WASHINGTON (Bloomberg)—A federal judge's ruling striking down a health-law mandate that all Americans buy insurance would cause “skyrocketing costs” if affirmed by higher courts, says a group that represents health plans in Washington.

Eliminating the mandate undercuts insurers' ability under the law to guarantee coverage for people with pre-existing conditions and to lower cost for those who can't afford to buy plans, said Robert Zirkelbach, a spokesman for the Washington lobby group America's Health Insurance Plans.

The insurance industry can't afford to let people sign up only when they get sick, Mr. Zirkelbach said. An alternative being discussed is to guarantee coverage for all at a lower price for people who buy into plans during a certain time period, Dan Mendelson, CEO of Washington-based consulting firm Avalere Health.

“It's using a carrot instead of a stick,” Mr. Mendelson said in a telephone interview.

U.S. District Judge Henry Hudson, of Richmond, Va., didn't order the government to stop implementing the law. He ruled that outside of the mandate, the rest of the law should stand. Monday's ruling is one among about two dozen suits against the health law. Judges in two other cases, in Michigan and a different Virginia court, have ruled that the entire law is constitutional.

32 million people

Through the individual mandate and expansions of Medicaid and employer-based coverage, the health care overhaul signed into law by President Barack Obama in March is estimated to provide 32 million more people with insurance coverage by 2019, according to the Congressional Budget Office.

Because the mandate doesn't go into effect until 2014, the White House doesn't need to make any decisions on changes, said Nancy-Ann DeParle, director of the White House Office of Health Reform, in an interview. She said she expected the provision to be upheld by higher courts.

“We have plenty of time,” Ms. DeParle told Bloomberg TV. “It's a really important provision and we're confident we'll prevail on it in the end.”

The Republican Party isn't likely to push for a change in the mandate before the 2012 elections, Avalere's Mr. Mendelson said. That's because Republicans want to keep controversy over the mandate alive, believing the requirement is unpopular with voters, he said.

Republicans react

Rep. Eric Cantor, R-Va., in line to become House majority leader next year, called on President Obama and U.S. Attorney General Eric Holder to ask the Supreme Court for an expedited review of the health-law challenge.

“We must not burden our states, employers, and families with the costs and uncertainty created by this unconstitutional law,” Rep. Cantor said in a statement.

The ruling demonstrates that “Congress must obey the Constitution rather than make it up as we go along,” Senator Orrin Hatch, R-Utah, said in a statement.

The Obama administration faced a similar situation when pushing insurers to comply with a requirement in the law to offer coverage to children with pre-existing conditions. Insurers wanted to set up a separate, limited enrollment period in which children who had pre-existing conditions or were sick would be able to sign up for coverage.

The White House told insurers then that they couldn't set up different sign-up periods for sick and healthy kids.

Coverage expansion

The government could take a similar route with the coverage expansion, using some combination of existing state law, federal and state regulations, and voluntary agreements with insurers to offer incentives for people to sign up before they get sick.

The White House needs to begin discussions with congressional leaders about an alternative to the individual mandate because a ruling upholding the requirement is “well short of a certainty,” said Henry Aaron, a health care policy expert at the Brookings Institution in Washington.

While there are other options to an insurance mandate that might be considered, almost all would require a higher subsidy so people would see it in their interest to buy insurance, Mr. Aaron said in a telephone interview.

“The only way this works is if they offer an adequate subsidy and it’s debatable whether the law currently does that,” he said. “It would be prudent for the White House to start these discussions now.”

Republicans in the U.S. House of Representatives, who will be in the majority next year, plan a vote to repeal the health law, said John Murray, a spokesman for Rep. Cantor. He said they are no plans for a separate vote to repeal only the mandate.

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