to retool the statute. >> i know so you've -- i would say stay out of politics. that's for congress, not us. but the question here is, you've read all of these cases, or dozens. have you of found a severability case where the court of said, well, the heart of the thing is gone. and, therefore, we strike down these other provisions that have nothing to do which would stand on their feet independently, and can be funded separately or don't require money at all? >> i think the accurate answer

would be, i'm not aware in modern case that says that. i think there probably are cases in the '20s and '30s would are more like that. if i could just take one second to address the economist brief, because justice alito racised i earlier. if one looks at the economist brief, it's very important to note that when they are talking about one side of the balance -- may i finish? >> certainly. >> when they're talking about the balance, they're not just talking about the minimum coverage provision. they're carefully worded to say the minimum coverage provision and the subsidy programs, and then so when you're doing the mathematical balancing, the subsidies programs are extremely large. in the year 20 20sh20, expectede over $100 billion in that one year alone. it you're looking at the number, please consider that. >> thank you, mr. farr. mr. clement, you have four minutes remaining.

>> a point. he says that congress will go into this act to impose minimum coverage. they went into the act to have a different purpose. i.e. to get people coverage when they needed it. to increase coverage for people. but this is only a tool. but other states, going back to my original point that there are other tools besides minimum coverage, that congress can achieve the same goals. so if we strike just the tool, why should we strike the whole act? when congress has other tools available? >> mr. chief justice, i'll make four points of rebuttal but start with justicesotomayor's question. congress identified it as essential tool. not just a toolto